Ashland Hosp. Corp. v. Darwin Select Ins. Co.

Ashland Hosp. Corp. v. Darwin Select Ins. Co.

Opinion

OPINION OF THE COURT BY JUSTICE CONLEY

REVERSING AND REMANDING

This case [*2]  is before the Court on appeal from the Court of Appeals which determined that Exclusion 15, the prior notice of events exclusion, contained in the insurance policies applied to deny the coverage sought by the Appellants, King's Daughters Medical Center (KDMC),¹ for claims made against it. Consequently, the Court of Appeals also determined the insurance companies were entitled to recoupment of expenses and remanded back to the trial court for further proceedings. The Appellants moved for discretionary review which we granted. After reviewing the record and hearing oral arguments, we reverse the Court of Appeals on both issues. We remand back to the Court of Appeals to consider the applicability of two other exclusions in the policies which it had determined were superfluous to consider in light of its ruling as to Exclusion 15. The issue of recoupment was never properly before the Court of Appeals thus it lacked, and continues to lack, jurisdiction to rule on that matter even on remand.

I. Facts and Procedural Posture

There are three insurance policies between as many insurance companies involved in this case. The first is the Directors and Officers policy (D&O policy) issued by Darwin [*3]  National Insurance Company (Darwin). The second is the professional liability policy issued by Darwin Select (Allied), a related entity to Darwin. Lastly is the excess liability policy issued by Homeland Insurance Company of New York (Homeland). Although the timeline of events spans three policy periods, KDMC sought professional liability and excess liability coverage from Allied and Homeland only for the policy period of 2012-2013.

In July 2011, KDMC was served a subpoena duces tecum by the United States Department of Justice pursuant to the Health Insurance Portability and Accountability Act of 1996. The subpoena sought a host of documents generally pertaining to all medical records, files, and communications related to cardiac patients, including prior review proceedings, revocations of hospital privileges, disciplinary proceedings, and medical malpractice complaints of any kind, going back to 2006, in order to investigate potential federal health care offenses. On December 30, 2011, KDMC notified Darwin of this subpoena and sought coverage under its D&O policy. Darwin granted coverage.

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