U.S. Fid. & Guar. Co. v. St. Elizabeth Med. Ctr

In U.S. Fid. & Guar. Co. v. St. Elizabeth Med. Ctr. (1998), 129 Ohio App.3d 45, 716 N.E.2d 1201, a physician committed malpractice while performing surgery on a number of patients. As a result, the patients filed lawsuits against the hospital where the surgeries had occurred. The lawsuits alleged that the hospital was liable for negligent credentialing of the physician. USF&G, the hospital's insurer, argued that the negligent credentialing claims were excluded from coverage under general-liability policies it had issued to the hospital. The policies included a malpractice and professional-services exclusion that barred coverage for "bodily injury or property damage due to the rendering of or failure to render medical, surgical, dental, x-ray or nursing service or treatment." Id. at 51. The insurer argued that the exclusion precluded coverage on the negligent credentialing claims against the hospital because the patients' bodily injuries were due to the physician's rendering or failure to render medical or surgical service or treatment. In response, the hospital argued that the negligent credentialing claims themselves were not barred from coverage under the exclusion. The Court rejected this argument. In so doing, the Court observed: "'The nature of many liability insurance losses is such that it is almost always possible to theoretically separate the activity which was occurring at the time of the loss (driving, loading, treating patients, and so forth), from some related but antecedent or concurrent activity that arguably contributed to the loss (hiring, supervision, training, packaging, and so forth).' 7 Couch on Insurance (3 Ed.1997), 101-157, Section 101.60. "It is often the case that 'the activity which was occurring at the time of the loss' (e.g., treating patients) is excluded from coverage under the insurance policy in question, while the 'related but antecedent or concurrent activity that arguably contributed to the loss' (e.g., hiring, supervision, etc.) is not excluded. In such cases, courts will allow recovery under the policy where the preliminary or concurrent act of planning, supervising, etc. is 'independent' of the excluded cause. Conversely, courts will disallow recovery where the preliminary or concurrent act contributing to the loss is not independent of the excluded cause. The preliminary or concurrent act contributing to the loss is independent of the excluded cause only where the act: (1) can provide the basis for a cause of action in and of itself and; (2) does not require the occurrence of the excluded risk to make it actionable." Id. at 51-52. The Court next explained in U.S. Fid. & Guar. Co. why the negligent credentialing claims against the hospital were excluded from coverage: "Applying the foregoing to the case before us, we begin by noting that any injuries stemming from the surgical procedures performed by Dr. Burt are expressly excluded from coverage under paragraph 1(a) of the exclusionary clause in question. For purposes of this argument, we shall assume without deciding that losses caused by negligent credentialing are not excluded per se from coverage. Therefore, the question becomes whether SEMC's alleged negligent credentialing of Dr. Burt is 'independent' of the surgical procedures performed by Dr. Burt, for purposes of determining whether negligent credentialing constitutes a cause of loss independent from the excluded cause, i.e., the rendering of medical or surgical services or treatment. "While it is clear that a claim of negligent credentialing provides a basis for a cause of action in and of itself, it is equally clear that no plaintiff can maintain a cause of action for negligent credentialing without demonstrating that his or her injuries were caused by some physician on the hospital's staff who rendered or failed to render medical services to the plaintiff. Thus, losses caused by negligent credentialing are not independent losses caused by the rendering or failure to render medical or surgical service or treatment. As a result, the claims brought against SEMC are excluded from the policies' coverage." Id. at 52-53.