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Adhealth, Limited v. PorterCare Adventist Health Systems
For about two years, PorterCare Adventist Health Systems had inadequate surgical sterilization procedures.
In early February 2018, a whistleblower notified a hospital accreditation organization that PorterCare had inadequate surgical sterilization procedures. The organization investigated the hospital and swiftly announced that the hospital was “an immediate threat to health and safety.” Soon after that announcement, Colorado’s public health department also began investigating the hospital. In April 2018, PorterCare closed its operating rooms for a week. The investigations revealed several deficiencies, including a “fail[ure] to implement and oversee sterilization policies; fail[ure] to train, hire and supervise employees; fail[ure] to properly sterilize equipment; knowingly underreporting patient infections; [and] overworking staff and understaffing operating rooms[.]”
After the inadequate surgical sterilization procedures became public, PorterCare incurred more than $40 million in liability resolving thousands of patient claims.
PorterCare sought coverage from AdHealth, its excess liability insurer, for the full $40 million policy limit, claiming that the thousands of claims arose from one medical incident. AdHealth refused coverage and filed a complaint seeking a declaratory judgment that it did not owe PorterCare coverage under that reading of the policy, because in its view, a medical incident covers the injuries of only a single person, not multiple people. PorterCare counterclaimed for declaratory judgment and for breach of contract. The parties cross-moved for summary judgment.
The district court granted summary judgment to AdHealth, agreeing with AdHealth’s reading that a medical incident is limited to the acts or omissions that cause an injury to one person.
The 10th Circuit Court of Appeals agreed that the policy’s definition of “medical incident” unambiguously applies to the injuries of a single person. According to the appeals court, that means AdHealth owes coverage only for the claims of a single patient that trigger the excess policy’s liability threshold, not for coverage of multiple patients’ claims grouped together.
The 10th Circuit affirmed the district court’s judgment.