THE MEDICAL PROTECTIVE COMPANY v. LAUREL PEDIATRIC ASSOCIATES, INC.

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

THE MEDICAL PROTECTIVE CoO., )

and PRINCETON INSURANCE CoO. )

)

Plaintiff/Counterclaim Defendant, )

v. ) Civil No. 3:23-cv-00235

) Judge Stephanie Haines

LAUREL PEDIATRIC ASSOCIATES, )

)

Defendant/Counterclaim Plaintiff. —_)

)

OPINION

The Medical Protective Company (“MedPro”) and the Princeton Insurance Company

(“Princeton”) filed this Complaint in civil action (ECF No. 1) to seek a judicial determination and

declaration pursuant to 28 U.S.C. §§ 2201 and 2202. MedPro and Princeton seek a declaration

that they do not owe a duty to defend or a duty to indemnify Laurel Pediatric Associates (“Laurel’’)

in an underlying lawsuit filed against Laurel by multiple minor-plaintiffs in the Court of Common

Pleas of Cambria County, Pennsylvania (“Underlying Litigation”).

On September 29, 2023, MedPro and Princeton filed a Complaint for Declaratory

Judgment (ECF No. 1). On December 4, 2023, Laurel filed an Answer to the Complaint and filed

Counterclaims against MedPro and Princeton (ECF No. 18). Each of the parties claims the

following:

MedPro claims as to Laurel (ECF No. 1):

Count I: No Duties to Defend and Indemnify Because Underlying Action Does

Not Allege Professional Services

' A default judgment was entered against co-defendants Johnstown Pediatric Associates, Inc., and Johnnie W. Barto,

M.D. on February 29, 2024 (ECF Nos. 40, 41). Count VI of the Complaint (“No Duties to Defend or Indemnify Dr.

Barto under Pennsylvania Public Policy”) is moot because it only pertains to Dr. Barto and it will not be addressed

in this Memorandum Opinion.

Count ITI: No Duties to Defend and Indemnify Because Exclusion for Damages

in Consequence of Criminal Acts, Willful Torts, and/or Sexual Acts Applies

Count V: No Duties to Defend and Indemnify to the Extent the MCARE Exclusion

Applies

Count VII: No Duties to Defend or Indemnify with Respect to Claims by

Claimants Who Did Not Treat during an Effective Policy Period

Princeton Claims as to Laurel (ECF No. 1):

Count II: No Duties to Defend and Indemnify Because Underlying Action Does

Not Allege Professional Services

Count IV: No Duties to Defend and Indemnify Because Exclusion for Injury

Resulting from the Performance of Criminal Acts Applies

Count IX: No Duties to Defend or Indemnify with Respect to Claims by Claimants

who did not Treat during an Effective Policy Period

MedPro and Princeton Claims as to Laurel (ECF No. 1):

Count VII: No Coverage for Punitive Damages

Count X: Number and Timing of Occurrences/Medical Incidents

Laurel Counterclaims (ECF No. 18):

Count I: Declaratory Relief as to MedPro.

Count II: Declaratory Relief as to Princeton

On February 16, 2024, MedPro and Princeton filed a Motion for Judgment on the Pleadings

(ECF No, 32) and a Brief in Support (ECF No. 33). Laurel Pediatrics filed a Cross Motion for

Partial Summary Judgment on the Pleadings (ECF No. 42) as well as a Brief in Opposition to the

Motion for Judgment on the Pleadings (ECF No. 43). MedPro and Princeton filed a Brief in

Opposition to the Motion for Partial Summary Judgment (ECF No 44) and Laurel filed a Reply

Brief in Opposition to the Motion for Judgment on the Pleadings and in Support for the Cross-

Motion for Summary Judgment (ECF No. 45). This matter is ripe for the Court’s disposition.

I. Factual Background

A. The Underlying Litigation

The operative Fourth Amended Complaint of the Underlying Litigation (ECF No. 1-2, pp.

1-123 (Exhibit 1, part 1)) originally filed in Cambria County Court of Common Pleas has 45

plaintiffs (“Doe Plaintiffs”)? suing (1) Laurel Pediatric Associates, Inc.; (2) Johnstown Pediatric

Associates, Inc.; (3) Conemaugh Valley Memorial Hospital d/b/a Memorial Medical Center; (4)

DLP Conemaugh Memorial Medical Center, LLC d/b/a Conemaugh Health System and

Conemaugh Memorial Medical Center Lee Campus; (5) DLP Healthcare, LLC d/b/a Duke

Lifepoint Healthcare; and (6) Dr. Johnnie W. Barto (“Dr. Barto”), M.D. (collectively “Underlying

Litigation Defendants”). ECF No. 1-2, pp. 1-5. The Underlying Litigation stems from Dr. Barto’s

treatment of a multitude of pediatric patients that occurred at various times between 1974 through

2018 at various healthcare facilities. ECF No. 1-2, 4 58.

According to the Fourth Amended Complaint, Dr. Barto was a licensed pediatric physician

between 1974 and 2018 and during those years he used his professional position to sexually abuse

minor patients under the pretense and in conjunction with medical treatment. ECF No. 1-2, {4 58,

60. In March 2018, Dr. Barto was charged with multiple counts of aggravated indecent assault,

indecent assault, corruption of minors, unlawful contact with a minor, and endangering the welfare

of children. ECF No. 1-2, § 61. On March 18, 2019, Dr. Barto received a criminal sentence of 79

to 158 years in state prison for his crimes. ECF No. 1-2,,§64. The Fourth Amended Complaint

states, “At all times relevant hereto, Barto was acting in the course and scope of his employment

with Defendants Laurel Pediatric, Johnstown and/or Conemaugh and/or DLP as their agent,

apparent agent, servant and/or employee ...” ECF No. 1-2, 65.

After Dr. Barto’s criminal sentence, Doe Plaintiffs brought the claims below against the

Underlying Litigation Defendants which included Laurel (ECF No. 1-2, pp. 92-148):

2 As of the date of the Complaint in this case, there are fifty-nine (59) minor Jane and John Doe Underlying Litigation

Plaintiffs. ECF No. 1, § 17.

Count I: Childhood Sexual Abuse and Vicarious Liability

Count II: Negligence and Hiring/Retention

Count III: Negligent Supervision

Count V: Negligent Misrepresentation

Count VII: Intentional Infliction of Emotional Distress

Count IX: Civil Conspiracy to Protect Reputation and Finances

Count X: Medical Negligence

Count XI: Assault (Dr. Barto only)

Count XII: Battery (Dr. Barto only)

Count XIII: Violations of Title IX 20 U.S.C. §1681(a), et seq. (Conemaugh and DLP only)

Count XIV: Corporate Negligence (AKA: Negligent Credentialing)?

B. Princeton Policies

The Princeton Policies with Laurel as the “Insured” cover the time-period from June 1,

2000, through January 1, 2003 (ECF Nos. 1-21, 1-22, 1-23). The Princeton Policy in pertinent

part reads:

I. COVERAGE

Coverage N — Partnership, Association, or Corporation Professional Liability

We will pay all amounts up to the limit of liability which you become legally

obligated to pay as a result of injury to which this insurance applies. The injury

must be caused by a “medical incident” arising out of the supplying of or failure

to supply professional services by you or anyone for whose professional acts or

whose failure to act you are legally responsible during the policy period stated on

the Declarations of this policy.

We have the right and duty to defend any “suit” against you seeking payment

for injury....

II. EXCLUSIONS

(a) Injury resulting from your performance of a criminal act.

Il. PERSONS INSURED

(b) Under Partnership, Corporation, or Professional Association Professional Liability.

The word “you” means the partnership, corporation, or professional association

named in the schedule and any of its members with respect to the acts of others or

their failure to act....

ECF No. 1-21, pp. 7-8 (emphasis added).

3 The Count numbering is not sequential because certain counts have been stricken from the Underlying Complaint.

XI. ADDITIONAL DEFINITIONS

“medical incident” means any act or failure to act

(b) Partnership, Association, or Corporation Professional Liability — in the furnishing

of professional services by (1) any member, partner, officer, director, stockholder,

or employee of yours or (2) any person acting under your personal direction,

control, or supervision.

Any such act or failure to act, together with all related acts or failure to act in the

furnishing of such services to any one person shall be considered one “medical

incident”

ECF No. 1-21, pp. 9 (emphasis added).

This insurance does not apply to fines, penalties, taxes, or punitive, exemplary,

trebled, or multiplied damages... ECF No. 1-21, p. 6 (“Damages Exclusion”)

(emphasis added).

The three policies covering Laurel from 2000 to 2003 are substantially the same.

C. MedPro Policies

The MedPro Policies with Laurel as the “Insured” cover the time-period from January 1,

2003, to January 1, 2006 (ECF Nos. 1-14, 1-15, 1-16). The MedPro Policy in pertinent part reads:

... the Company hereby agrees to DEFEND and PAY DAMAGES, in the name

and on behalf of the Insured...

A IN ANY CLAIM FOR DAMAGES, AT ANY TIME FILED, BASED ON

PROFESSIONAL SERVICES RENDERED OR WHICH SHOULD HAVE

BEEN RENDERED, BY THE INSURED OR ANY OTHER PERSON FOR

WHOSE ACTS OR OMISSIONS THE INSURED IS LEGALLY

RESPONSIBLE, IN THE PRACTICE OF THE INSURED’S PROFESSION

DURING THE TERM OF THIS POLICY; EXCEPT this policy does not cover ...

2. payment of damages (BUT WILL DEFEND) in any claim for damages if said

damages are in consequence of the performance of a criminal act or willful tort or

sexual acts;

6. any punitive damages or damages over and above actual compensatory damages,

which may be assessed against the Insured.

ECF No. 1-14 p. 1 (emphasis added).

The following exclusion was added to the policy:

Payment of damages in any claim for damages on which the Pennsylvania Medical

Care Availability and Reduction of Error (MCARE) Fund is required to defend and

pay damages pursuant to 40 P.S. § 1303.715, as well as any amendments or

extensions thereto...

Furthermore, the Company shall not be obligated to defend any claim after the

Pennsylvania Medical Care Availability and Reduction of Error (MCARE) Fund

has assumed the Insured’s defense pursuant to 40 P.S. § 1303.715, as well as any

amendments or extensions hereto.

ECF No. 1-14, p. 4. The three policies covering Laurel from 2003 to 2006 are substantially

the same.

II. Standard of Review

A party may move for judgment on the pleadings “[a]fter the pleadings are closed —- but

early enough not to delay trial.” Fed. R. Civ. P. 12(c). Judgment on the pleadings is appropriate

when “the movant clearly establishes that no material issue of fact remains ... and that he is entitled

to judgment as a matter of law.” Rosenau vy. Unifund Corp., 539 F.3d 218, 221 3d Cir. 2008).

When deciding a motion for judgment on the pleadings, the Court considers the pleadings and

exhibits attached thereto, matters of public record and “undisputedly authentic documents attached

to the motion for judgment on the pleadings if plaintiffs’ claims are based on the documents.”

Atiyeh v. Nat'l Fire Ins. Co. of Hartford, 742 F. Supp. 2d 591, 595 (E.D. Pa. 2010). “A motion for

judgment on the pleadings based on the defense that the plaintiff has failed to state a claim is

analyzed under the same standards that apply to a Rule 12(b)(6) motion.” Zimmerman y. Corbett,

873 F.3d 414, 417 (3d Cir. 2017) (citing Revell v. Port Auth. of NY, NJ, 598 F.3d 128, 134 Gd Cir.

2010)). “In considering a motion for judgment on the pleadings, a court must accept all allegations

in the pleadings of the party against whom the motion is addressed as true and draw all reasonable

inferences in favor of the non-moving party.” Id. at 417-18; see also Allah v, Al-Hafeez, 226 F.3d

247, 249 (3d Cir. 2000).

Discussion

There are three Princeton Policies (ECF Nos. 1-21, 1-22, 1-23), and three MedPro Policies

(ECF Nos. 1-14, 1-15, 1-16) that were issued to Laurel as the Insured covering time periods June

2000, through January 2003, and January 2003, through January 2006, respectively. To the extent

that this issue becomes pertinent to the case, Princeton and MedPro would only be liable to defend

and indemnify those cases in which the facts occurred during the times that the Princeton or

MedPro Insurance Policies were in effect. “An ‘occurrence’ policy protects the policy holder from

liability for any act done while the policy is in effect, whereas a ‘claims made’ policy protects the

holder only against claims made during the life of the policy.” City of Erie, Pa. v. Guar. Nat. Ins.

Co., 109 F.3d 156, 158-59 (3d Cir. 1997) (quoting St. Paul Fire & Marine Ins. Co. v. Barry, 438

U.S. 531, 535 n. 3 (1978). The language of the Policies indicate that the Policies are occurrence-

based policies and the time periods covered by the policies are not in dispute. See e.g., “IN ANY

CLAIM FOR DAMAGES, AT ANY TIME FILED, BASED ON PROFESSIONAL SERVICES

RENDERDERED... DURING THE TERM OF THIS POLICY” ECF No. 1-14, p. 1 (MedPro

Policy dated 1/1/2003-1/1/2004); “We will pay all amounts up to the limit of liability which you

become legally obligated to pay as a result of injury...arising out of your supplying... professional

services during the policy period stated on the Declarations of this policy.” ECF No. 1-21, p. 7

(Princeton Policy dated 6/1/2000). There is no ambiguity in the language and reading the contract

plainly this appears to be the parties’ intent. Counts VIII and IX (“No Duties to Defend or

Indemnify with Respect to Claims by Claimants who did not Treat during an Effective Policy

Period”) of MedPro and Princeton’s Motion for Judgment on the Pleadings is granted as to these

Counts.

Related to the Court’s holding as to Counts VIII and IX is Count X of Plaintiff's Motion

for Judgment on the Pleadings, the number and timing of occurrences. Count X states that the

Policies limit the liability of the Insurers for any one occurrence, as well as its aggregate liability

under any policy period. ECF No. 1, § 132. The Princeton Policy reads,

The total limit of our liability during the policy year for all injury to which this

insurance applies shall not exceed the limit of liability stated in the schedule as

aggregate.

Subject to the provision above regarding aggregate, the total limit of our liability

during the policy year for all injury to which this insurance applies in connection

with any one ‘medical incident’ shall not exceed the limit of liability stated in the

schedule as ‘each medical incident.’

[a]ny such failure to act, together with all related acts or failures to act in the

furnishing of such services to any one person shall be considered one ‘medical

incident.’

ECF No. 1-21, pp. 8, 9. The MedPro Policy reads, “Furthermore, for the purpose of determining

the Company’s liability, the following shall be considered as arising from one occurrence: a) all

injury resulting from a series of acts or omissions in rendering professional services to one person

and b) all injury arising out of continuous or repeated exposure to substantially the same general

conditions. ECF No. 1-14, p. 1. Recognizing that the Policies are occurrence-based policies and

interpreting a plain reading of the language, this Court will grant the Motion for Judgment on the

Pleadings as to Count X of the Complaint.

Princeton and MedPro (collectively “Plaintiffs”) allege that Laurel cannot meet its burden

of proving the claims against it in the Underlying Litigation meet the requirements of the insuring

agreements for coverage. Plaintiffs’ Motion for Judgment on the Pleadings is based on two

primary positions, (1) the Underlying Litigation does not allege any conduct involving “medical

skills” associated with specialized training. Sexual abuse and failure to prevent sexual abuse does

not constitute “professional services”; and (2) exclusions in the insurance policies bar coverage

for damages that are a consequence of a criminal act, willful tort, and/or sexual acts. ECF No. 32,

p. 2.

The Court will review the provisions of the Policies in the context of the Underlying

Litigation to determine whether Princeton or MedPro is liable to defend and/or indemnify Laurel.

“The interpretation of an insurance policy is a question of law...” Kvaerner Metals Div. of

Kvaerner U.S., Inc. v. Com. Union Ins. Co., 908 A.2d 888, 897 (2006) (citing 401 Fourth Street v.

Investors Ins. Co., 879 A.2d 166, 170 (2005)). “Courts may therefore dispose of such cases on

motions for judgment on the pleadings where the sole issue is the interpretation of the policy.”

Leithbridge Co. v. Greenwich Ins. Co., 464 F. Supp. 3d 734, 738 (E.D. Pa. 2020). Of specific

importance are the claims alleged against Laurel in the Underlying Litigation. “In determining

whether the underlying litigation falls within the scope of the insurer's duties to defend or

indemnify, a court must examine only those factual allegations made within the “four corners” of

the underlying complaint.” Jd. at 739. The duties cannot be triggered by allegations outside the

complaint. See Kvaerner, 908 A.2d at 896 (“[A]n insurer's duty to defend and indemnify [must]

be determined solely from the language of the complaint against the insured.... [A]n insurer's duty

to defend is triggered, if at all, by the factual averments contained in the complaint itself.”).

There are eight counts in the Fourth Amended Complaint where Laurel is named as a

defendant (ECF No. 1-2, pp. 92-148). These claims against Laurel stem from the illegal conduct

of Dr. Barto. Even so, Laurel asserts the claims against them in the Underlying Litigation are

separate from the intentional tort claims against Dr. Barto. The underlying plaintiffs assert

negligence and tort claims against Laurel which are “founded upon Laurel’s employees’ alleged

failure to render proper medical treatment and otherwise deviating from their duties of care vis-a-

vis the minor plaintiffs.” ECF No. 43, p. 1.

Under Pennsylvania law the interpretation of an insurance policy is a matter of law which

the Court may decide. See Gardner v. State Farm Fire and Cas. Co., 544 F.3d 553, 558 (3d Cir.

2008) (citing Donegal Mut. Ins. Co. v. Baumhammers, 595 Pa. 147, 938 A.2d 286, 290 (2007)).

The goal is to ascertain the intent of the parties as manifested by the policy terms. See Netherlands

Ins. Co. v. Butler Area Sch. Dist., 256 F. Supp. 3d 600, 611 (W.D. Pa. 2017) (“A policy must be

read as a whole and its meaning construed according to its plain language.”) (quoting Meyer v.

CUNA Mut. Ins. Soc., 648 F.3d 154, 163 (3d Cir. 2011)). If the terms are clear and unambiguous,

courts are required to give effect to those terms. See Netherlands, 256, F. Supp at 611. But if the

terms are ambiguous, they must be construed for the insured and against the insurer. See id. Terms

in an insurance policy are ambiguous if they are reasonably susceptible to different constructions,

obscure in meaning through indefiniteness of expression, or have a double meaning. See id.

Therefore, the Court must consult the four corners of the Underlying Litigation Complaint

to determine whether its factual allegations trigger coverage under the policy. See Hanover Ins.

Co. v. Urb. Outfitters, Inc., 806 F.3d 761, 765 (3d Cir. 2015). To interpret the terms of insurance

policies for a duty to defend or indemnify, the duty to defend is broader than the duty to indemnify.

See USAA Cas. Ins. Co. v. Bateman, Civ. A. No. 07-3700, 2008 WL 4761718, at *4 (E.D. Pa. Oct.

30, 2008). When an underlying complaint makes at least one allegation that falls within the scope

of the policy's coverage, the duty to defend is triggered, even where an insured is ultimately found

to be not liable. See Gen. Accident Ins. Co. of Am. v. Allen, 692 A.2d 1089, 1095 (1997) (“If the

complaint against the insured avers facts that would support a recovery covered by the policy, then

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coverage is triggered and the insurer has a duty to defend until such time that the claim is confined

to recovery that the policy does not cover.”).

A. Duty to Indemnify and Defend under Princeton’s Policies

Princeton’s Motion for Judgment on the Pleadings seeks judgment in its favor excluding a

duty to indemnify and defend Laurel in the Underlying Litigation for the following reasons. First,

Princeton states that because the Underlying Litigation involves allegations of sexual abuse,

molestation, and other sexual misconduct, Princeton is not liable to indemnify or defend because

sexual misconduct is not a “medical incident” arising out of professional services. Second, the

Princeton Policies exclude coverage for criminal acts. Laurel in its Cross-Motion for Summary

Judgment seeks enforcement of coverage under Princeton’s insurance policies which includes a

duty to defend and indemnify Laurel in litigation. Laurel counters that allegations against it in the

Underlying Litigation are not integral to Dr. Barto’s criminal acts but instead assert liability related

to its professional services. Laurel also argues that if a term of the contract (i.e., professional

services) is ambiguous, that provision of the policy should be found for the insured. ECF No. 43,

p. 9 (citing Slate Const. Corp. v. Bituminous Cas. Corp., 323 A.2d 141, 143-44 (Pa. Super. 1974).

Therefore, Laurel claims that it is not excluded from coverage in the Princeton Policies.

Laurel points to the medical negligence claims against them that they proffer are separate

from the sexual abuse claims. Laurel states, the underlying plaintiffs “assert numerous negligence

claims against Laurel, including negligent hiring and retention (Count II), negligent supervision

(Count III), negligent misrepresentation (Count V), medical negligence (Count X), and corporate

negligence/negligent credentialing (Count XIV).” ECF No. 43, p. 3; Fourth Amended Complaint

(ECF No. 1-2), generally. The Certificate of Merit reads, “[T]here is a basis to conclude that the

care, skill or knowledge exercised or exhibited by this defendant in the treatment, practice or work

11

that is the subject of the complaint fell outside acceptable professional standards and that such

conduct was a cause of bringing about the harm.” ECF No. 43, p. 3. Laurel provides several

examples of the underlying allegations against it that support its position. ECF No. 43, pp. 3-4.

For example,

Laurel[‘s]...failure to implement and enforce adequate policies as well as their

inactivity in responding to parents’ reported concerns breached their duties to

ensure: (1) the maintenance of a safe facility, (2) the selection and retention of

competent physicians, (3) proper oversight over physicians’ on-site patient care,

and (4) the formulation and adoption of rules to ensure quality care for the patients.

Each of these failures were ‘acts,’ and ‘omissions’ by licensed medical

professionals, that required an exercise of medical judgment and observance of

their special duty of care to each of the named Plaintiffs, which they breached.

ECF No. 1-2, 4 558.

These allegations in the Fourth Amended Complaint are distinct from the sexual

misconduct allegations against Dr. Barto. In other words, while Dr. Barto’s criminal activity

brought Laurel’s negligence to light, Laurel’s negligence was occurring, nonetheless. In the

Court’s review of the language of the Princeton Policies, and the claims against Laurel in the

Underlying Litigation it finds that the claims relate to the ‘medical incident’ of supplying or failing

to provide professional services, and therefore, the claims fall within the purview of the Policies.‘

A “medical incident” as defined in the Princeton Policies means any act or failure to act in

the furnishing of professional services by Laurel or any person acting under Laurel’s personal

direction, control, or supervision. Its definition is broader than the term might suggest. The

negligence claims against Laurel are covered because the underlying allegations are that Laurel

failed to properly carry out its professional services maintaining of a safe facility, selecting and

retaining competent physicians, and properly overseeing its physicians’ on-site patient care. These

4 Count I of the Underlying Litigation is “Childhood Sexual Abuse and Vicarious Liability.” The Court finds

Plaintiffs are not liable for defense and indemnification for Count I because it is unrelated to a medical incident or

professional services as specified in the Policies for coverage.

12

claims, while discovered in the context of a sexual abuse crime, are stand-alone claims and not

criminal in and of themselves. In other words, the medical incident of negligently failing to

provide professional services is within the terms of the Policies. The key wording in the Princeton

Policies is the relationship of the term “medical incident” to the term “professional services,”

which broadens the meaning of medical incident to activities other than the practice of medicine

thereby broadening the coverage of the Policies to those acts performed by all professional

employees of Laurel.

Princeton counters that Laurel is reading outside the intent of the professional services

policy. Princeton states that the Policies intend to only cover injury which must be tied to

professional services, not injury that happened as a consequence of sexual abuse. ECF No. 44, p.

3. We agree with Princeton’s interpretation of its Policy that the injury must be tied to the

professional services, and we find that the allegations against Laurel are for negligent performance

of its professional services. Defendants rely on Physicians Ins. Co. v. Pistone, 726 A.2d 339 (Pa.

1999),° which held that the term “professional services” is something more than an act flowing

from mere employment. “The act or service must be such as exacts use or application of special

leaning or attainments of some kind ... [it] implies intellectual skill.... A ‘professional’ act or

service is one arising out of a vocation, calling, occupation or employment involving specialized

knowledge, labor or skill, and the skill involved is predominantly mental or intellectual rather than

physical or manual....” Jd. at 341.

5 The Court takes emphatic note that the language in the insuring agreement at issue in Pistone uses the term

“professional health care services” which by its own wording is more specifically related to services of health care

professionals and the focus of the opinion is the coverage of the doctor who performed the deviant sexual acts. See

Pistone, 726 A.2d at 340-41(emphasis added). This case is distinguished from Pistone because the term used in the

Policies at issue is simply “professional services” as it relates to claims against the health care institution, Laurel.

13

The Court finds that it is a specialized professional service to maintain a safe medical

facility, select and retain competent doctors, and to oversee such doctors. A person of an ordinary,

non-medical background, not specially trained in medical services would not be competent to carry

out such duties. In addition, it is reasonable to find the act of properly maintaining a safe facility

with qualified, ethical doctors would be the intent of the drafters of an insurance policy. This

seems especially apparent when the Policy includes as persons insured, the company itself and any

member, partner, officer, director, stockholder, or employee and any person acting under the

company’s personal directions, control, or supervision. The Policy was not intended to only cover

medical practitioners; it includes coverage for those who support medical practitioners whose

professional duties are not direct caretaking of patients.

In Chubb Nat'l Ins. Co. v. D'Cunha, the Court evaluated the insurability of state court

claims against two doctors and came to a similar conclusion. No. 2:22-CV-1042-NR, 2023 WL

4866101 (W.D. Pa. July 31, 2023). The Chubb Court found that plaintiffs’ restrictive construction

that “professional medical services” means only “the provision of medical treatment or the failure

to provide such treatment” is not appropriate in light of the policy's language; the policy

specifically labels itself as “professional liability insurance,” rather than “medical malpractice

insurance.” Jd. at 6. Under the policy in Chubb, a “medical incident” can include an act or

omission: (2) in the service by the insured as a member of a formal accreditation, standards review,

ethics or similar professional board or committee, including non-employed committee members.

See id. at 7. Chubb is representative of the fact that “medical incident” can include non-medical

acts of the medical institution. In this case, the Policies’ language is even broader covering

‘medical incident’ arising out of the supplying of or failure to supply professional services by you

6 The Princeton Policies are labelled as Professional Liability Insurance. The MedPro Policies has no label at all.

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or anyone for whose professional acts or whose failure to act you are legally responsible,”

(Princeton Policies) and

‘medical incident’ means any act or failure to act

(c) Partnership, Association, or Corporation Professional Liability — in the furnishing

of professional services by (1) any member, partner, officer, director, stockholder,

or employee of yours or (2) any person acting under your personal direction,

control, or supervision. (MedPro Policies).

Finally, in a case analogous to this, Princeton Ins. Co. v. Kosoy, No. CIV. A. 98-4985,

1999 WL 79055 (E.D. Pa. Feb. 9, 1999), aff'd, 281 F.3d 223 (3d Cir. 2001), in which the underlying

complaint alleged claims for negligence, fraud, and breach of contract arising solely out of non-

medical functions of billing practices, the Court found “[t]here is no claim that conceivably could

be deemed to be a ‘medical incident’ as the term is defined in the policy.” /d. at *3 (emphasis

added). Similar to the Policies, the coverage provisions of the Kosoy policy stated that the injuries

covered by the policy must be caused by a “medical incident” arising out of the insured's

“supplying or failure to supply professional services.” Jd. But unlike the Policies, the Kosoy

policy defined “medical incident” as any act or failure to act in the furnishing of professional

medical services. This language clearly and unambiguously limits coverage to the provision of

medical treatment or the failure to provide such treatment. See id. The Court in Kosoy found that

Dr. Kosoy's billing practices fell outside the definition of professional medical services as required

by the policy and was thus not covered under the Princeton policy.

In summary, Plaintiffs’ argument is off-point in that they argue that sexual abuse occurring

during medical treatment does not qualify as the rendering of “professional services.”’ But for

7 Plaintiffs also rely on Aria Health v. Med. Care Availability & Reduction of Error Fund, 88 A.3d 336 (Pa. Commw.

Ct. 2014) for support of its argument against coverage for Laurel. The Court distinguishes Aria from this case because

Aria discusses coverage of the MCARE fund which may apply to litigation of medical professional liability. The

Aria Court did not find the claim of negligent credentialing to be covered. See id. at 346. “[T]he critical question is

whether the claim asserts a failure to exercise professionally medically related judgment in providing healthcare.” □□□

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Laurel, the medical-institution, the underlying claims against it are not for sexual abuse but for a

negligence in carrying out its professional duties. In the insurance context, the Third Circuit has

defined “professional services” as an act or service “arising out of a vocation, calling, occupation

or employment involving specialized knowledge, labor, or skill... [T]he relevant consideration is

not the title or character of the party performing the act, but the act itself.” Visiting Nurse Ass'n.

y. St. Paul Fire & Marine Ins. Co., 65 F.3d 1097, 1101 (3d Cir.1995). Professional services are

not held to be strictly medical services, but services performed by professionals. The Court will

deny Princeton’s Motion for Judgment on the Pleadings as to Count II.

B. Duty to Indemnify and Defend under MedPro’s Policies

The issues are the same as to the MedPro Policies as in the Princeton Policies, and the

Court refers to the discussion above as it applies to the MedPro Policies. The Court nonetheless

will perform an analysis of the specific language in the MedPro Policies. The MedPro Policies

state that it will defend and pay damages on behalf of Laurel in any claim for damages based on

professional services rendered by the insured or based on professional services whose acts Laurel

is legally responsible for. Unlike Princeton, MedPro does not define professional services,® but

the language of the Policies indicates that “professional services” are services rendered “in the

practice of the insured’s profession...” Taking the language plainly, the Court concludes that,

like Princeton, professional services refer to the specific expertise of the persons who are legally

at 345. Aria is not instructive for this case because the Court found that professional services as to Laurel need not be

medical to be covered under the Policies. Plaintiffs also cite Connolly v. Com., Med. Pro. Liab. Catastrophe Loss

Fund, 739 A.2d 104 (1999), which is another case based on statutory law, the Medical Professional Liability

Catastrophe Loss Fund, which may be distinguished because the terms of the statute differ from the Policies.

8 The Court notes the argument “that where a professional liability policy does not contain its own definition of

‘professional services,’ courts sitting in Pennsylvania have found that the phrase can well be regarded as ambiguous

and, therefore, must be construed against the insurer.” ECF No. 43, p. 12 (citing Biborosch v. Transamerica Ins. Co.,

603 A.2d 1050, 1056 (Pa. Super 1992)).

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covered by Laurel. For example, a doctor’s professional services relate to the practice of medicine

while the secretary’s professional services relate to the administration of office functions.

Laurel maintains the same argument here as with Princeton, that the Underlying Litigation

against it are claims of negligence separate and aside from Dr. Barto’s actions. The claims of

negligence are in the discharge of the duties of professional services by its employees, whatever

position, in the context of the medical business. Like Princeton’s Policies, the MedPro Policies

cover both Laurel itself and its employees. The Court, as above, finds that MedPro’s Policies

cover the Underlying Litigation claims of negligence as it pertains to Laurel’s (employees)

rendering of professional services. The Court will deny MedPro’s Motion for Judgment on the

Pleadings as to Count I.

a. The But-For Relationship Exclusion

Plaintiffs argue that the Policies contain exclusions of liability for criminal acts. The

Princeton Policies exclude “[i]njury resulting from your performance of a criminal act.” Where

“your” refers to both Laurel, including its employees and Dr. Barto. The MedPro Policies do not

cover “payment of damages (BUT WILL DEFEND) in any claim for damages if said damages are

in consequence of the performance of a criminal act or willful tort or sexual acts. This Court

addressed a similar argument in Conemaugh Health Sys., Inc. v. ProSelect Ins. Co., 2023 WL

4540997, at *6-10 (W.D. Pa., July 14, 2023). In that case, the Court focused on policy language

that provided an exclusion for liability arising out of an illegal sexual act. The Court stated, “The

phrase ‘arising out of has been equated with ‘but for’ causation.” Tuscarora, 889 A.2d at 563;

Gen. Refractories Co. v. First State Ins. Co., 855 F.3d 152, 155 (3d Cir. 2017); McCabe v. Old

Republic Ins. Co,, 228 A.2d 901, 903 (1967); F. Ins. Co. v. Allied Sec., Inc., 866 F.2d 80, 82 3d

Cir. 1989). “But for causation, i.e., a cause and result relationship, is enough to satisfy [a]

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provision of the policy.” Mfrs. Cas. Ins. Co. v. Goodville Mut. Cas. Co., 170 A.2d 571, 573 (1961).

The Court finds that the exclusion language used in the Plaintiffs’ Policies also used “but-for”

language. In Princeton Policies, coverage is excluded for injury resulting from a criminal act; and

in MedPro Policies indemnity coverage is excluded for damages that are in consequence of the

performance of a criminal act or willful tort or sexual acts.

While the Court acknowledges its finding that the underlying allegations against Laurel are

negligence for professional services that would be covered under the Policies, it finds that the

exclusions of coverage in the Policies apply. As it did in Conemaugh Health Sys., Inc. v. ProSelect

Ins. Co., No. 3:21-CV-00190, 2023 WL 4540997, at *1 (W.D. Pa. July 14, 2023), the Court finds

that there is a causal, “but for” relationship, between the factual allegations in the Underlying

Litigation and the claims against Laurel. See Mut. Ben. Ins. Co. v. Haver, 725 A.2d 743, 745

(1999) (“{T]he particular cause of action that a complaint pleads is not determinative of whether

coverage has been triggered. Instead, it is necessary to look at the factual allegations contained in

the complaint.”); Kvaerner, 908 A.2d at 896 (“[A]n insurer's duty to defend and indemnify [must]

be determined solely from the language of the complaint against the insured.... [A]n insurer's duty

to defend is triggered, if at all, by the factual averments contained in the complaint itself”); see cf

Nat'l Liab. & Fire Ins. Co. v. Brimar Transit, Inc., No. 22-2565, 2023 WL 6172886, at *4 (3d Cir.

Sept. 22, 2023) (“Because the allegations in the complaint do not forge a strong enough link

between the use of the school bus and K.M.’s injuries, we conclude the District Court erred in

finding National had a duty to defend Brimar and the District.”)

There is a causal connection between the allegations against Laurel and the sexual

misconduct of Dr. Barto. But for the sexual abuse and other deviant behaviors for which Dr. Barto

was convicted, Laurel would not have been sued for its negligent acts. In other words, the damages

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of the Underlying Litigation are a consequence or a result of Dr. Barto’s sexual misconduct.

Without the damages caused by Dr. Barto’s actions, there would be no damages and therefore, no

claims against Laurel for its negligent professional services.

As in ProSelect, this Court once again will use as instructive the Pennsylvania Supreme

Court case of Madison Constr. Company v. Harleysville Mutual Ins. Co., 735 A.2d 100 (1999). In

the underlying action in Madison, the insured's employee alleged that after inhaling hazardous

fumes on the insured's construction site, he passed out and fell into a pit, hurting himself badly in

the process. See id at 102. The employee sued for negligence, and the insurer disclaimed

coverage, citing a policy exclusion for bodily injury “arising out of” the release of pollutants. See

id. at 102-03. The insured argued that the “underlying lawsuit state[d] claims for acts of alleged

negligence, such as failure to warn, which do not arise out of” the release of the pollutant. See id.

at 105-06. The Pennsylvania Supreme Court disagreed concluding that “regardless of the language

chosen by the [underlying] plaintiff, the plaintiff's “injuries ‘arose out of the release of the

irritating fumes at the construction site.” Jd. at 110. Here, Laurel is arguing, just like the insured

in Madison, that the underlying action arises out of its “negligence.” But just like the pollutant

release was unavoidably a basis of the underlying plaintiff's personal injury claim in Madison, Dr.

Barto’s criminal misconduct is unavoidably the basis of the Underlying Doe Plaintiffs’ claims.

Leithbridge reveals this point using the basic elements of negligence. “To demonstrate

negligence, a plaintiff must establish [1] that the defendant owed a duty of care to the plaintiff, [2]

that duty was breached, [3] the breach resulted in the plaintiff's injury, and [4] the plaintiff suffered

an actual loss or damages.” 464 F. Supp. 3d 734, 740 (E.D. Pa. 2020) (citing Kinney-Lindstrom

Med. Care Availability & Reduction of Error Fund, 73 A.3d 543, 563 (2013); Merlini v. Gallitzin

Water Auth., 980 A.2d 502, 506 (2009)). In the Underlying Litigation, the sexual misconduct is

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crucial to the claim causing the injury at element [3] and causing the actual loss or damage at [4].

Without the sexual misconduct, the Underlying Doe Plaintiffs have no negligence claim.

Underlying Doe Plaintiffs’ negligence claim, therefore, is unavoidably “based on” the sexual

misconduct.

In assessing whether an underlying negligence claim results from a particular event for

insurance purposes, the law in Pennsylvania is that the event may be independent of the alleged

breach of duty. See Madison, 735 A.2d at 109-10; Leithbridge, 464 F. Supp. 3d at 740. The

allegations of negligent hiring, negligent misrepresentation, negligent supervision, and medical

negligence could have not existed without first Dr. Barto’s illegal actions. Therefore, the claims

against Laurel result from, or are consequent to Dr. Barto’s the sexual misconduct. The Court

finds the exclusions in the Princeton and MedPro Policies apply and therefore, the insurance

companies’ exclusions apply as written.

Laurel seeks to distinguish the language in the Policies from cases that have decided the

similar exclusions applied. Laurel says the “resulting from” and “consequence of” language used

in the Policies is more akin to “caused by” and not “arising from.” The Court is not persuaded by

this argument and finds caselaw support for “but for causation” is implied with the terms “as a

result of and “consequent to.” See Maryland Cas. Co. v. Regis Ins. Co., No. CIV.A, 96-CV-

1790, 1997 WL 164268, at *4 (E.D. Pa. Apr. 9, 1997); Dillon Gage Inc. of Dallas v. Certain

Underwriters at Lloyd's, 440 F. Supp. 3d 587, 591 (N.D. Tex. 2020), aff'd sub nom. Dillon Gage,

Inc. of Dallas y. Certain Underwriters at Lloyds Subscribing to Pol'y No. EE1701590, 26 F.4th

323 (5th Cir. 2022) (“The Court believes a proper interpretation of “consequent upon” is “a

consequence of” or “because of’—in other words: but-for causation.”)

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In a close reading of the exclusionary language, the Court finds further support that

Laurel’s coverage is excluded by the Policies’ language. The exact wording of the Policies is:

(c) Injury resulting from your performance of a criminal act. The word “you” means

each individual named in the schedule and the partnership, corporation, or

professional association named in the schedule and any of its members...

ECF No. 1-21, pp. 7-8 (Princeton).

this policy does not cover ...

2. payment of damages (BUT WILL DEFEND) in any claim for damages if said

damages are in consequence of the performance of a criminal act or willful tort or

sexual acts;

ECF No. 1-14, p. 1 (MedPro). As to Princeton, the word “you” includes Laurel employees, so

coverage is excluded when the injury of the claim results from any employee of Laurel’s

performance of a criminal act. Because Dr. Barto was an employee of Laurel, the resulting

exclusion of coverage is clear. Even if the Court were to take Laurel’s interpretation of “resulting

from” to be akin to “caused by,” ECF No. 43, p. 26, the result is the same. Coverage is excluded

as it pertains to Laurel in the Princeton Policies.

As to MedPro’s Policies which exclude coverage in any claim for damages that are in

consequence of a criminal sexual act, the Policies’ language covers Laurel or any other person for

whose acts the Insured is legally responsible. Thus, the exclusion states it will not cover damages

in consequence of criminal sexual acts for any person for whom Laurel is legally responsible, such

as Dr.Barto.

Duty to Defend

Laurel argues that even if Plaintiffs’ exclusions for criminal/sexual acts are found to be

enforceable as to indemnification, the Insurers are still liable to defend Laurel based on specific

language in the Policies. The Princeton Policies contain the following language in the I Coverage

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section: “We have the right and duty to defend any ‘suit’ against you seeking payment for

injury...” Section I adds, “We will investigate any claim or ‘suit’ as we feel appropriate. We will

settle any claim or ‘suit’ as we deem appropriate.” ECF No. 1-21, p. 7. The following Section II

enumerates exclusions, including the exclusion for injury resulting from the performance of a

criminal act: The Princeton Policy language cited does not persuade the Court that the exclusion

does not apply for both indemnification and the broader duty to defend. First, the language cited

is in the Coverage Section and as such it is referring to cases that are deemed to be appropriately

covered and thus are entitled to a defense by Princeton. Section II provides the exclusions from

coverage and there is no indication that the exclusions partially apply to indemnification. It is the

Court’s determination that Princeton is not obligated to Laurel under its Policies to indemnify or

defend Laurel in the Underlying Litigation.

The MedPro Policies exclude “payment of damages (BUT WILL DEFEND) in any claim

for damages if said damages are in consequence of the performance of a criminal act or willful tort

or sexual acts.” The Court has found that the insuring agreement applied to Laurel as to the

negligence claims for Laurel’s professional services. See State Farm Fire & Cas. Co. v. Est. of

Mehlman, 589 F.3d 105, 111 (3d Cr. 2009) (“Ordinarily in insurance coverage disputes an insured

bears the initial burden to make a prima facie showing that a claim falls within the policy's grant

of coverage, but if the insured meets that burden, the insurer then bears the burden of demonstrating

that a policy exclusion excuses the insurer from providing coverage if the insurer contends that it

does.”). But the Court also finds that the exclusion clause allows MedPro to avoid liability for

payment of damages if the damages are in consequence of a criminal act. But the exclusion

language is clear and unambiguous that MedPro will continue to defend the insured under such

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circumstances. The Court finds that MedPro had no duty to indemnify Laurel but does maintain

the duty to defend Laurel in the Underlying Litigation.

The Court will grant Princeton’s Motion for Judgment on the Pleadings as it pertains to

Count IV. The Court will grant in part and deny in part MedPro’s Motion for Judgment on the

Pleadings as it pertains to Count III.

b. MedPro MCARE Exclusion

According to the Complaint, Laurel gave notice of the Underlying Litigation to the Medical

Care Availability and Reduction of Error Fund (““MCARE”) and sought defense and

indemnification for the claims set forth against it. ECF No. 1, p. 7. MCARE advised Laurel “it

would be assigning counsel pursuant to § 1303.715 ‘[t]o the extent the underlying Fourth Amended

Complaint could arguably be construed as alleging a violation of medical standards applicable to

the chaperoning of pediatric examinations.’” Jd. MCARE denied defense and indemnification for

any claims that were not alleging a “medical professional liability claim.” In Count V of MedPro’s

Motion for Judgment on the Pleadings, it asserts that it has no duty to Defend and Indemnify to

the extent the MCARE Exclusion Applies. The MCARE exclusion was added to MedPro Policies

covering January 1, 2003, to January 1, 2006. It reads

PENNSYLVANIA SECTION 715 ENDORSEMENT

The following exclusion is added to the policy:

Payment of damages in any claim for damages on which the Pennsylvania Medical

Care Availability and Reduction of Error (MCARE) Fund is required to defend and

pay damages pursuant to 40 P.S. § 1303,715, as well as any amendment or

extensions thereto.

The following sentence is added to Paragraph B:

Furthermore, the Company shall not be obligated to defend any claim after the

Pennsylvania Medical Care Availability and Reduction of Error (MCARE) Fund

has assumed the Insured’s defense pursuant to 40 P.S. § 1303.715, as well as any

amendments or extensions thereto.

23

ECF No. 1, p. 12; ECF No. 1-13, p. 4. The Court finds that to the extent that the MCARE Fund

assumes responsibility to defend and indemnify Laurel on any claims in the Underlying Litigation,

MedPro’s exclusion applies, and it will not be liable to indemnify or defend Laurel for the same

claims.

C. Punitive Damages

The Court has determined that neither Princeton nor MedPro are responsible to indemnify

Laurel in the Underlying Litigation. Count VII of Plaintiffs’ Motion for Judgment on the Pleadings

asks the Court to find that there is No Coverage for Punitive Damages. ECF No. 1, p. 31. The

Princeton Policies contain the provision, “This insurance does not apply to fines, penalties, taxes,

or punitive, exemplary, trebled, or multiplied damages.” ECF No. 1-21, p. 6 (emphasis added).

The MedPro Policies provide, “[T]his policy does not cover... any punitive damages or damages

over and above actual compensatory damages which may be assessed against the Insured.” ECF

No. 1-14, p. 1 (emphasis added). The language of the Policies is unambiguous, and the Court finds

that neither Princeton nor MedPro is responsible for payment of punitive damages in the

Underlying Litigation.

IV. Conclusion

For the reasons stated above, Plaintiffs’ Motion for Judgment on the Pleadings will be

GRANTED in part and DENIED in part and Defendant Laurel’s Cross Motion for Partial

Summary Judgment is GRANTED in part and DENIED in part. The Court enters Declaratory

Judgment in favor of Princeton. Princeton is not required to defend or indemnify Laurel in the

Underlying Litigation. The Court enters Declaratory Judgment in part as to MedPro. It is not

required to indemnify Laurel but is liable to defend Laurel as to certain claims.

An appropriate Order will be entered.

24

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_” Stephanie L. Haines

United States District Court Judge

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