Penn Psychiatric Center v. United States Liability

J-A10032-21

2021 PA Super 125

PENN PSYCHIATRIC CENTER, INC : IN THE SUPERIOR COURT OF

: PENNSYLVANIA

Appellant :

:

:

v. :

:

:

UNITED STATED LIABILITY : No. 1462 EDA 2020

INSURANCE COMPANY :

Appeal from the Order Entered June 17, 2020

In the Court of Common Pleas of Montgomery County Civil Division at

No(s): No. 2019-28413

BEFORE: PANELLA, P.J., OLSON, J., and COLINS, J.*

OPINION BY COLINS, J.: FILED JUNE 17, 2021

This is an appeal from an order dismissing an insurance coverage action

brought by Penn Psychiatric Center, Inc. (Insured) against United States

Liability Insurance Company (Insurer) on preliminary objections. Insured

claimed that it was entitled to coverage under an employment practices

insurance policy for an action brought against Insured and one of its therapists

by Amanda Madonna and Adrienne Martorana, two former patients who had

no employment relationship with Insured (the Underlying Action). The Court

of Common Pleas of Montgomery County (trial court) sustained Insurer’s

preliminary objections in the nature of a demurrer on the ground that the

allegations in the Underlying Action do not fall within the definition of a

____________________________________________

* Retired Senior Judge assigned to the Superior Court.

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“Wrongful Act” covered by Insurer’s policy. For the reasons set forth below,

we affirm.

Plaintiffs Madonna and Martorana filed the Underlying Action in

November 2018. The complaint in the Underlying Action alleges that the

therapist, under the guise of providing therapy for past sexual abuse, groped

and sexually assaulted plaintiff Madonna and sent her sexually charged

messages, and that after she complained about his conduct, the therapist

threatened her and gave information protected by the federal Health

Insurance Portability and Accountability Act of 1996 (HIPAA) to his girlfriend,

who then harassed and threatened her. Madonna/Martorana First Amended

Complaint (attached to Insured’s Amended Complaint as Ex. A) ¶¶63-72, 75-

79, 83-87, 93-106, 109-16, 122-24. This complaint also alleges that the same

therapist, under the guise of providing therapy for past sexual abuse, groped

plaintiff Martorana and sexually propositioned her. Id. ¶¶140-50. The

complaint in the Underlying Action asserts claims of negligent hiring, negligent

supervision, negligent undertaking to render services, violations of the Unfair

Trade Practices and Consumer Protection Law, and negligent

misrepresentation against Insured, alleging that Insured’s conduct caused the

plaintiffs to be treated by and assaulted by the therapist. Id. ¶¶158-212,

258-307. It also asserts claims of negligence per se, professional negligence,

and negligent infliction of emotional distress against the therapist and against

Insured on the ground that Insured is vicariously liable for the therapist’s acts.

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Id. ¶¶213-257. Plaintiff Madonna’s negligence per se count includes a claim

that the therapist’s sharing of her patient information with his girlfriend

violated HIPAA and that Insured is vicariously liable for his HIPAA violation.

Id. ¶¶215-17.

Insurer provided employment practices liability insurance coverage to

Insured under Medical Providers Employment Practices Protection Insurance

Policy No. MP1006654F (the Policy). Insured’s Amended Complaint ¶11;

Policy (attached to Insured’s Amended Complaint as Ex. B), Declarations &

Coverage A, Coverage Form at 1-6. The Policy is a claims-made policy

providing coverage to Insured for the period October 18, 2018 to October 18,

2019. Policy, Declarations.

The Policy provides indemnity and defense for actions and other

proceedings that seek to impose liability on Insured for a “Wrongful Act” as

that term is defined in the Policy. Policy, Coverage A § I, § III (B), Coverage

Form at 1. The Policy defines “Wrongful Act” as follows:

“Wrongful Act” means any actual or alleged act of:

(1) Discrimination; or

(2) Harassment; or

(3) Retaliation; or

(4) Wrongful Termination; or

(5) Workplace Tort; or

(6) negligent violation of the Uniform Services Employment &

Reemployment Rights Act; or

(7) negligent violation of the Family and Medical Leave Act of

1993; or

(8) negligent violation of state law having the same or

substantially similar purpose as the Acts in (6) or (7) above; or

(9) acts described in clauses (1) through (8) above arising from

the use of the Organization's Internet, e-mail, telecommunication

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or similar systems, including the failure to provide and enforce

adequate policies and procedures relating to such use of the

Organization's Internet, e-mail, telecommunication or similar

systems;

committed or allegedly committed by the Organization or by an

Individual Insured acting solely within his/her capacity as such

involving and brought by any Employee, former Employee,

or applicant for employment with the Organization or

asserted by any Employee, former Employee or applicant for

employment with the Organization against an Individual Insured

because of his/her status as such.

Wrongful Act shall also include any actual or alleged act of:

(1) Third Party Discrimination[.]

Id. § III(V), Coverage Form at 4 (emphasis added).1 The definitions of

“Discrimination,” “Harassment,” “Retaliation,” and “Wrongful Termination” all

limit coverage to claims arising out of an employment relationship or

application for employment. Id. §§ III(E), (H), (P), (W), Coverage Form at

1-4.

The Policy defines “Workplace Tort” and “Third Party Discrimination” as

follows:

“Third Party Discrimination” means discrimination by an

Insured in their capacity as such against a Third Party based

on such Third Party’s race, religion, age, sex, disability,

national origin, marital status, sexual orientation or other

protected class or characteristic established under applicable

federal, state or local statute or ordinance while the Insured is

performing duties related to the conduct of the Organization’s

business. This definition does not include any Claim which

in whole or part involves an allegation(s) of Patient

Molestation.

* * *

____________________________________________

1 The Policy Coverage Form also includes “Third Party Harassment” in the

definition of “Wrongful Act,” but that coverage was removed by endorsement.

Policy, Third Party Harassment Exclusion Endorsement.

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“Workplace Tort” means any actual or alleged

employment-related:

(1) misrepresentation; or

(2) negligent supervision, training or evaluation; or

(3) wrongful discipline; or

(4) wrongful deprivation of a career opportunity; or

(5) failure to enforce written policies and procedures relating to a

Wrongful Act.

Policy, Coverage A §§ III(S), (U), Coverage Form at 3-4 (emphasis added).

The Policy further provides that “Third Party Discrimination does not include

Third Party Harassment.” Policy, Third Party Harassment Exclusion

Endorsement (emphasis omitted).

The Policy’s employment practices liability coverage also contains the

following exclusion:

The Company shall not be liable to make payment for Loss or

Defense Costs (except where otherwise noted) in connection with

any Claim made against the Insured arising out of, directly or

indirectly resulting from or in consequence of, or in any way

involving:

* * *

(14) Any Claim arising or resulting directly or indirectly from

Patient Molestation.

Policy Coverage A § IV(A)(14), Coverage Form at 4-5 (emphasis omitted).

The Policy defines “Patient Molestation” as follows:

“Patient Molestation” means bodily injury, sickness, disease or

death, mental anguish, pain and suffering, emotional trauma, or

similar emotional injury arising out of improper physical contact

of a sexual nature with a patient of the Organization.

Policy, Definition of Patient Molestation Clarification Endorsement ¶1

(emphasis omitted).

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On February 27, 2019, Insured reported the Underlying Action to

Insurer. Insured’s Amended Complaint ¶13. On April 22, 2019, Insurer

notified Insured that “there is no coverage, either defense or indemnification,

under the Policy for the [Underlying Action]” because the plaintiffs in the

Underlying Action were not employees or former employees of Insured and

the Underlying Action did not assert a third-party discrimination claim and, in

addition, because any coverage would be excluded by the patient molestation

exclusion. Id. ¶21 & Ex. C at 1, 4-5.

On December 9, 2019, Insured filed the instant action against Insurer.

Insurer filed preliminary objections and Insured, in response, filed an

amended complaint. In its amended complaint, Insured asserted that it was

entitled to coverage for the Underlying Action on the ground that the

Underlying Action alleged negligent hiring, negligent supervision, and violation

of HIPAA and that these allegations fell within the Policy’s coverage of

“Workplace Tort” and “Third Party Discrimination” claims. Insured’s Amended

Complaint ¶¶15-18, 23-28, 32-34, 48-52. Insured asserted both claims for

declaratory judgments that Insurer was obligated to defend and indemnify it

in the Underlying Action and claims for bad faith denial of coverage and breach

of contract. Id. ¶¶19-71.

Insurer filed preliminary objections in the nature of a demurrer to

Insured’s amended complaint, asserting that none of Insured’s claims stated

a cause of action because the Policy’s coverage for “Workplace Tort” is limited

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to claims brought by employees, former employees and applicants for

employment and there was no “Third Party Discrimination” claim in the

Underlying Action, and because coverage was excluded by the patient

molestation exclusion. On June 17, 2020, the trial court sustained Insurer’s

preliminary objections and dismissed the action in its entirety on the ground

that the Policy did not provide coverage for the Underlying Action since the

plaintiffs in the Underlying Action were not employees, former employees or

employment applicants and the Underlying Action asserted no discrimination

claim. Trial Court Opinion at 4-7.

Insured timely appealed. Insured raises three issues in this appeal: 1)

whether the trial court erred in holding that the Policy’s “Workplace Tort”

coverage was limited to claims by employees, former employees or

employment applicants; 2) whether the trial court erred in holding that the

Underlying Action’s HIPAA claim was not a “Third Party Discrimination” claim;

and 3) whether the trial court’s dismissal of the action can be sustained on

the alternative ground that the patient molestation exclusion excludes

coverage. We conclude that the trial court correctly held that the Policy’s

“Workplace Tort” or “Third Party Discrimination” provisions do not provide

coverage for any of the claims in the Underlying Action and therefore do not

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reach the issue of whether coverage is barred by the patient molestation

exclusion.2

On an appeal from an order sustaining preliminary objections in the

nature of a demurrer, our standard of review is de novo and our scope of

review is plenary. Hospital & Healthsystem Association of Pennsylvania

v. Department of Public Welfare, 888 A.2d 601, 607 n.12 (Pa. 2005);

Frank v. TeWinkle, 45 A.3d 434, 438 (Pa. Super. 2012). “Preliminary

objections in the nature of a demurrer test the legal sufficiency of the

complaint.” Estate of O'Connell v. Progressive Insurance Co., 79 A.3d

1134, 1137 (Pa. Super. 2013). In determining whether a demurrer was

properly sustained, this Court must accept as true all well-pleaded material

____________________________________________

2 Under the Pennsylvania Supreme Court’s decision in Vale Chemical Co. v.

Hartford Accident & Indemnity Co., 516 A.2d 684 (Pa. 1986), where a

declaratory judgment is sought concerning liability coverage for a tort action,

the plaintiffs in the tort action are indispensable parties and failure to join

them deprives the court of jurisdiction to issue a declaratory judgment.

Although Insured sought declaratory relief, neither plaintiff in the Underlying

Action was named as a party. We conclude, however, that this did not divest

the trial court of jurisdiction to issue the order that is before us. The

requirement that the tort plaintiffs be joined is a requirement for declaratory

relief only, as it is based on the fact that the Declaratory Judgment Act

requires that “all persons shall be made parties who have or claim any interest

which would be affected by the declaration, and no declaration shall prejudice

the rights of persons not parties to the proceeding.” 42 Pa.C.S. § 7540(a);

Vale Chemical Co., 516 A.2d at 686-88. Here, two of Insured’s claims, its

bad faith claim and its breach of contract claim, did not seek declaratory relief

and were not subject to the requirements of the Declaratory Judgment Act.

The absence of the tort plaintiffs therefore had no effect on the trial court’s

jurisdiction over those claims. Moreover, the trial court did not issue a

declaratory judgment in favor of any party; rather it sustained Insurer’s

demurrer and dismissed the action.

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averments of fact in the complaint and every inference that is reasonably

deducible from those facts. Hudson v. Pennsylvania Board of Probation

and Parole, 204 A.3d 392, 395 (Pa. 2019); O'Connell, 79 A.3d at 1137;

Frank, 45 A.3d at 438. The Court, however, is not required to accept as true

conclusions of law, unwarranted inferences, or argumentative allegations.

Hudson, 204 A.3d at 395; Conrad v. City of Pittsburgh, 218 A.2d 906, 907

n.3 (Pa. 1966). If a claim is based on a document, it is the document, not

averments in the plaintiff’s complaint characterizing it, that determine

whether the plaintiff has stated a cause of action, and averments that conflict

with the document need not be accepted as true. Jenkins v. County of

Schuylkill, 658 A.2d 380, 383 (Pa. Super. 1995); Framlau Corp. v.

Delaware County, 299 A.2d 335, 338 (Pa. Super. 1972).

The interpretation of an insurance policy is an issue of law over which

this Court exercises plenary, de novo review. Donegal Mutual Insurance

Co. v. Baumhammers, 938 A.2d 286, 290 (Pa. 2007); Kiely v.

Philadelphia Contributionship Insurance Co., 206 A.3d 1140, 1145 (Pa.

Super. 2019). In determining whether an insurance policy provides coverage

for a suit brought against the insured, a court must compare the terms of the

insurance policy to the allegations of the complaint filed against the insured.

American and Foreign Insurance Co. v. Jerry’s Sport Center, Inc., 2

A.3d 526, 541 (Pa. 2010); Pennsylvania Manufacturers Indemnity Co. v.

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Pottstown Industrial Complex LP, 215 A.3d 1010, 1014 (Pa. Super. 2019);

Kiely, 206 A.3d at 1146.

The burden is on the insured to show that the claim is within the policy’s

coverage. Erie Insurance Group v. Catania, 95 A.3d 320, 322 (Pa. Super.

2014); O'Connell, 79 A.3d at 1138. Where coverage is denied based on an

exclusion, however, the burden is on the insurer to prove the applicability of

the exclusion. Nationwide Mutual Insurance Co. v. Arnold, 214 A.3d 688,

695, 701-02 (Pa. Super. 2019); Catania, 95 A.3d at 322-23. If a complaint

against the insured pleads facts that are potentially within the scope of the

policy’s coverage, the insurer has a duty to defend the action until all covered

claims are removed from the action. Jerry’s Sport Center, 2 A.3d at 541-

42; Kiely, 206 A.3d at 1146.

In determining whether the complaint pleads facts potentially within a

policy’s coverage, we are guided by the following additional principles. Where

the policy provisions are clear and unambiguous, the courts must give effect

to the policy’s language. Baumhammers, 938 A.2d at 290; Pottstown

Industrial Complex, 215 A.3d at 1015; Allstate Fire and Casualty

Insurance Co. v. Hymes, 29 A.3d 1169, 1172 (Pa. Super. 2011). “[C]ourts

must construe the terms of an insurance policy as written and may not modify

the plain meaning of the words under the guise of ‘interpreting’ the policy.”

Swarner v. Mutual Benefit Group, 72 A.3d 641, 645 (Pa. Super. 2013)

(quoting Hymes). In determining the meaning of policy terms, the court must

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consider the language of the policy in its entirety. Kurach v. Truck

Insurance Exchange, 235 A.3d 1106, 1116 (Pa. 2020); State Farm Mutual

Automobile Insurance Co. v. Dooner, 189 A.3d 479, 482 (Pa. Super.

2018).

Policy provisions that are ambiguous must be construed in favor of the

insured. Baumhammers, 938 A.2d at 290; Pottstown Industrial

Complex, 215 A.3d at 1015; Swarner, 72 A.3d at 645. Policy provisions are

ambiguous, however, only if they are reasonably susceptible of more than one

construction. Swarner, 72 A.3d at 645; Tuscarora Wayne Mutual

Insurance Co. v. Kadlubosky, 889 A.2d 557, 561-62 (Pa. Super. 2005).

The fact that the parties disagree on the proper construction of policy language

does not make it ambiguous. Dooner, 189 A.3d at 482; Brown v. Everett

Cash Mutual Insurance Co., 157 A.3d 958, 962 (Pa. Super. 2017);

Kadlubosky, 889 A.2d at 561. Courts should interpret insurance policy

provisions to avoid ambiguities, if possible. Dooner, 189 A.3d at 482-83;

Brown, 157 A.3d at 962; Kadlubosky, 889 A.2d at 562. “A court cannot

‘torture the [policy] language’ to create ambiguities where none exist.”

Swarner, 72 A.3d at 645 (quoting Ryan Homes, Inc. v. Home Indemnity

Co., 647 A.2d 939 (Pa. Super. 1994)) (brackets in original); see also

Kadlubosky, 889 A.2d at 562.

In its first issue, Insured argues that the claims in the Underlying Action

for negligent hiring and negligent supervision fall within the Policy’s definition

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of “Workplace Tort” and are therefore “Wrongful Acts” for which the Policy

provides coverage.3 The trial court correctly rejected this argument because

the Policy’s definitions of both “Workplace Tort” and “Wrongful Act”

unambiguously limit coverage to claims arising out of an employment or

prospective employment relationship.

Contrary to Insured’s contentions, the negligent hiring and negligent

supervision claims in the Underlying Action do not fall within the Policy’s

definition of “Workplace Tort.” The Policy does not include negligent hiring in

the definition of “Workplace Tort” or “Wrongful Act” at all. Policy, Coverage A

§§ III(U), (V), Coverage Form at 3-4. The Policy does include negligent

____________________________________________

3 Insured also argues in this appeal that the misrepresentation claims in the

Underlying Action are “Wrongful Acts” under the Policy. Insured did not allege

in its amended complaint or argue in the trial court that the misrepresentation

claims in the Underlying Action were covered by the Policy. This coverage

claim is therefore waived. It, however, does not raise any additional issues

concerning the Policy language beyond those concerning coverage for

negligent supervision, as both misrepresentation and negligent supervision

are under the definition of “Workplace Tort.” Accordingly, even if it were not

waived, it would fail for the same reasons that we hold that the negligent

supervision claim is not covered by the Policy. Insured does not contend that

the Policy provides coverage for the Underlying Action on the ground that it

asserts claims of harassment. Although the Policy’s definition of “Wrongful

Act” coverage includes harassment, Policy, Coverage A § III (V)(2), Coverage

Form at 4, the harassment claims in the Underlying Action are clearly not

covered because the Policy’s definition of harassment limits coverage to

employee claims. Id. § III(H), Coverage Form at 2 (defining “Harassment”

as sexual or other harassment that is “made a condition of employment, that

is “used as a basis for employment decisions,” or that “creates a work

environment that is hostile, intimidating or offensive or that otherwise

interferes with performance”).

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supervision in its definition of “Workplace Tort.” Policy, Coverage A § III(U)

(2), Coverage Form at 3. The definition of “Workplace Tort,” however,

expressly restricts coverage to “employment-related” claims. Id. § III(U),

Coverage Form at 3 (“‘Workplace Tort’ means any actual or alleged

employment-related: … (2) negligent supervision, training or evaluation …”)

(emphasis added).

Insured argues that all negligent supervision claims are employment-

related even if they are brought by non-employees. That contention cannot

be accepted because it would make the language “employment-related”

surplusage with respect to almost all of the items listed as “Workplace Torts.”

In interpreting an insurance policy, the courts are to give effect to all of the

policy’s language and not treat any provisions as mere surplusage. Clarke

v. MMG Ins. Co., 100 A.3d 271, 276 (Pa. Super. 2014); Millers Capital

Insurance Co. v. Gambone Brothers Development Co., 941 A.2d 706,

715 (Pa. Super. 2007). Insured also argues that negligent supervision claims

can only be third-party claims. That assertion is inaccurate. While negligent

supervision can be a theory on which liability to third parties is based, it could

also be the subject of a claim by an employee, as negligent supervision of

other employees could cause harm to an employee. In addition, the coverage

is for “negligent supervision, training or evaluation,” Policy, Coverage A §

III(U)(2), Coverage Form at 3, not negligent supervision and hiring, and

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providing inadequate or improper supervision, training, and evaluation to an

employee could harm that employee in his or her employment.

Furthermore, the Policy’s definition of “Wrongful Act” expressly limits

coverage of “Workplace Tort” claims, and all other claims except for “Third

Party Discrimination,” to claims for acts “committed or allegedly committed

by the Organization or by an Individual Insured acting solely within his/her

capacity as such involving and brought by any Employee, former

Employee, or applicant for employment with the Organization.” Policy,

Coverage A § III (V), Coverage Form at 4 (emphasis added). The claims in

the Underlying Action are not claims brought by an employee, former

employee, or job applicant.

Insured argues that because the language “involving and brought by

any Employee, former Employee, or applicant for employment” immediately

follows the words “Individual Insured acting solely within his/her capacity as

such” and because there is no comma before it, the requirement that the claim

be brought by an employee, former employee, or applicant applies only to

individual insureds and not to Insured itself or that it could reasonably be

interpreted as applying only to individual insureds.4 We do not agree.

____________________________________________

4 Insurer contends that this argument was waived because Insured did not

make any argument in the trial court based on the position or punctuation of

the language “involving and brought by any Employee, former Employee, or

applicant for employment.” While Insured did not make this grammatical

structure argument below, Insured did argue to the trial court that coverage

(Footnote Continued Next Page)

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Under the “last antecedent” rule of construction, qualifying words and

phrases generally are interpreted as referring only to the last word, phrase,

or clause that can be made an antecedent without impairing the meaning of

the sentence where no contrary intention appears. Commonwealth v.

Rosenbloom Finance Corp., 325 A.2d 907, 909 (Pa. 1974); Buntz v.

General American Life Insurance Co., 7 A.2d 93, 95 (Pa. Super. 1939);

Summit Township Industrial and Economic Development Authority v.

County of Erie, 980 A.2d 191, 208 (Pa. Cmwlth. 2009) (en banc). This rule,

however, does not limit a qualifying phrase to the last item or make the

document ambiguous, even where there is no comma before the qualifying

phrase, where it is clear from the document as a whole that the phrase in

question was intended to apply to all of the items that are listed before the

qualifying phrase. Rosenbloom Finance Corp., 325 A.2d at 909-10;

Summit Township Industrial and Economic Development Authority,

980 A.2d at 207-10. “When several words are followed by a modifying phrase

which is applicable as much to the first and other words as to the last, the

natural construction of the language demands that the modifying phrase be

read as applicable to all.” Rosenbloom Finance Corp., 325 A.2d at 909

____________________________________________

for “Workplace Tort” was not limited to claims by employees, former

employees, and employment applicants. Moreover, the fact that the trial court

did not evaluate the grammatical argument does not impair this Court’s review

as the interpretation of the Policy is a question of law that this Court reviews

de novo. We therefore do not find this argument barred by waiver.

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(quoting Porto Rico Railway, Light & Power Co. v. Mor, 253 U.S. 345

(1920)) (parentheses omitted).

Here, applying the phrase “involving and brought by any Employee,

former Employee, or applicant for employment” to claims against both the

insured entity and individual insureds is a normal grammatical reading of the

Policy’s language. Moreover, the intent that the phrase apply to both the

insured entity and individual insureds is demonstrated by the language of the

Policy as a whole. The Policy repeatedly and consistently requires that covered

claims other than those bearing the label “Third Party” be employment related.

Policy, Coverage A §§ III(E), (H), (P), (U), (W), Coverage Form at 1-4. If the

intent was to cover claims against the insured entity regardless of whether

they were brought by an employee or former or prospective employee and

restrict only coverage of claims against individual insureds, there would be no

reason for a category of “Third Party Discrimination” separate from

“Discrimination” and the Policy could have simply restricted “Wrongful Act[s]”

committed by individual insureds, other than discrimination, to those involving

and brought by employees, former employees, or applicants. None of the

cases cited by Insured in support of its last antecedent argument involves

Pennsylvania law, insurance coverage, or language similar to that at issue

here.

In addition, there is no apparent reason in the structure or purpose of

the Policy for limiting only individual insureds’ coverage. The language

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“Individual Insured acting solely within his/her capacity as such” restricts

coverage for individuals to their work-related acts; the language “involving

and brought by any Employee, former Employee, or applicant for

employment” restricts the type of suit that is covered by the Policy, not

whether the individual insured’s act was work-related. The inclusion, in the

definition of “Wrongful Act,” of coverage for assertions against individual

insureds based on their status in the insured entity, Policy, Coverage A §

III(V), Coverage Form at 4 (“or asserted by any Employee, former Employee

or applicant for employment with the Organization against an Individual

Insured because of his/her status as such”), does not indicate any intent to

provide coverage of non-employee claims against the insured entity. The

apparent reason for this additional clause for individual insureds would be to

provide coverage for claims that the individuals are liable based on their status

for acts they are not claimed to have committed; no equivalent language is

necessary for the insured entity because its agents’ acts are its acts.

Our conclusion that the Policy does not cover negligent supervision and

other “Workplace Tort” claims brought by plaintiffs with no present, past, or

prospective employment relationship with Insured is also supported by case

law throughout the country interpreting employment liability insurance

policies. While our courts have not previously addressed this issue, decisions

of other courts have repeatedly held that employment practices liability

insurance covers only claims of employees, former employees, and job

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applicants, except to the extent that the policy expressly provides third-party

or non-employment-related coverage for a particular type of claim. See, e.g.,

McCalla Corp. v. Certain Underwriters at Lloyd's, London, 2014 WL

1745647 at *4 (D. Kan. No. 13–1317–SAC filed May 1, 2014) (construing

employment practices liability (EPL) policy language covering “wrongful failure

or refusal to adopt or enforce adequate workplace or employment practices,

policies or procedures” to provide coverage for a claim filed by a party with no

employment relationship to the insured “would defeat the purpose of EPL

coverage, which is necessarily limited to enumerated acts claimed by

employees, former employees and prospective employees”); Carolina

Casualty Insurance Co. v. Red Coats, Inc., 2014 WL 11428185 at *3-*4

(N.D. Fla. No. 1:12-cv-00232-MP-GRJ filed Apr. 22, 2014) (employment

practices liability insurance policy’s coverage for “negligent retention,

negligent supervision, and negligent hiring” did not cover claim by non-

employee), aff’d on this issue, 624 Fed.Appx. 992, 994-95 (11th Cir. 2015);

101 Ocean Condominium Homeowners Association v. Century Surety

Co., 2009 WL 10698412 at *3-*4 (C.D. Cal. CV 09-01206 SVW (JCx) filed

July 29,2009), aff’d, 407 Fed.Appx. 129, 132 (9th Cir. 2010); General Star

Indemity Co. v. Virgin Islands Port Authority, 2007 WL 185122, at *3-

*4 (D.V.I. No. 2001–188 filed Jan. 5, 2007); Clarendon National

Insurance Co. v. City of York, 290 F. Supp. 2d 500, 506 (M.D. Pa. 2003),

aff’d, 121 Fed.Appx. 940 (3d Cir. 2005).

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Insured contends in its second issue that it is entitled to coverage for

the Underlying Action under the Policy’s coverage of “Third Party

Discrimination” claims. This argument likewise fails.

The Policy includes “Third Party Discrimination” in the definition of

“Wrongful Act” without the qualification “involving and brought by any

Employee, former Employee, or applicant for employment.” Policy, Coverage

A § III(V), Coverage Form at 4. The fact that neither plaintiff in the Underlying

Action had any employment relationship with Insured would therefore not

preclude coverage of such a claim.

The Underlying Action, however, does not assert any claim of “Third

Party Discrimination.” The Policy defines “Third Party Discrimination” as

“discrimination by an Insured in their capacity as such against a Third Party

based on such Third Party’s race, religion, age, sex, disability, national

origin, marital status, sexual orientation or other protected class or

characteristic established under applicable federal, state or local statute or

ordinance.” Policy, Coverage A § III(S), Coverage Form at 3 (emphasis

added). The complaint in the Underlying Action does not make any allegations

that Insured’s or the therapist’s actions toward the plaintiffs were based on

race, religion, age, gender, disability, national origin, marital status, sexual

orientation or any other group characteristic of any kind. Indeed, the

complaint in the Underlying Action does not contain the words “discriminate”

or “discrimination” at all.

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J-A10032-21

Insured argues that plaintiff Madonna’s negligence per se claim of

sharing of confidential patient information in violation of HIPAA falls within the

definition of “Third Party Discrimination” because HIPAA is an applicable

federal statute that creates a protected class or characteristic. The Underlying

Action, however, alleges only a violation of plaintiff Madonna’s rights under

HIPAA, not that she was harassed or treated differently because she was a

patient or had rights protected by HIPAA. Madonna/Martorana First Amended

Complaint ¶¶215-16.

Insured also argues that there is “Third Party Discrimination” coverage

because the Underlying Action plaintiffs are members of a protected class,

women, and were discriminated against by the HIPAA violation. This

argument too is without merit. The Underlying Action does not allege that

any plaintiff’s HIPAA rights were violated because they were female or that

their status as women had any connection to the HIPAA violation.

Insured does not argue and did not allege in its complaint that any claim

in the Underlying Action, other than the HIPAA violation, falls within the

Policy’s “Third Party Discrimination” coverage. Appellant’s Br. at 14, 21-22;

Insured’s Amended Complaint ¶¶33-34, 51-52. Moreover, even if the

allegations of the Underlying Action were characterized as involving sex

discrimination because the therapist assaulted only women (an allegation that

is absent from the complaint in the Underlying Action), that could not

constitute a claim of “Third Party Discrimination” under the Policy because the

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definition of “Third Party Discrimination” specifically excludes such claims. The

Policy’s definition of “Third Party Discrimination” provides both that it “does

not include any Claim which in whole or part involves an allegation(s) of

Patient Molestation” and that “Third Party Discrimination does not include

Third Party Harassment.” Policy, Coverage A § III(S), Coverage Form at 3 &

Third Party Harassment Exclusion Endorsement (emphasis omitted). The

Policy defines “Third Party Harassment” as including “[s]exual harassment

including any unwelcome sexual advances, requests for sexual favors or other

verbal or physical conduct of a sexual nature against a Third Party.” Policy,

Coverage A § III(T)(2), Coverage Form at 3. The Policy does not cover “Third

Party Harassment.” Policy, Third Party Harassment Exclusion Endorsement.

Because the trial court correctly held that none of the claims in the

Underlying Action are “Wrongful Acts” covered by the Policy, we affirm its

order sustaining Insurer’s demurrer.5

____________________________________________

5 Insured argues in its third issue that there is a factual dispute as to whether

Insured had coverage for patient molestation claims under Coverage B in the

Coverage Form that is part of the Policy. Coverage B of the Coverage Form

sets forth a coverage for “Defense Costs … that the Insured shall become

legally obligated to pay because of Claims … for Patient Molestation or Claims

which in whole or part involve an allegation(s) of Patient Molestation,” but

provides no coverage for indemnity. Policy, Coverage Form at 6 (emphasis

omitted). The Policy’s declarations page, however, states under the Coverage

B heading: “NOT COVERED.” Policy, Declarations. Insured asserts its third

issue only as an argument that the trial court’s decision cannot be sustained

on an alternative ground, not as a ground for reversal. We note, moreover,

that any issues of fact concerning whether Coverage B was part of the Policy

cannot constitute a ground for reversal of the trial court’s dismissal of

(Footnote Continued Next Page)

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J-A10032-21

Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 6/17/2021

____________________________________________

Insured’s action and are irrelevant to this appeal because Insured did not

assert any claim under Coverage B in its complaint. Rather, Insured’s

complaint asserted coverage for the Underlying Action solely under Coverage

A and its coverage for “Workplace Tort” and “Third Party Discrimination”

claims and specifically alleged that the claims against Insured in the

Underlying Action “are not claims arising or resulting directly or indirectly from

Patient Molestation.” Insured’s Amended Complaint ¶¶23-28, 31, 33-34, 48-

52. We therefore need not address Insured’s third issue.

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