The court determined there was no coverage for 150 underlying lawsuits which alleged that injections for back pain caused bodily injury and death. Westfield Ins. Co. v. Orthopedic & Sports Med. Ctr. of N. Ind., 2017 U.S. Dist. LEXIS 46119 (N. Ind. March 28, 2017).
NECC made preservative-free methylprednisolone acetate (MPA). MPA was an epidural steroid medication that was administered by injection for pain management. Defendants Orthopedic and Sports Medicine Center of Northern Indiana, Inc. (OSMC) and its affiliate, ASC Surgical Ventures, LLC (ASC), purchased MPA from NECC to treat patients with back pain. In September 2012, a multistate outbreak of fungal meningitis, lumbar fungal infections and related injuries arose as a result of patients receiving injections of contaminated MPA.
Over 150 patients and personal representatives sued OSMC ASC, and their physicians (OSMC Physicians) in state court. Most of the patients also filed complaints with the Indiana Department of Insurance. (Malpractice Complaints).
Westfield issued CGL and umbrella policies to the OSMC defendants.The defendants requested that Westfield defend and indemnify against the lawsuits and Malpractice Complaints. Westfield refused, and filed an action for declaratory judgment in federal court against the OSMC defendants and the patients.
Indiana law controlled the coverage dispute. The court first determined that there was no duty to defend the Malpractice Complaints which were addressed by a medical review panel. The panel had the sole duty to express its expert opinion as to whether or not the evidence supported the conclusion that the defendants acted or failed to act within the appropriated standards of care as charged in the complaint. The panel did not have jurisdiction to award damages against the OSMC Defendants, eliminating the possibility of coverage under the Westfield policies.
Nor was there a duty to defend and/or indemnify insureds in the lawsuits. There was a difference under Indiana law between an accident/occurrence and a professional error or omission. An accident/occurrence was covered by CGL insurance, while a professional error or omission was covered by E&O insurance.
The lawsuits alleged a professional relationship between the OSMC Defendants, who were "engaged in the business of providing health care," and the patients to whom they administered the epidural MPA injections. The failure to meet a standard of care under a contractually assumed duty was not an "accident." Although the OSMC Defendants did not intentionally commit wrongdoing, this failure did not convert their actions into an "accident." The lawsuits' claims that the OSMC Defendants were negligent in selecting NECC as a supplier of MPA and in managing the supplier relationship did not allege an "accident" under the policies.
Even if there was an accident, the exclusions barred coverage. For example, the umbrella policies had a Professional Services Exclusion. It provided that the insurance did not apply to bodily injury "due to rendering . . . any professional service," which included "medical . . . or nursing service or treatment, any health or therapeutic service or treatment and service in the practice of pharmacy." Westfield contended this exclusion eliminated coverage because the negligence claims were based on acts taken by the OSMC Defendants in the course of providing professional services. The insureds contended that the term "treatment" in the exclusion was ambiguous, and should be construed against Westfield. The court disagreed, Because the injections constituted the rendering of a medical service or "treatment," the lawsuits' negligence claims were excluded under the Professional Services Exclusion.
Therefore, no coverage existed and no duty to defend or to indemnify arose.
