Penn Psychiatric Center, Inc. v. United States Liability Insurance Company
In Penn Psychiatric Center, Inc. v. United States Liability Insurance Company, 2015 PA Super 125 (June 17, 2020), the Pennsylvania Superior Court determined that insurance coverage did not exist for claims that involve allegations of patient molestation.
Amanda Madonna and Adrienne Martorana allegedly received psychotherapy services from Penn Psychiatric Center, Inc. (âPPCâ). These individuals had no employment relationship with Penn Psychiatric Center, Inc. whatsoever, and claimed that PPCâs psychotherapist assaulted them (âUnderlying Claimâ). Specifically, Ms. Madonna claimed the therapist groped and sexually assaulted her and sent her sexually charged messages. Ms. Madonna also claimed 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. Ms. Martorana also claimed the same therapist groped and sexually propositioned her. The complaint in the Underlying Claim contained allegations of negligent hiring, negligent supervision, negligent undertaking to render services, violations of the Unfair Trade Practices and Consumer Protection Law and negligent misrepresentation against PPC, alleging that PPCâs conduct caused the plaintiffs to be treated by and assaulted by the therapist. Plaintiffs also asserted claims of negligence per se (including HIPAA violation), professional negligence and negligent infliction of emotional distress against the therapist and against PPC on the ground that PPC is vicariously liable for the therapistâs acts.
The United States Liability Insurance Company (âUSLICâ) provided employment practices liability insurance coverage to PPC. The Policy provides indemnity and defense for actions and other proceedings that seek to impose liability on PPC for a âWrongful Act,â which the Policy defined in pertinent part as any actual or alleged act of a âWorkplace TortâŚinvolving and brought by any Employee, former Employee, or applicant for employment with the Organization. Wrongful Act shall also include any actual or alleged act of third-party discrimination.â The Policy defined âWorkplace Tortâ and âThird Party Discriminationâ as follows:
âThird Party Discriminationâ means discrimination by an Insured in their capacity as such against a Third Party based on such Third Partyâs 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 Organizationâs business. This definition does not include any Claim which in whole or part involves an allegation(s) of Patient Molestation⌠âWorkplace Tortâ means any actual or alleged employment-related⌠negligent supervision, training or evaluationâŚ
The Policy also contained 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.
The Policy defined âPatient Molestationâ as 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.
Based on the foregoing, USLIC denied coverage for the claims arising out of the Underlying Claim. Thereafter, PPC filed a Declaratory Action seeking to have the court determine that the Policyâs âWorkplace Tortâ or âThird Party Discriminationâ provisions provide coverage for any of the claims in the Underlying Action. More specifically, PPC argued that the claims in the Underlying Action for negligent hiring and negligent supervision fall within the Policyâs definition of âWorkplace Tortâ and are therefore âWrongful Actsâ for which the Policy provides coverage. In deciding this issue, the Superior Court affirmed the trial courtâs rejection of this argument because the Policyâs definitions of both âWorkplace Tortâ and âWrongful Actâ unambiguously limit coverage to claims arising out of an employment or prospective employment relationship. Specifically, the court determined the definition of âWorkplace Tortâ expressly restricts coverage to âemployment-relatedâ claims, including negligent supervision, training or evaluation.
The court noted this case was one of first impression in Pennsylvania, but other courts have repeatedly held that employment practices liability insurance covers only claims of employees, former employees and job 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. 13â1317âSAC filed May 1, 2014) (construing employment practices liability (EPL) policy language covering âwrongful failure or refusal to adopt or enforce adequate workplace or employment practices, policies or proceduresâ to provide coverage for a claim filed by a party with no employment relationship to the insured âwould defeat the purpose of EPL coverage, which is necessarily limited to enumerated acts claimed by employees, former employees and prospective employeesâ)(Other citations omitted.)
The Superior Court also agreed with the trial court finding that PPC was not entitled to coverage in the Underlying Action under the Policyâs coverage of âThird Party Discriminationâ claims. Specifically, the court determined that the Underlying Action, however, did not assert any claim of âThird Party Discrimination,â which the Policy defines as âdiscrimination by an Insured in their capacity as such against a Third Party based on such Third Partyâs 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.â In this instance, the court held that a HIPAA violation did not constitute third-party discrimination. Finally, the court determined that the definition of âThird Party Discriminationâ excluded any claims which in whole or in part involves an allegation of Patient Molestation.