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. (“PPC”). These individuals had no employment relationship with Penn Psychiatric Center, Inc. whatsoever, and claimed that PPC’s psychotherapist assaulted them (“Underlying Claim”). 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 PPC’s 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 therapist’s acts.
The United States Liability Insurance Company (“USLIC”) 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 “Wrongful Act,” which the Policy defined in pertinent part as any actual or alleged act of a “Workplace Tort…involving 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.” The Policy defined “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… “Workplace Tort” means any actual or alleged employment-related… negligent supervision, training or evaluation…
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 “Patient Molestation” 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 Policy’s “Workplace Tort” or “Third Party Discrimination” 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 Policy’s definition of “Workplace Tort” and are therefore “Wrongful Acts” for which the Policy provides coverage. In deciding this issue, the Superior Court affirmed the trial court’s rejection of 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. Specifically, the court determined the definition of “Workplace Tort” expressly restricts coverage to “employment-related” 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. 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”)(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 Policy’s coverage of “Third Party Discrimination” claims. Specifically, the court determined that the Underlying Action, however, did not assert any claim of “Third Party Discrimination,” which the Policy defines 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.” In this instance, the court held that a HIPAA violation did not constitute third-party discrimination. Finally, the court determined that the definition of “Third Party Discrimination” excluded any claims which in whole or in part involves an allegation of Patient Molestation.