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Travelers Indemnity Co. v. American Casualty Company of Reading

March 05, 2003

TRAVELERS INDEMNITY COMPANY, A CONNECTICUT CORPORATION, PLAINTIFF-APPELLANT,
v.
AMERICAN CASUALTY COMPANY OF READING, PA, A PENNSYLVANIA CORPORATION DOING BUSINESS AS CNA INSURANCE COMPANIES, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County. The Honorable Nancy J. Arnold, Judge Presiding.

The opinion of the court was delivered by: Justice Wolfson

Released for publication April 7, 2003.

TRAVELERS INDEMNITY COMPANY, A CONNECTICUT CORPORATION, PLAINTIFF-APPELLANT,
v.
AMERICAN CASUALTY COMPANY OF READING, PA, A PENNSYLVANIA CORPORATION DOING BUSINESS AS CNA INSURANCE COMPANIES, DEFENDANT-APPELLEE.

Appeal from the Circuit Court of Cook County. The Honorable Nancy J. Arnold, Judge Presiding.

The opinion of the court was delivered by: Justice Wolfson

PUBLISH

This appeal arises from a dispute between Travelers Indemnity Company (Travelers) and American Casualty Company (American Casualty) over the priority of coverage between an excess liability policy issued by Travelers and three primary liability policies with "other insurance" provisions issued by American Casualty. The circuit court concluded the excess policy and the primary policies should contribute pro rata to settlement of the underlying action.

Travelers appeals, contending the circuit court erred because the limits of the primary policies should be exhausted before Travelers is required to pay under the excess policy.

We agree with Travelers. We reverse and remand.

BACKGROUND

In the underlying action, Ronald D. Potts brought a medical malpractice suit against two physicians and ten nurses employed at Pekin Memorial Hospital and against Pekin Memorial Hospital. Potts alleged the prenatal and postnatal treatment of his wife and son, born on July 15, 1985, was negligent. Among the nurse defendants were Dorothy C. Lovell, Deborah M. Ruwe, and Patricia E. Krile.

NURSES' LIABILITY INSURANCE POLICIES

For the time at issue in the underlying action, each of these three nurses had a professional nursing liability insurance policy issued by American Casualty (American Casualty Liability Policies). The policies for Lovell and Ruwe each had professional liability limits of $500,000 for each medical incident. Krile's policy had a professional liability limit of $1,000,000 for each medical incident.

The American Casualty Liability Policies provided coverage for:

"all amounts up to the limits of liability:

1. which you become legally obligated to pay as a result of injury or damage. The injury or damage must be caused by:

a. a medical incident as a result of the supplying of or failure to supply professional services by you ***."

Each of the three policies also contained an "other insurance" clause, which read:

"If you have other insurance which applies to injury or damage

resulting from your professional services, the other insurance must pay first. It is the intent of this policy to apply to the amount of loss which is more than the limit of the other insurance."

PEKIN MEMORIAL HOSPITAL'S LIABILITY INSURANCE POLICIES

Travelers Primary Liability Policy

Pekin Memorial Hospital had a primary general liability policy issued by Travelers covering the time at issue in the underlying complaint (Travelers Primary Liability Policy). The policy included coverage for professional liability with a limit of $500,000 per occurrence or medical incident.

The policy extended coverage to any employee of Pekin Memorial Hospital while acting within the scope of her duties. The underlying complaint alleged the nurses were acting within the scope of their employment. Thus, for purposes of the underlying action, Krile, Ruwe, and Lovell ...


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