In a significant victory for our client, Healthcare Professionals Insurance Company (“HPIC”), the New York Court of Appeals unanimously affirmed an Appellate Division, Fourth Department decision allocating responsibility for a large medical malpractice settlement among three sources of insurance coverage. The ruling leaves HPIC responsible for only 8.33% of the underlying settlement, despite vigorous arguments to the contrary by our adversary Kaleida Health.
In Kolli v. Kaleida Health, the Court of Appeals upheld two important arguments advanced by HPIC concerning the interpretation of coverages and the physician’s employment agreement.
First, the Court rejected Kaleida Health’s contention that its purported “self-insurance plan” was not actually insurance. Although Kaleida argued that its plan fell outside the “other insurance” provisions of HPIC’s excess liability
policy, the Court disagreed. Looking beyond the plan’s label to its substance, the Court held that Kaleida’s plan was an insurance policy because it protected physicians against risk, required claims reporting, and contained provisions governing coverage, exclusions, and priority. The Court further held that, even if the plan were not technically insurance, it constituted “equivalent coverage” expressly contemplated by HPIC’s policy.
Second, the Court adopted HPIC’s interpretation of a critical provision in the underlying
physician’s employment agreement. Kaleida argued that the agreement excluded Dr. Venkateswara Kolli from coverage under its self-insurance plan. The Court rejected that interpretation because it would effectively nullify other express provisions of the agreement guaranteeing coverage to physicians performing their employment duties. Instead, the Court agreed that the disputed provision applied to Dr. Kolli’s treatment of his private practice patients, not patients treated in the course of his on-call employment with Kaleida.
These rulings were decisive. They preserved Kaleida’s obligation to provide coverage and allowed the courts to apply established New York principles governing priority and allocation of insurance coverage, including those articulated in Lumbermens Mutual Casualty Co. v. Allstate Insurance Co., 51 NY2d 651 (1980).
The result: HPIC bears only a small fraction of the underlying malpractice loss, with the overwhelming majority allocated elsewhere, including Kaleida’s so-called “self-insurance” plan.
The Court of Appeals’ unanimous decision affirms Kolli v. Kaleida Health, 229 A.D.3d 1303 (4th Dept. 2024).
Benjamin F. Neidl represented HPIC at all stages of the case, including the appeal before the Court of Appeals.