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Insurer must defend doctor against patient’s lawsuit

Judge distinguishes ‘injury’ from ‘incident’ doctor had to disclose

An insurance company must defend a La Plata gynecologist in a medical negligence suit over a surgery he performed nearly a year before renewing his policy, a federal judge in Baltimore has ruled.

Catlin Specialty Insurance Co. had argued it had no duty to defend and indemnify Dr. Barry Aron because he had failed to timely notify the company that a patient had a potential malpractice claim against him due to a medical “incident.”

Aron is accused of removing a portion of Sherry Marie Pfenninger’s right ureter on Dec. 30, 2010, when he operated to remove a cystic mass from her right pelvic area.

Catlin argued that Aron learned from a pathologist’s report on Jan. 3, 2011, that the removed mass contained part of ureter, which enables urine to drain from the kidney to the bladder.

Based on that knowledge, Aron was obliged to notify Catlin of the possibility of the claim in November 2011 when he renewed his insurance coverage for the 2012 calendar year, the company added.

U.S. District Judge Richard D. Bennett rejected the company’s argument, saying the facts known to Aron in November 2011 did not constitute an “incident” under the policy.

“Under the reading of the [policy] term, there was no ‘incident’ triggering the coverage exclusions,” Bennett wrote in a memorandum opinion last week. “Specifically, Dr. Aron’s receipt of the pathology report indicating that he had removed part of Ms. Pfenninger’s ureter was merely an ‘injury’ under the terms of the policy. It was not the type of “incident’ indicating an impending claim against Dr. Arron that was necessary to trigger” the exclusion.

Aron, in court papers, said he was unaware of his potential legal exposure until Nov. 26, 2012, when Pfenninger’s attorney sent a letter stating the patient intended to file a lawsuit, which could be settled for $725,000. The lawyer sent a follow-up letter on Jan. 4, 2013, and Aron told Catlin about Pfenninger’s claim three days later, according to Bennett’s opinion.

Catlin at first denied coverage on Feb. 1, 2013, stating in a letter that Aron had “waited to report the claim” past the policy’s expiration date of Dec. 31, 2012.

On March 13, 2013, Catlin filed an action in federal court, seeking a declaratory judgment that the company owed no duty to defend or indemnify Aron under Exclusion 11(ii) of the policy, which excluded coverage for “claims, incidents or loss events which were first brought to the attention of the insured or reported to another insurer prior to the inception date.”

One week later, Pfenninger, who lives in Virginia, filed the negligence action against Aron in U.S. District Court. That litigation was essentially placed on hold during the pendency of the insurance coverage dispute, said Pfenninger’s attorney, Patrick Malone of Patrick Malone & Associates P.C. in Washington.

Bennett, in ruling against the company, said the term “incident” could refer either to a legal claim or action against the doctor — as Aron argued — or to an injury to a patient, as asserted by Bermuda-based Catlin, which has its U.S headquarters in Atlanta.

“In light of this ambiguity, the court must construe the policy against Catlin Specialty Insurance,” Bennett wrote. “Considering the other terms in Exclusion 11(ii) relate to claims (in the generic sense) against the insured rather than injuries to the insured’s patients, this court construes the term in a similar claims-related fashion. This reading is buttressed by the fact that the policy expressly defines ‘injury’ in a way that significantly overlaps with the reading Catlin now offers for the undefined term ‘incident.”

Aron’s attorney, Geoffrey H. Genth, declined to comment on the dispute with the insurance company and the underlying lawsuit brought by Pfenninger. Genth is with Kramon & Graham P.A. in Baltimore.

But Malone was not so reticent.

“The whole lawsuit by the insurance company was ill-conceived…,” Malone said. Pfenninger and Aron, the litigants in the underlying malpractice suit, “just lost a lot of time from unnecessary delay,” Malone added.

Catlin’s attorney, Gregory W. Brown, said the company’s lawsuit was not ill-conceived.

“Insurance carriers give every bit of consideration and deliberation to all of their decisions,” said Brown, of Brown Law LLP in Raleigh, N.C. “They look at the facts and the terms of the insurance contract and applicable law and make the decision they believe is correct.”

The insurance dispute was Catlin Specialty Insurance Co. v. Aron, No. 1:13-cv-00826-RDB.

The underlying malpractice litigation is Pfenninger v. Aron, No. 8:13-cv-00844-RDB.

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