Reservation of Rights HELP

[Eagleeye]

One of our Insured's is involved with a law suit that started back in 2009. To the point - the insurance company is saying that hey will not pay for bodily injury to the claiment due to her being punctured by a needle from a hospital that was wrapped up in the linen that they were cleaning. The insurance company is sighting that they do not cover anything to do with Bacteria or Fungus. (This is listed as an exclusion on the policy.) However, what about a Virus, (ie. AIDS) Would this fall under that same parameter. They are further saying that they will not cover any of the emotional distress claims from the claiment either. Does anyone have any thoughts on this?

[fseigel]

Need tons more info, including type of policy (it sounds like a CGL). It seems more of a professional liability claim than CGL, but it could be both/either. One would need to look at the policy language, and the specifics of the claim to provide you with a more definitive answer.

As respects the exclusion you mention, you would need to look at it specifically, to determine what is defined by the endorsements terms. On first blush, however, it seems that the exclusion would not bar coverage.

You sent this under the heading of ROR, but was a ROR letter actually issued to the hospital?

[Eagleeye]

ROR was issued but not to the hospital. It was issued to a linen service that cleans the linen from the hospital. There was a hypodermic needle in the linen. The linen service subs out the linen cleaning to another company in WV. The WV company employee opened up the linen bag and the needle fell out and punctured the employee's skin. She is suing the linen company and the hospital for improper disposal of a biological hazard material. This is on a CGL program. They, the insurance company, is wanting to exclude the coverage for this claim under the Mold/Fungi exclusion that reads that BI and PD are excluded in claims arising out of Mold/Fungi/Bacteria exposure,contact, or inhilation. The insurance company further indicates that emotional distress is excluded as well since the underlying coverage is excluded. We are not seeing where the emotional distress would be excluded and the standard Mold/Fungi exclusion pertains to the Property side and not the GL side of the policy. Thoughts out there?

[LadyBroker]

This might be not relevent, but wouldn't the injured worker seek remeditaion against their Work Comp carrier? And then the Work Comp carrier might subrogate back against the Hospital , or the linen company, or whomever?

[OldIndyAgent]

Does it matter to the plaintiff? They were injured and work comp, linen service, and hospital are on the hook. If their insurance companies cover it, great, if they don't great...they will pay no matter what because a judge will say so.

If your client is one of those entities, then it is a problem for their attorney.

[Big Dog]

Let me guess....the carrier is AIG, right?

[Eagleeye]

It was not AIG but a major player in the industry.

[OldIndyAgent]

Basic INS-101 all agents should know:

An ambiguous provision in an insurance policy is construed most favorably to the insured and strictly against the insuror.
Vargas v. Insurance Co. of North America, 651 F.2d 838 (2d Cir. 1981)

[michaeldcollins]

It turns on the policy language and fact allegations of the 3d party, as you know. Make sure you do a policy audit of the forms, endorsements, etc. I do not believe that the exclusion would preclude the duty to defend from attaching. I also do not think the purpose of the bacteria exclusion was intended to apply to the facts set out so far. I am not trying to get an engagment but as a coverage lawyer, I would recommend the insured to get an experienced coverage lawyer to review the denial and/or reservation of rights as the case may be.

[fseigel]

First, which entity is the insured? I just want to get the players straight in my mind. Second, as respects emotional distress claims, in general, courts have found a difference (depending on jurisdiction) in cases where emotional distress is separate from bodily injury. For example, a woman is injured, suffers BI AND claims emotional distress. Probably covered. Next - a woman claims emotional distress because she witnesses a co-worker injured, but suffers no BI herself. Probably not covered.

[Eagleeye]

The Linen Company that picks up the linen from the hospital and sends off to a 3rd party to clean is the insured.

[michaeldcollins]

The Linen Company that picks up the linen from the hospital and sends off to a 3rd party to clean is the insured.

That fact helps.