Defense and Indemnity: Hospital’s Insurance Policy, Not Agency Staffing Agreement, Determines Nurse’s Liability Coverage

June 21, 2017 | Strategic Insights for Health System


Applying Maryland law, a U.S. court of appeals for the Fourth Circuit resolved an insurance coverage dispute by concluding that the defendant hospital's insurance policy—not the hospital's agreement with a staffing agency—controls whether a nurse qualifies as an insured practitioner under the professional liability portion of the hospital's policy. The appellate court concluded that a nurse who was assigned to the hospital by a staffing agency was covered under the hospital's professional liability insurance policy even though the general liability portion of that policy excluded practitioners provided to the hospital by the staffing agency. The hospital's insurance policy was issued by an insurer wholly owned by the corporation that owned the hospital.

The insurance coverage dispute arose with regard to a malpractice case against the hospital and several of its doctors and nurses. Among the defendants was a nurse supplied to the hospital by a staffing agency under an agreement between the hospital and the agency. The agreement characterized agency-provided professionals as "employees of the agency, not the hospital." Accordingly, the hospital's liability insurer took the position that the nurse was not an employee of the hospital and refused to defend or indemnify the nurse with regard to allegations made against her in the malpractice suit. The insurer for the staffing agency undertook the nurse's defense, ultimately settling the claims against her for $2.5 million and incurring nearly $500,000 in defense costs. To recoup its losses, the agency's insurer sued the hospital's insurer, contending that...

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