• Admiral Insurance Co. v. Superior Court (4th Dist. Ct. App. 2017) ___Cal. App. 5th___, 2017 DJDAR 11782, Case No. D072267
  • February 6, 2018

    A Perfect Match is a company that matches surrogate with egg donors with infertile families. Prior to purchasing a professional liability policy from Admiral, A Perfect Match learned that former clients Ghersi and Arango intended to file a lawsuit against it due to the birth of their daughter with a rare form of eye cancer. These clients retained counsel who forwarded three letters, one on behalf of each parent and the child, to A Perfect Match informing it that the clients intended to file a complaint alleging medical negligence and lack of informed consent. A Perfect Match subsequently applied for a commercial liability insurance policy from Admiral. The application asked whether the insured was "aware of any act, error, omission, fact, circumstance, or records request from any attorney which may result in a malpractice claim or suit?" A Perfect Match responded "no" and did not disclose the potential lawsuit anywhere else in the application. Admiral issued a policy covering "damages caused by a professional incident...for which a claim is first made against the insured during the policy period." A "professional incident" was defined as "a negligent act, error or omission in the rendering of or failure to render professional services by the insured." However, Admiral was only to pay claims "if prior to the inception date of the policy, no insured knew, nor could have reasonably foreseen, that the professional incident might result in a claim."

    After Ghersi and Arango filed suit for professional negligence, A Perfect Match notified Admiral and requested a defense. Admiral refused and A Perfect Match filed an action against it for breach of contract and bad faith. Admiral moved for summary judgment alleging that it owed no obligation to defend as there was no possibility of coverage since A Perfect Match knew or reasonably could have foreseen that a claim would be made. Admiral also contended material misrepresentations had been made in the application. A Perfect Match responded by arguing that the application was inappropriate for the kind of business it operated as it was not a health care provider and could not be sued for medical malpractice. The trial court denied the motion, finding that there existed triable issues of fact due to Admiral's reliance on an application designed for use for businesses such as medical laboratories, medical imaging and blood plasmapheresis centers. The court found that there was a question of fact as to whether the "no" response by A Perfect Match to the question about malpractice claims was truthful. The court also found there existed a question of fact as to whether Admiral could rely on the prior notice condition in its policy. Admiral filed a petition for writ of mandate.


    The appellate court assumed, for the purpose of argument, that A Perfect Match was truthful when it responded "no" to the question on the application about whether it was aware of any malpractice claims since it was not a health care provider. The court determined that this issue was a "red herring" because the policy itself provided that there would be no coverage for claims arising from professional incidents if, prior to policy inception, the insured knew or could have reasonably foreseen a claim might result. The court found that the letters sent by the lawyer were sufficient evidence of prior notice. The court also disagreed with the argument by A Perfect Match that the prior notice language must be read in context with the application. Although the court recognized that policy language must be construed in the context of the instrument as a whole and the surrounding circumstances, the document and surrounding context must "support 'a meaning to which the language of the instrument is reasonably susceptible.' (Citation.)" A Perfect Match failed to provide a reasonable meaning for the policy language other than the obvious. In fact, if professional incident were interpreted to mean medical malpractice, A Perfect Match, which was admittedly not a health care provider, would not have coverage for anything. Since the letters from the lawyer to A Perfect Match indisputably provided notice that its professional services might result in a claim, no coverage was provided and Admiral's motion should have been granted.


    Interestingly, the appellate court in this case was apparently willing to consider the language contained in an application to assist in the interpretation of the policy language, even when no showing had been made that the policy was at all ambiguous. However, it did recognize that the language in the application will only be considered where it supports a meaning to which the policy language is reasonably susceptible. This case could be relied on by an insured to argue in favor of coverage where language in the application supports the insured's interpretation of the policy. The holding here should be kept in mind by insurers in drafting application language to avoid contradictions which may later be relied on by insureds to argue coverage.

    This opinion is not final. It may be withdrawn from publication, modified upon rehearing, or review may be granted by the California Supreme Court. These events would render the opinion unavailable for use as legal authority.

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