Allied, Zurich doesn’t need to pay physician, hospital system – firm insurance

The units of Allied World Assurance Co. Ltd. and Zurich Insurance Corp. NA is under no obligation to indemnify a hospital system and doctor under its excessive medical malpractice policy for the birth of a girl suffering from cerebral palsy and other problems, a federal appeals court said Friday in upholding a lower court ruling.

Dr. Erica Kesselman gave birth to the baby, who also suffers from brain injuries and "intellectual disabilities and defects," in 2013 at a Day Kimball Healthcare Inc. hospital based in Putnam, Connecticut, according to the underlying judgment of the US District Court in Bridgeport , Connecticut in Day Kimball Healthcare Inc., Erica J. Kesselman, MD v. Allied World Surplus Lines Insurance Co., FKA Darwin Select Insurance Co., Steadfast Insurance Co.

A surgical sponge was also left in the mother, which had to be surgically removed, causing inflammation, urinary tract infections and deformities, according to the district court's ruling.

The American International Group Inc. unit, Lexington Insurance Group, which covered primary insurance and defends the hospital system, and Dr. Kesselman in the underlying medical malpractice litigation in state courts are not party to the lawsuit.

The district court ruled that the excess insurers were not required to provide coverage under their policies, and was ruled by a three-person board of the 2nd U.S. Circuit Court of Appeals in New York upheld.

The hospital and doctor were unable to insure professional claims because the insurance policy was not notified in a timely manner, the ruling said.

Instead, the hospital system and Dr. Kesselman is seeking coverage under an insurance policy for claims related to employee benefit programs, the ruling said.

The panel agreed with the lower court that this was not covered by the deductible policies, which "clearly only cover the Lexington policy for claims related to employee benefit programs".

"The underlying legal dispute is a lawsuit for medical malpractice, which clearly only implies professional liability insurance," it confirmed the judgment of the lower court.

The lawyers on the case did not respond to requests for comment.

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