(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued April 28, 1997 -- Decided August 8, 1997
STEIN, J., writing for a majority Court.
The issue posed in this appeal is whether an exclusion from coverage in a medical malpractice
insurance policy for “injury resulting from [the physician's] performance of a criminal act” insulates the
insurer from liability for compensatory damages awarded to the insured's patient in an action based on a
sexual assault by the insured physician in the course of a gynecological examination.
In 1994, June Davis filed suit seeking compensatory and punitive damages against Dr. Prasert
Chunmuang for medical malpractice, negligent and intentional infliction of emotional distress, sexual assault,
and assault and battery. Chunmuang failed to answer the complaint. By order of the Law Division, the
complaint was also served on Princeton, who declined to answer or provide a defense for Chunmuang. The
Law Division entered a default judgment against Chunmuang.
A proof hearing was held to determine the appropriate amount of damages. An attorney
representing Princeton attended the hearing but did not participate. Davis testified that she made an
appointment with Chunmuang in the fall of 1992 because she had been experiencing monthly cramping but
had not yet menstruated. Davis was seventeen years old at the time. During the course of her examination,
Davis was inappropriately touched by Chunmuang. Davis continued to experience cramping but was unable
to seek medical assistance from another gynecologist because of the emotional distress resulting from
Chunmuang's examination. Davis also presented a complaint against Chunmuang by the Attorney
General's office on behalf of the Board of Medical Examiners dated March 4, 1993, an order of temporary
suspension dated March 16, 1993, and an order revoking Chunmuang's license to practice medicine dated
June 17, 1993. The complaint described similar claims brought by five other women who were patients of
Chunmuang. The court took judicial notice of the criminal complaint filed by Davis and the other women
and the subsequent indictment of Chunmuang. He pled guilty to several charges, although the charge
relating to Davis was dismissed as part of a plea bargain.
The court found that Chunmuang's conduct not only deviated from accepted standards of medical
care but also was clearly a criminal sexual assault. The court was satisfied that Davis had established a case
of medical malpractice and awarded her $50,000 in compensatory damages and $50,000 in punitive damages.
The court made no finding that any portion of the damages was attributable to acts of medical malpractice
distinct and separate from the sexual assault.
Princeton instituted a declaratory judgment action against Chunmuang and Davis, seeking a
determination pursuant to the policy language that it had no duty to either defend Chunmuang in Davis's
civil action or satisfy any portion of the judgment against Chunmuang. The policy provides coverage for
injuries caused by a “medical incident” arising out of the insured's supplying or failing to supply professional
services. Medical incident is further defined as any act or failure to act in the furnishing of professional
medical services by the insured. The policy excludes coverage for injury resulting from the insured's
performance of a criminal act.
The court granted summary judgment on behalf of Princeton on the punitive damage obligation
because that portion of the judgment was based solely on Chunmuang's criminal conduct. The court
concluded that the compensatory portion of the judgment was based on both medical malpractice and
criminal conduct and, therefore, granted summary judgment to Davis on Princeton's obligation to satisfy the
compensatory portion of the judgment.
A majority of the Appellate Division affirmed the decision of the trial court that Princeton was liable
for compensatory damages notwithstanding the criminal-act exclusion in its medical malpractice policy.
Princeton appeals to the Supreme Court as of right based on the dissent in the Appellate Division.
HELD: Claims based on injuries caused by a physician's criminal conduct are properly excluded from
coverage under a policy that contains a criminal-act exclusion clause. Therefore, Princeton
Insurance Company is not responsible to June Davis for the damages she suffered as a result of Dr.
Chunmuang's sexual assault.
1. The majority rule in other jurisdictions is that claims based on sexual assaults on patients by health care
providers other than mental health professionals fall outside the scope of coverage provided by policy
language substantially similar to the policy in this case. These courts apply a narrow test for malpractice
coverage that is based on a restrictive definition of the policy term “professional services,” and emphasizes
the lack of causal relationship between the treatment sought and the injury. (pp. 8-12)
2. Among jurisdictions that hold that sexual assault by a doctor on a patient is generally not covered by
malpractice insurance, a minority of courts has adopted the exception found in Asbury for sexual assaults
that are intertwined and inseparable from the services provided. In New Jersey, the Appellate Division has
applied a “substantial nexus” approach, concluding that conduct that has a substantial nexus to an insured
activity may be found to “arise out of” that activity even if it is unlawful. (pp. 12-19)
3. Exclusions in insurance policies are narrowly construed and the burden is on the insurer to bring the case
within the exclusion. Exclusions are presumptively valid and will be given effect if clear, prominent and not
against public policy. Proof of a criminal conviction is sufficient to bring the conduct within the exclusion.
Courts in other jurisdictions have generally upheld criminal act, intentional act or sexual misconduct
exclusions in medical malpractice policies. (pp. 19-22)
4. A fair reading of the Princeton policy language suggests that the coverage encompasses injuries caused by
any act or failure to act by the doctor that occurs in the course of rendering professional services. Therefore,
it is not necessary to rely on the reasoning of Asbury. The acts committed by Chunmuang in his office
constituted a medical incident as defined in the Princeton malpractice policy. These acts, in addition to
being criminal, constituted malpractice that would be covered by the policy was it not for the criminal-act
exclusion. (pp. 22-23)
5. Criminal-act exclusions are valid and do not violate public policy. To invalidate the exclusion as applied
to patients of gynecologists and not to those of other physicians would be inappropriate. Because Davis did
not offer evidence of damages attributable solely to acts of malpractice that were independent of the criminal
assault, she should be afforded on remand the opportunity to produce proof of damages caused by
Chunmuang's malpractice that is separable from his criminal conduct. (pp. 23-28)
Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Law
Division for proceedings consistent with this opinion.
JUSTICE O'HERN, concurring, disagrees with the view of the dissent that it is not realistic to
require the finder of fact to determine the source and uniqueness of the injuries suffered by Davis; she
should be compensated, to the extent possible, for the treatment of her condition that fell below generally
accepted standards of medical care.
JUSTICE HANDLER, dissenting, is of the view that the insured's sexual misconduct was so
intertwined with his medical malpractice -- both the mishandling of the examination and the failure to
properly treat Davis's medical condition -- that it is not realistically possible to identify, differentiate, and
quantify the injuries occasioned by the malpractice apart from the injuries attributable to the sexual
misconduct. The Court's interpretation is not required by the language or essential meaning of the
insurance policy and its result is patently unfair to Davis.
CHIEF JUSTICE PORITZ and JUSTICES POLLOCK, and GARIBALDI join in JUSTICE
STEIN'S opinion. JUSTICE O'HERN has filed a separate concurring opinion. JUSTICE HANDLER has
filed a separate dissenting opinion, in which JUSTICE COLEMAN joins.
SUPREME COURT OF NEW JERSEY
A-
133 September Term 1996
PRINCETON INSURANCE COMPANY,
Plaintiff-Appellant,
v.
PRASERT CHUNMUANG, M.D.,
Defendant,
and
JUNE DAVIS,
Defendant-Respondent.
Argued April 28, 1997 -- Decided August 8, 1997
On appeal from the Superior Court, Appellate
Division, whose opinion is reported at
292 N.J. Super. 349 (1996).
Joseph P. La Sala argued the cause for
appellant (McElroy, Deutsch & Mulvaney,
attorneys; Mr. La Sala, Thomas P. Scrivo and
John T. Coyne, on the briefs).
Donald A. Caminiti argued the cause for
respondent (Breslin and Breslin, attorneys;
Karen Boe Gatlin and Lawrence Z. Farber, on
the brief).
Michael A. Ferrara, Jr., and Jennifer A.
Deiter submitted a brief on behalf of amicus
curiae Association of Trial Lawyers of
American-New Jersey (Ferrara & Rossetti,
attorneys).
Joseph R. McDonough submitted a brief on
behalf of amicus curiae American Insurance
Association (Graham, Curtin & Sheridan,
attorneys).
The opinion of the Court was delivered by
STEIN, J.
The critical issue posed by this appeal is whether an
exclusion from coverage in a medical malpractice insurance policy
for "injury resulting from [the physician's] performance of a
criminal act" insulates the insurer from liability for
compensatory damages awarded to the insured's patient in an
action based on a sexual assault by the insured physician in the
course of a gynecological examination. In a published opinion,
292 N.J. Super. 349 (1996), a divided panel of the Appellate
Division affirmed the Law Division's determination that the
insurer was liable for the compensatory damages award
notwithstanding the criminal acts exclusion in its medical mal-practice policy. The insurer, Princeton Insurance Company
(Princeton), appeals to this Court as of right. R. 2:2-1(a)(2).
This declaratory judgment action filed by Princeton to determine its liability under the medical malpractice policy at issue was preceded by a civil action instituted in 1994 by June Davis against Dr. Prasert Chunmuang, Princeton's insured. In
that action Davis sought compensatory and punitive damages
against Chunmuang for medical malpractice, negligent and
intentional infliction of emotional distress, sexual assault, and
assault and battery. Chunmuang failed to answer the complaint
and Princeton, on whom the complaint was also served by order of
the Law Division, declined to answer or provide a defense for
Chunmuang. The Law Division entered a default judgment against
Chunmuang.
At the proof hearing, attended by an attorney for Princeton
who did not participate, Davis testified that she had made an
appointment to see Chunmuang in the fall of 1992 because she was
experiencing monthly cramping but had not yet menstruated. Davis
was seventeen years old at the time. Davis stated that the first
thing that had made her feel uncomfortable was that when
Chunmuang arrived in the examination room he told her to undress,
but he did not immediately leave the room. She waited until he
left to undress and then closed the door after him when he left
it ajar.
In the course of the examination, during which Davis was in
the stirrups, Chunmuang twisted his hand inside of her in a way
that she perceived to be wrong. She tried to move away and he
repeatedly moved her back down on the table and told her "Don't
worry about it." This went on for five or ten minutes. During
that time he asked her whether she was sexually active, and then
why not. Afterwards, he examined her breasts. Again, Davis
perceived that his actions were not appropriate to a breast exam,
which she had read about in pamphlets. She became very upset.
When Davis was ready to leave the office, Chunmuang prescribed
some pills and told her to come back in ten days.
Davis did not go back because Chunmuang made her "feel
dirty." At the time of the proof hearing, although she continued
to experience cramping and had not yet menstruated, Davis had not
been able to seek medical assistance from another gynecologist
because of the emotional distress that resulted from her
examination by Chunmuang. She did not present any expert medical
testimony at the proof hearing.
Davis did present, however, an administrative complaint
against Chunmuang by the Attorney General's office on behalf of
the Board of Medical Examiners dated March 4, 1993, an order of
temporary suspension dated March 16, 1993, and an order revoking
Chunmuang's license dated June 17, 1993. The complaint outlined
charges of misconduct under similar circumstances brought
independently by five women, including Davis. Davis was the only
minor. The other four women were longterm patients of
Chunmuang's.
Davis's attorney also informed the court, and the court took
judicial notice, that Davis and several other women had made
criminal complaints against Chunmuang, who was subsequently
indicted. Chunmuang pled guilty to several charges, although
apparently the charge concerning Davis was dismissed as part of
the plea bargain.
The court found that Davis's "testimony reflects activity
and actions on the part of the doctor, which were not only a
deviation from accepted standards but clearly a criminal act in
the sense of amounting to a sexual assault." The court indicated
that it found confirmation of the sexual assault in the Attorney
General's complaint and the indictments of Chunmuang. Overall,
the court was satisfied "that the doctor has departed from
accepted standards and that the plaintiff has established a case
of medical malpractice." The court noted that the plaintiff was
caught in a "catch-22" situation regarding the proof of
compensatory damages because part of her injury was her
continuing inability to visit a gynecologist for further
diagnosis and treatment. Confessing that it was "at a loss a
little bit as to what the compensatory damages should be," the
court nevertheless awarded $50,000 in compensatory damages as
well as $50,000 in punitive damages to Davis. The Court made no
finding that any portion of the compensatory damages was
attributable to acts of medical malpractice distinct and separate
from the sexual assault, nor did Davis offer any evidence that
would support such a finding.
Prior to the final disposition of Davis's suit against
Chunmuang, Princeton instituted this declaratory judgment action
against Chunmuang and Davis seeking a determination that it had
no duty either to defend Chunmuang in Davis's civil action or to
satisfy any portion of the judgment against Chunmuang. In
support of its motion for summary judgment, Princeton submitted
the complaint in Davis's action against Chunmuang, the transcript
of the proof hearing, the final judgment in favor of Davis, and a
copy of the medical malpractice policy issued to Chunmuang.
The policy declaration page states that it provides
professional liability coverage. Under "Coverage," the policy
states in relevant part:
We will pay all amounts up to the limit of
liability which you become legally obligated
to pay as a result of injury to which this
insurance applies. The injury must be caused
by a "medical incident" arising out of your
supplying or failure to supply professional
services.
"Medical Incident" is further defined, in relevant part, as:
"any act or failure to act . . . in the furnishing of the
professional medical . . . services by you . . . ."
Under "Exclusions," the policy states in relevant part:
This insurance does not apply for:
(a) injury resulting from your performance
of a criminal act.
The Law Division determined that the punitive damages
portion of the judgment recovered by Davis was based solely on
Chunmuang's criminal conduct, granting summary judgment to
Princeton concerning its obligation to satisfy that portion of
Davis's judgment. Concluding that the compensatory damages
portion of the judgment was based on both medical malpractice and
criminal conduct, the Law Division granted summary judgment to
Davis concerning Princeton's obligation to satisfy the
compensatory damages portion of her judgment against Chunmuang.
In affirming the Law Division, the Appellate Division
majority "construe[d] the Princeton policy to mean that there
will be coverage for `injury' resulting from `professional
services' unless the `injury' results from a `criminal act.'"
292 N.J. Super. at 354. The majority agreed with Davis that, in
this case, the "services performed and the assault are
intertwined and inseparable." Ibid. Indicating that it may
represent a minority view, the majority nevertheless cited with
approval St. Paul Fire & Marine Insurance Co. v. Asbury,
720 P.2d 540, 542 (Ariz. Ct. App. 1986), which held that claims based on a
physician's intentionally improper manipulations during a
gynecological examination were covered by his professional
liability policy, because the abuse was "intertwined with and
inseparable from the services provided." 292 N.J. Super. at 355.
The majority acknowledged, however, that the policy at issue in
Asbury did not contain an exclusion for criminal acts. Id. at
356. The majority also cited with approval language in Asbury
stating that public policy favored protecting the interests of
innocent victims. Id. at 355.
Dissenting, Judge Keefe stressed that Davis did not dispute
that Chunmuang's actions were criminal, and reasoned that "but
for Dr. Chunmuang's criminal act, Davis would have suffered no
compensable injury." Id. at 362. Judge Keefe distinguished this
case from Asbury because the medical malpractice policy in Asbury
contained no exclusion for criminal acts. Judge Keefe stated
that the "intertwined and inseparable" nature of the services and
the assault would be relevant only in deciding if the injuries
were covered as the result of a "medical incident," asserting
that the nature of the services is irrelevant in this case
because of the express exclusion for criminal acts. Id. at 362-63.
Princeton contends that it is not liable for the damages
awarded against Chunmuang under the basic terms of its policy
because the sexual assault was not a "medical incident."
Princeton also contends that it is not responsible for the
damages because they are excluded from coverage by the policy's
criminal acts exclusion. We address the law relevant to the
question of basic coverage and the law relevant to the question
of the exclusion separately.
Individual physicians are not required to carry medical malpractice insurance in New Jersey.See footnote 1 See generally N.J.S.A. 17:30D-1 to -17 (provisions related to medical malpractice liability insurance); N.J.S.A. 45:1-1 to -27 (general provisions related to professions and occupations regulated by state boards of registration and examination); N.J.S.A. 45:9-1 to -58 (provisions related to medicine and surgery). Because medical malpractice insurance is not statutorily required, determining the scope of coverage under a malpractice policy is primarily a matter of contract interpretation. Cf. Allstate Ins. Co. v. Malec, 104 N.J. 1, 6 (1986) (stating that where insurance is statutorily required "the policy is automatically amended by operation of law to conform to the statutory standard."). In general, insurance policies are interpreted according to the reasonable expectations of the parties. Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 175 (1992). Because insurance policies are typically contracts of adhesion, ambiguities generally will be resolved in favor of the insured. Sparks v. St. Paul Ins. Co., 100 N.J. 325, 334-39 (1985).
The majority rule in other jurisdictions is that claims
based on sexual assaults on patients by health care providers
other than mental health professionals fall outside the scope of
coverage provided by policy language substantially similar to the
policy at issue. See Snyder v. Major,
789 F. Supp. 646, 649
(S.D.N.Y. 1992) (summarizing case law), modified,
818 F. Supp. 68
(S.D.N.Y. 1993); David S. Florig, Insurance Coverage for Sexual
Abuse or Molestation, 30 Tort & Ins. L.J. 699, 721, 724 (1994)
(same); Debra E. Wax, Annotation, Coverage and Exclusions of
Liability or Indemnity Policy on Physicians, Surgeons, and Other
Healers,
33 A.L.R.4th 14 § 7 (1984 & 1996 Supp.) (same).
The case most frequently cited for that rule is Hirst v. St.
Paul Fire & Marine Ins. Co.,
683 P.2d 440 (Idaho Ct. App. 1984).
See, e.g., Lindheimer v. St. Paul Fire & Marine Ins. Co.,
643 So.2d 636, 639 (Fla. Dist. Ct. App. 1994), rev. denied,
651 So.2d 1194 (1995); Standlee v. St. Paul Fire & Marine Ins. Co.,
693 P.2d 1101, 1102 (Idaho Ct. App. 1984); St. Paul Fire & Marine
Ins. Co. v. Quintana,
419 N.W.2d 60, 62 (Mich. Ct. App. 1988);
South Carolina Med. Malpractice Liab. Ins. JUA v. Ferry,
354 S.E.2d 378, 381 (S.C. 1987); Washington Ins. Guar. Ass'n v.
Hicks,
744 P.2d 625, 627 (Wash. Ct. App. 1987). In Hirst, supra,
a physician drugged and sexually assaulted a boy who was brought
to him for treatment of a wrestling injury to his hand. 683 P.
2d
at 442. The court held that the tortious actions of the
physician were not covered under his malpractice insurance,
emphasizing the lack of causal relationship between the treatment
sought and the injury:
[E]ven if we assume that "professional
services" embrace all enumerated activities
within the "practice of medicine," including
"treat[ment] [of] any human disease [or]
injury," there still must be a causal
relationship between such treatment and the
harm alleged by the malpractice claimant.
Here, as the district court noted, there was
no specific showing in the record that Mark
was damaged in any way simply from the
administration of the drugs. Nor was there
any showing that Donehue negligently treated
the boy's injuries or illness. The district
court found that, in spite of the Hirsts'
general allegations, the action in reality
was one in tort for sexual molestation and
that the use of the drugs merely rendered
Mark more susceptible to Donehue's
"advances." We agree.
Thus, Hirst embraced a narrow test for malpractice coverage based
on a restrictive definition of the policy term "professional
services."
Hirst and many of the cases that have followed it looked to
the discussion in Marx v. Hartford Accident & Indemnity Co.,
157 N.W.2d 870 (Neb. 1968), to support that definition of
"professional services." See Hirst, supra, 683 P.
2d at 444
(citing Marx); Roe v. Federal Ins. Co.,
587 N.E.2d 214, 217
(Mass. 1992) (citing Marx and listing other jurisdictions that
follow Marx); Florig, supra, 30 Tort & Ins. L.J. at 721
(discussing reliance on Marx). Marx, supra, defined the scope of
malpractice coverage as follows:
[A medical malpractice] insurer's liability
is . . . limited to the performing or
rendering of "professional" acts or services.
Something more than an act flowing from mere
employment or vocation is essential. The act
or service must be such as exacts the use or
application of special learning or
attainments of some kind. The term
"professional" in the context used in the
policy provision means something more than
mere proficiency in the performance of a task
and implies intellectual skill as contrasted
with that used in an occupation for
production or sale of commodities. A
"professional" act or service is one arising
out of a vocation, calling, occupation, or
employment involving specialized knowledge,
labor, or skill, and the labor or skill
involved is predominantly mental or
intellectual, rather than physical or manual
. . . . In determining whether a particular
act is of a professional nature or a
"professional service" we must look not to
the title or character of the party
performing the act, but to the act itself.
[157 N.W.
2d at 871-72 (citations omitted)
(emphasis added).]
Among jurisdictions that hold that sexual assault by a physician on a patient is generally not covered by malpractice insurance, a minority of courts have adopted an exception to that rule for sexual assaults that are "intertwined with and inseparable from the services provided." Asbury, supra, 720 P. 2d at 542; see St. Paul Fire & Marine Ins. Co. v. Shernow, 610 A.2d 1281, 1285 (Conn. 1992); St. Paul Fire & Marine Ins. Co. v. Torpoco, 879 S.W.2d 831, 834 (Tenn. 1994). The primary case espousing that approach is Asbury, supra, which, like the case on appeal, involved a gynecologist who was accused of improperly manipulating his patients during gynecological examinations. See 720 P. 2d at 541. The Asbury court accepted the analysis of Marx
and Hirst, and the general rule that sexual assaults by
physicians on patients fall outside of malpractice coverage. See
id. at 541-42. However, the court emphasized that in cases such
as Hirst, involving a sexual assault during treatment for a hand
injury, the assault was not related in any way to the treatment
sought. See id. at 542. In contrast, the Asbury court found
that injuries sustained in a sexual assault that took place
during a gynecological examination were covered as injuries
caused by the "providing or withholding of professional
services." Id. at 541. The policy in question in Asbury did not
contain any applicable exclusions. Ibid.
Although the Supreme Court of Connecticut ostensibly adopted
Asbury's "intertwined . . . and inseparable rule" in Shernow,
supra, 610 A.
2d at 1285, that case was factually very different,
involving a dentist who drugged his patient and sexually
assaulted her, see id. at 1282-83. Like the Asbury court, the
Shernow court distinguished Hirst, supra, because the assault in
that case was not closely related to the treatment sought. Id.
at 1284. However, the Shernow court also emphasized that "unlike
Hirst, the jury here heard evidence of specific acts of
professional negligence, some of which had occurred prior to the
sexual encounter," and that the claimant's injuries were due, not
only to the sexual assault itself, but also to the administration
of excessive amounts of anesthesia. Id. at 1284-85. Therefore,
the result in Shernow can be understood to rest on somewhat
different grounds than the result in Asbury.
As support for the exception to the general rule denying coverage for tortious acts that are "intertwined . . . and inseparable" from the professional services provided, the Asbury court relied on cases holding that malpractice insurance covers claims based on sexual contact between psychiatrists and patients. See Asbury, supra, 720 P. 2d at 542 (citing St. Paul Fire & Marine Ins. Co. v. Mitchell, 296 S.E.2d 126, 127-29 (Ga. Ct. App. 1982); Vigilant Ins. Co. v. Kambly, 319 N.W.2d 382, 384-85 (Mich. Ct. App. 1982); Zipkin v. Freeman, 436 S.W.2d 753, 761 (Mo. 1986)). Contrary to the general rule for sexual assault by a physician on a patient, the general rule for claims based on sexual contact between a mental health care professional and a patient is that such contact constitutes malpractice for which the malpractice insurer is liable. See Snyder, supra, 789 F. Supp. at 649 (reviewing cases); Florig, supra, 30 Tort & Ins. L.J. at 727 (same); Wax, supra, 33 A.L.R.4th 14 § 7 (same). However, most often, the factual basis in cases involving mental health care professionals differs significantly from cases involving other physicians because the sexual conduct is consented to as such, although that consent may be considered coerced. The rule providing coverage for such cases is based on the theory that the phenomenon of transference is an integral part of psychotherapy and its mishandling by the mental health professional constitutes malpractice. See Simmons v. United States, 805 F.2d 1363, 1364-66 (9th Cir. 1986); Snyder, supra,
789 F. Supp. at 649; Florig, supra, 30 Tort & Ins. L.J. at 727;
Wax, supra,
33 A.L.R.4th 14 § 7.
Most courts that have considered Asbury in the context of
sexual assaults by physicians have declined to follow it. See,
e.g., D.D. v. Insurance Co. of North Am.,
905 P.2d 1365, 1369 n.8
(Ala. 1995); St. Paul Fire & Marine Ins. Co. v. Alderman,
455 S.E.2d 852, 854 (Ga. Ct. App. 1995); Roe v. Federal Ins. Co.,
supra,
587 N.E 2d at 218-19; Niedzielski v. St. Paul Fire &
Marine Ins. Co.,
589 A.2d 130, 132-33 (N.H. 1991); New Mexico
Physicians Mut. Liab. Co. v. LaMure,
860 P.2d 734, 739 (N.M.
1993); Standard Fire Ins. Co. v. Blakeslee,
771 P.2d 1172, 1176-77 (Wash Ct. App.), review denied,
781 P.2d 1320 (Wash. 1989).
In St. Paul Fire & Marine Insurance Co. v. Cromeans,
771 F. Supp. 349, (N.D. Ala. 1991), which held that sexual abuse of two minor
girls was not covered as "professional services," the court
criticized Asbury for its reliance on the mental health
professional cases and for its assertion that a sexual assault
could be intertwined with professional services:
[T]he Asbury case relies exclusively on the
cases in which a psychiatrist or psychologist
failed to properly handle the "transference
phenomenon," a medically recognized
condition.
. . . [T]he Asbury case is a poorly
reasoned decision in that it held that
massaging a woman's clitoris was intertwined
with and inseparable from a gynecological
examination. The Asbury court apparently
attempts to distinguish Hirst (and its
progeny) by the location of the various parts
of the anatomy. . . .
Moreover to this point, the Asbury court
seems to be saying that if the physician is
treating a sexual part of the patient's body
(or a part near thereto) and commits sexual
abuse by improperly manipulating or stroking
the patient in the same general area, it is
thus "intertwined" with treatment and ipso
facto there is insurance coverage. [The
insurance company] argues and this Court
agrees that this "Asbury" reasoning is
illogical.
Another federal court that considered the "intertwined . . .
and inseparable" exception originated by Asbury declined to
follow it because (1) the exception did not comport with the
parties' expectations; (2) its boundaries were undefined; and (3)
the distinction between assaults during examinations of erogenous
zones and assaults during other physical examinations had no
logical basis. The court observed:
Plaintiff suggests that this Court use
Asbury to frame a rule that sexual misconduct
is a medical incident if (a) it arises out of
psychiatric treatment or (b) it arises out of
treatment of the erogenous zones. . . .
We reject the proposed rule for several
reasons. First, we emphasize that the
fundamental issue here is not whether the
conduct in question is negligence, but
whether a particular contract was intended to
cover this conduct.
. . . .
Second, we are hesitant to adopt a rule with such amorphous boundaries. We think it unworkable for courts to be placed in the position of deciding what constitutes a "sexual incident arising out of treatment of erogenous zones." Because of the subjectivity of the term "erogenous zone," courts are poorly situated to second guess litigants' accounts of what is or is not an
erogenous zone in a particular case. The
proposed rule would invite such disputes.
Third, even considered on its own right,
we are not convinced of the merit of the
proposed rule. We are skeptical of the
suggestion, implicit in plaintiff's proposal,
that a physician's duty to refrain from
sexually abusing his (or her) patients is any
greater in cases where the physician is
treating the erogenous zones. Perhaps the
patient's fear of such abuse is greater in
such cases -- and undoubtedly it is appalling
when such fears are realized, as in this
case. However, we think it no less appalling
and no less a violation[] of a physician's
duty when, as in Hirst, for example, a person
being treated for a wrist injury was drugged
and sexually abused. We thus see no reason
to carve out the class of exceptions proposed
by plaintiff.
[Snyder, supra, 789 F. Supp. 650 (footnotes
omitted).]
Although the courts of this state previously have not considered medical malpractice insurance in the context of a sexual assault by a physician on a patient, the Appellate Division recently has addressed the scope of a medical malpractice policy as applied to an assault by a physician on a nurse. See Records v. Aetna Life & Cas. Ins., 294 N.J. Super. 463 (App. Div. 1996). The policy provided coverage for "injury arising out of the rendering of or failure to render . . . professional services" and defined "professional services" to mean "services requiring specialized knowledge and mental skill in the practice of the profession." Id. at 467. The nurse alleged that the physician assaulted her after becoming angry because she transferred his patient from a nursing home to a hospital. Id. at 465. The Appellate Division held that the
nurse's claim was covered by the malpractice policy. Id. at 465-67. Rather than focus on the definition of "professional
services," the Appellate Division focused on the term "arising
out of":
[T]he MIIX policy provides coverage not only
for claims of malpractice in the direct
"rendering of professional services" but also
for any other claim "arising out of" the
rendering of professional services. The
phrase "arising out of" has been defined
broadly in other insurance coverage decisions
to mean conduct "originating from," "growing
out of" or having a "substantial nexus" with
the activity for which coverage is provided.
Westchester Fire Ins. Co. v. Continental Ins.
Cos.,
126 N.J. Super. 29 (App.Div. 1973),
aff'd o.b.,
65 N.J. 152 (1974); Franklin Mut.
Ins. Co. v. Security Indem. Ins. Co.,
275 N.J. Super. 335, 340-41 (App. Div.), certif.
denied,
139 N.J. 185 (1994); see also
Harrah's Atlantic City, Inc. v. Harleysville
Ins. Co.,
288 N.J. Super. 152, 157-59
(App.Div. 1996); Minkov v. Reliance Ins. Co.,
54 N.J. Super. 509, 516 (App.Div. 1959).
Consequently, if plaintiff had consulted with
Koch in deciding whether to transfer a
patient to the hospital and negligently
stepped on her toe during the course of that
consultation, any resulting injury could
reasonably be said to "originate from," "grow
out of" or have a "substantial nexus" with
plaintiff's rendering of professional
services and thus fall within the coverage of
the MIIX policy.
The Records approach can be termed a "substantial nexus" test, and emphasizes "the existence of a substantial nexus between the subject matter of the plaintiff's discussion with [the injured party] and his professional practice rather than [the policy holder's] conduct during that discussion." Id. at 469. The court specifically stated that "conduct which has a substantial
nexus to an insured activity may be found to `arise out of' that
activity even if it is unlawful." Id. at 469. The "substantial
nexus" test is significantly broader than the Marx test for
malpractice coverage that is followed by both Hirst and Asbury.
Cases in other jurisdictions that apply a restrictive test
to hold that malpractice insurance generally does not cover
injuries caused by sexual assaults by physicians on patients may
rest in part on the public policy ground that persons should not
be able to insure themselves for the results of such acts. See,
e.g., Cromeans, supra, 771 F. Supp. at 352 ("All contracts
insuring against intentional misconduct are void in the State of
Alabama as against public policy."); Lindheimer, supra, 643 So.
2d at 639 ("Any insured professional should not, in any way, be
insulated from the consequences of his reprehensible sexual
abuse."); see also Medical Mut. Liab. Ins. Soc. v. Azzato,
618 A.2d 274, 280 (Md. App.) (implying that if criminal acts
exclusion did not apply, physician would be indemnified for
"criminal malpractice"), cert. denied,
624 A.2d 491 (Md. 1993).
This Court has acknowledged the policy considerations that
justify restricting an insurer's right to indemnify an insured
against the civil consequences of his own wilful criminal act,
see Ruvolo v. American Cas. Co.,
39 N.J. 490, 496 (1963), as well
as the competing public interest in compensating innocent
victims, see Burd v. Sussex Mut. Ins. Co.,
56 N.J. 383, 398-99
(1970). Thus, in Ambassador Insurance Co. v. Montes, this Court
held that where the beneficiary of liability insurance is an
innocent third party, rather than the insured, payment should be
made "so long as the benefit thereof does not enure to the
assured."
76 N.J. 477, 484 (1978). Accordingly, we held that
the insurer should be indemnified by the insured for payments
made to cover the insured's civil liability for a criminal event.
Ibid. Consequently, the recognition of insurance coverage for
injuries caused by an insured's criminal acts should not be
understood as condoning unlawful conduct.
In general, insurance policy exclusions must be narrowly construed; the burden is on the insurer to bring the case within the exclusion. See Burd, supra, 56 N.J. at 399. However, exclusions are presumptively valid and will be given effect if "specific, plain, clear, prominent, and not contrary to public policy." Doto v. Russo, 140 N.J. 544, 559 (1995).
Exclusions for acts that are intentional, as opposed to criminal, have sometimes been narrowly construed, based in part on the subjective nature of intent. In Burd, supra, 59 N.J. at 396-99, this Court held that the a criminal conviction was evidentiary but not conclusive proof of intent as contemplated by the exclusion. See also Ruvolo, supra, 39 N.J. at 498 (holding that concept of insanity in context of intentional act exclusion was broader than concept accepted as defense to criminal charge); Atlantic Employers Ins. Co. v. Chartwell Manor School, 280 N.J. Super. 457, 466 (App. Div. 1995) (holding that guilty plea to
endangering welfare of child did not estop insured from
establishing lack of intent required by policy); Prudential
Property & Cas. Ins. Co. v. Kollar,
243 N.J. Super. 150, 156
(App. Div. 1990) (holding insured not estopped from relitigating
intent for purposes of coverage despite guilty plea to arson).
Exclusions for claims based on criminal acts, on the other
hand, require application of an objective standard. In Allstate
Insurance Co. v. Schmitt,
238 N.J. Super. 619 (App. Div.),
certif. denied,
122 N.J. 395 (1990), the Appellate Division
rejected the insured's argument that only the intended results of
criminal conduct were excluded by such a provision. See id. at
623. In general, proof of a criminal conviction is sufficient to
bring the conduct within the exclusion. See id. at 632-33.
In Malec, supra, this Court considered whether, in light of
the Ambassador holding that insurance companies would be
indemnified by the insured for claims based on civil liability
for the insured's criminal acts, explicit exclusions for claims
based on such liability should be enforced. See 104 N.J. at 11-13. Malec involved an exclusion in an automobile liability
policy for damages intentionally caused by the insured; the
insurance company denied coverage for claims arising from a
collision that the company contended was intentional. See id. at
5. The Malec Court held that "a specific exclusion . . . from
coverage for the insured's liability caused by his intentional
wrongful acts does not violate . . . public policy . . . ." Id.
at 13; see also New Jersey Mfrs. Ins. Co. v. Brower, 161 N.J.
Super. 293, 300 (App. Div. 1978) (holding that Ambassador did not
control where policy expressly excluded injury caused by
intentional act). The Malec Court reasoned that "[p]olicy
provisions that exclude coverage for liability resulting from
intentional wrongful acts are `common,' are `accepted as valid
limitations,' and are consistent with public policy." 104 N.J.
at 6 (citing Ruvolo, supra, 39 N.J. at 496).
Courts in other jurisdictions have generally upheld criminal
act, intentional act or sexual misconduct exclusions in medical
malpractice policies. See, e.g., Illinois State Med. Ins.
Servs., Inc. v. Cichon,
629 N.E.2d 822, 829 (Ill. App. 1994);
LaMure, supra, 860 P.
2d at 739-40; Azzato, supra, 618 A.
2d at
278. For example, the court in Rivera v. Nevada Medical
Liability Insurance Co.,
814 P.2d 71, 72 (Nev. 1991), held that a
claim based on a rape that occurred during the course of a
gynecological examination was excluded from coverage by a policy
exclusion for sexual misconduct. The court rejected the
claimant's argument that the exclusion precluded coverage only
for injuries that stemmed from tortious conduct that was separate
from the rendering of professional services. Id. at 73. The
Rivera court also rejected the claimant's argument that the exclu
sions for sexual and for criminal acts in the policy should be
void as against public policy when applied to deny recovery to an
innocent third party. Id. at 74. Noting that "[t]he average
law-abiding professional would not desire to pay more so that the
policy would cover their own criminal or intentionally tortious
conduct," the court emphasized that "an insurance policy is
nothing more than a contract between the insured and the carrier
. . . . [and] insurance companies may specifically exclude
anything from their policy that state law does not forbid them
from excluding." Ibid.
The policy at issue in this appeal covers an injury if it is "caused by a `medical incident' arising out of [the physician's] supplying or failure to supply professional services." "Medical Incident" is defined in relevant part as "any act or failure to act . . . in the furnishing of the professional medical . . . services by [the physician]." That language does not restrict the scope of coverage to injuries resulting only from acts that can fairly can be characterized as "professional" in nature, as would be implied by the Marx/Hirst test. A fair reading of the Princeton policy language suggests that the coverage encompasses injuries caused by any act or failure to act by the physician that occurs in the course of furnishing professional services. Therefore, we do not find it necessary to rely on the reasoning in Asbury that a sexual assault during a gynecological examination is more intertwined with the professional services sought than a sexual assault in the course of another type of physical examination. We agree with the Records court that the important question is simply whether a substantial nexus exists
between the context in which the acts complained of occurred and
the professional services sought.
The acts complained of by Davis took place in Chunmuang's
office in the course of what he represented to be a medical
examination. Those acts were possible only because Davis
entrusted herself to the physician's care for the purpose of
receiving diagnosis and treatment for a medical problem. We have
no difficulty in concluding that those acts constituted a
"medical incident" as defined by Chunmuang's malpractice policy.
That finding is not dispositive, however, because the policy
contained an exclusion for claims based on injuries resulting
from "the performance of a criminal act" by the insured. We
reiterate that such exclusions are valid and do not violate
public policy. See Malec, supra, 104 N.J. at 6-12. Although we
again acknowledge the public interest in compensating innocent
victims, we also recognize that a malpractice insurance policy is
essentially a contract between the insurer and the insured.
Civil liability for a criminal act is dramatically different from
the liability typically contemplated when a physician purchases
malpractice insurance. We do not believe that an exclusion for
liability based on criminal acts runs counter to the basic
purpose of malpractice insurance or to the parties' probable
intentions and expectations.
Asbury, which concerned a malpractice policy without a
criminal acts exclusion, is not instructive on the application of
the exclusion in the Princeton policy. We agree with the
dissenting opinion in the Appellate Division that the analysis in
Asbury would be "relevant only in the context of deciding whether
Dr. Chunmuang's conduct constituted `professional services'
within the meaning of the policy." 292 N.J. Super. at 362. The
Asbury court assumed that the physician's acts were criminal.
The question for that court was whether the acts also constituted
a "professional service" for the purpose of malpractice insurance
coverage. As noted, we do not find it necessary to rely on
Asbury to find that the acts that are the basis of Chunmuang's
civil liability, in addition to being criminal, also constituted
malpractice that would be covered by the policy were it not for
the criminal-acts exclusion.
The interpretation of a policy containing an exclusion
necessarily has a somewhat different focus. Logically, in order
to give any meaning to the exclusion, it must be interpreted to
exclude something that would otherwise be covered. Therefore, we
cannot agree with the majority in the Appellate Division and our
dissenting colleague that "the `criminal acts' exclusion was
reserved for situations where the criminal conduct has no
relation to the professional services sought." Post at ___ (slip
op. at 6).
We note that the dissent relies on cases from other
jurisdictions involving psychotherapist malpractice for the
proposition that a criminal acts exclusion should not be enforced
where the criminal acts are intertwined with malpractice. Post
at ___ (slip op. at 6-10). That reliance is misplaced. As the
Wisconsin Court of Appeals emphasized in L.L. v. Medical
Protective Co.,
362 N.W.2d 174, 177 (1984), one of the cases
cited by the dissent, a patient's emotional attachment to and
dependence on a therapist is a phenomenon of the therapeutic
relationship known as "transference." "A sexual relationship
between therapist and patient cannot be viewed separately from
the therapeutic relationship that has developed between them."
Id. at 178. Accordingly, the Wisconsin court declined to apply
the criminal acts exclusion in the policy because it concluded,
based on the unique context of the psychotherapist-patient
relationship, that the malpractice aspect of the therapist's
sexual contact with the patient was inseparable and
indistinguishable from any criminal conduct that may have
occurred. Id. at 178-79. That rationale clearly is inapplicable
to nonconsensual sexual contact between other types of physicians
and their patients.
We understand that a gynecologist has a greater opportunity
than some other physicians to cloak illegitimate sexual assaults
in the guise of professional services. However, that fact should
have no bearing on the application of a criminal acts exclusion
once it has been demonstrated that the physician's acts were
criminal. The damages caused by a physician's criminal conduct,
such as a sexual assault, inevitably will be significantly
distinct from damages occasioned by acts of medical malpractice
not involving criminal conduct. Moreover, we do not believe that
the additional access that a gynecologist has to a patient is
fundamentally different from the access that other physicians
have whenever a patient places herself or himself in that
professional's care. Therefore, to invalidate the exclusion as
applied to the patients of gynecologists and not to those of
other physicians would be inappropriate. We hold that claims
based on injuries caused by a physician's criminal conduct are
properly excluded from coverage under the policy at issue.
Princeton is not responsible to Davis for the damages she
suffered as a result of Chunmuang's sexual assault.
Our holding that public policy is not offended by enforcement of an exclusion in a medical malpractice policy of liability for injury caused by a criminal act, and that Princeton, accordingly, has no liability for any portion of Davis's judgment that awards compensation for injury caused by Chunmuang's criminal acts, resolves all but one issue posed by this appeal. Although Davis contends that Chunmuang's acts of medical malpractice are inseparable from his criminal conduct, entitling her to coverage from Princeton for the full amount of the judgment, she also alleges that a portion of her damages is attributable to medical malpractice by Chunmuang that is separate and distinct from his criminal conduct. Specifically, she
contends that Chunmuang's failure properly to diagnose and treat
the condition for which she consulted him was itself a deviation
from generally accepted medical standards and that a significant
amount of the judgment should be understood to constitute
compensation for that deviation.
Our examination of the record at the proof hearing, which
was uncontested, reveals that Davis did not attempt to offer
evidence of damages attributable solely to acts of malpractice
that were independent of Chunmuang's criminal assault. Under the
circumstances, which included Chunmuang's default and Princeton's
election not to defend, no apparent need existed for Davis to
attempt to apportion her damages. In view of our disposition of
this appeal, Davis should be afforded the opportunity on remand
to produce proof of damages caused by Chunmuang's malpractice
that is separable from his criminal conduct.
We reverse the judgment of the Appellate Division and remand
the matter to the Law Division for further proceedings consistent
with this opinion.
CHIEF JUSTICE PORITZ and JUSTICES POLLOCK, and GARIBALDI
join in JUSTICE STEIN'S opinion. JUSTICE O'HERN has filed a
separate concurring opinion. JUSTICE HANDLER has filed a
separate dissenting opinion, in which JUSTICE COLEMAN joins.
SUPREME COURT OF NEW JERSEY
A-
133 September Term 1996
PRINCETON INSURANCE COMPANY,
Plaintiff-Appellant,
v.
PRASERT CHUNMUANG, M.D.,
Defendant,
and
JUNE DAVIS,
Defendant-Respondent.
O'Hern, J., concurring.
I concur in the opinion and judgment of the Court. I
disagree with the view of the dissent that it is "unrealistic to
require . . . the factfinder to determine the source and
uniqueness of the injuries [plaintiff] suffered in this case."
Post at __ (slip op. at 13).
I have little doubt that a judge or jury will be able to
assess the damages that this young woman suffered as a result of
the doctor's deviations from accepted medical standards.
Although the policy does not insure against a criminal act, the
policy does insure against an unprofessional act. Plaintiff,
therefore, may be compensated to the full extent of the law for
the treatment of her condition that fell below standards
generally accepted in the medical profession.
SUPREME COURT OF NEW JERSEY
A-
133 September Term 1996
PRINCETON INSURANCE COMPANY,
Plaintiff-Appellant,
v.
PRASERT CHUNMUANG, M.D.,
Defendant,
and
JUNE DAVIS,
Defendant-Respondent.
HANDLER, J., dissenting.
The issue addressed by the Court in this case is whether a
medical malpractice insurer can be held liable for sexual
misconduct of its insured under a policy that provides insurance
for injury "caused by a medical incident arising out of [the
physician's] supplying . . . professional services," and
specifically excludes coverage for "injury resulting from [the
physician's] performance of a criminal act."
The Court concludes that, although the language in the
coverage section of the policy is sufficiently broad to provide
coverage for the injuries sustained by this patient -- injuries
from sexual misconduct occurring in the course of a gynecological
examination -- she nevertheless cannot recover against the
insurance carrier because of the policy's exclusion for injuries
resulting from criminal acts committed by the physician. The
Court adds that the patient may attempt to recover for that
portion of her damages that she can prove are derived from the
insured's failure to provide proper treatment for the condition
for which she initially sought medical care.
On these facts, I believe that the insured's sexual
misconduct was so intertwined with his medical malpractice -
both the mishandling of the examination and the failure properly
to treat plaintiff's condition -- that it is not realistically
possible to identify, differentiate, and quantify the injuries
occasioned by the malpractice apart from the injuries
attributable to the sexual misconduct. Yet, the Court's approach
demands that analysis, and thereby inevitably assures a result
that will be artificial and arbitrary, and one that will
drastically reduce, or quite possibly eliminate, recovery.
The Court's interpretation is not required by the language
or essential meaning of the insurance policy; its result is
patently unfair, if not unconscionable, to this injured patient.
I dissent.
The facts in this case, largely undisputed at this juncture of the litigation, are extremely important. They are recapitulated by the Court. Ante at __ - __ (slip op. at 2-5). It warrants iteration, however, that when June Davis visited with
Dr. Prasert Chunmuang in November 1992, she was extremely young
and inexperienced, factors that lend greater significance to her
state of dependence, helplessness, and passivity as a patient
undergoing a gynecological examination. In addition, Davis's
attorney informed the Court that Chunmuang had been indicted
based on complaints filed by several of his patients, including
Davis, and that he pled guilty to several of the charges. Ante
at __ (slip op. at 4). Chunmuang's plea bargain did not,
however, include a conviction or acknowledgment of criminal guilt
for the conduct stemming from Davis's gynecological examination.
The initial question posed is whether the misconduct of Dr. Chunmuang falls within the coverage of the insurance policy. The coverage provisions of the insurance policy state:
We will pay all amounts up to the limit of liability which you become legally obligated to pay as a result of injury to which this insurance applies. The injury must be caused by a "medical incident" arising out of your supplying or failure to supply professional services.
The policy defines "medical incident" as
any act or failure to act . . . in the
furnishing of the professional medical . . .
services by you . . . . Any such act or
failure to act, together with all related
acts or failures to act in the furnishing of
such services to any one person shall be
considered one "medical incident."
The Appellate Division relied on St. Paul Fire & Marine Ins.
Co. v. Asbury,
720 P.2d 540 (Ariz. Ct. App. 1986), as support
for its conclusion that the insured's conduct constituted
medical malpractice covered by the insurance policy.
292 N.J.
Super. 349, 355 (1996). In Asbury, as in this case, a
gynecologist was accused of improperly manipulating his patients
during gynecological examinations. Asbury, supra, 720 P.
2d at
541. The policy at issue provided coverage for claims arising
from "professional services," and the Asbury court held that
coverage was applicable to misconduct, such as sexual assault,
that is "intertwined with and inseparable from the services
provided." Id. at 542.
In Records v. Aetna Life & Cas. Ins.,
294 N.J. Super. 463
(App. Div. 1996), the court adopted what has been characterized
as the "substantial nexus" test, ante at __ (slip op.at 18),
ruling that "conduct which has a substantial nexus to an insured
activity may be found to 'arise out of' that activity even if it
is unlawful." Id. at 469. Relying on that decision, the Court
determines that "[w]e have no difficulty in concluding that [the
insured's actions] constituted a 'medical incident' as defined by
Chunmuang's malpractice policy." Ante at __ (slip op. at 23).
I agree with the Court that the language contained in the
coverage clause of this policy is broad enough to encompass
sexual misconduct occurring during the course of a medical
examination. There can be no question of coverage where, as
here, that sexual misconduct is virtually inseparable from and
overlaps with the conduct entailed in providing the medical
service itself.
The Court's result in this case is founded on its interpretation of the criminal-acts exclusion. That interpretation calls for a contrived application of the exclusionary clause to these facts. The Court's analysis unfairly requires Davis to prove, and unrealistically asks the fact-finder to determine, those injuries that are attribu