Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability (CGL) Policy to NMBJI, which includes a Professional Health Care Services exclusion that limits coverage for claims related to medical treatment.
Allegations Against NMBJI:
Dorsey alleges he suffered injuries due to medical negligence by NMBJI providers, leading to a lawsuit that includes multiple claims such as medical negligence and intentional infliction of emotional distress.
Exclusionary Clauses:
Travelers argues that the claims made by Dorsey fall under exclusions in the CGL Policy, thus asserting there is no duty to defend NMBJI.
Court’s Legal Standard:
New Mexico law states that an insurer must defend its insured if the allegations in the complaint could potentially be covered by the policy.
Ruling on Claims:
The court found that the claims related to medical negligence and other allegations arise from professional health care services, which are excluded from coverage under the policy.
No Duty to Indemnify:
Since Travelers had no duty to defend the claims, it also had no obligation to indemnify NMBJI for any potential damages arising from the state lawsuit.
LEGAL STANDARD
New Mexico substantive law governs the issue of whether Travelers has a duty to defend the CGL Policy insureds. To determine whether an insurance company must defend an insured client against a lawsuit, courts compare the factual allegations in the complaint with the insurance policy.
If the claimant’s complaint alleges facts potentially within the coverage of the policy, then the insurer has an obligation to defend its insured. This is true even though the complaint fails to state facts with sufficient clarity so that it may be determined from its face whether or not the action is within the coverage of the policy, provided the alleged facts tend to show an occurrence within the coverage.
Exclusionary clauses in insurance contracts must be narrowly construed.
Travelers Has No Duty To Indemnify.
If the allegations of the complaint clearly fall outside the provisions of the policy, neither defense nor indemnity is required. Because the Magistrate recommend finding that Travelers does not owe “the broader duty to defend in the underlying” state lawsuit, he further recommended finding that Travelers had no duty to indemnify the CGL Policy Insureds for the state claims either.
ZALMA OPINION
I am often confused by people and their lawyers try to turn an exclusion into an insuring agreement. Their arguments are creative and often brilliant, as were the arguments in this case. However, the Magistrate Judge simply read the clear and unambiguous exclusion and applied it to the facts and found that the CGL simply provided no coverage for defense or indemnity to the podiatrists for their medical malpractice and the bodily injuries caused to the plaintiffs because of the Professional Health Care Services exclusion in the Travelers policy.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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