Self Insurance is Excess Over Primary Insurance

Post 4572

Posted on October 29, 2026 by Barry Zalma

Employment Plan is Insurance Because it Transferred Risk and Contained Claim, Exclusion, and Priority Provisions.

In Ajay Kolli, & c. et al. v. Kaleida Health, 2026 NY Slip Op 06167, No. 72, New York Court of Appeals (October 22, 2026) Dr. Venkateswara Kolli treated a patient in 2011 while serving as an on-call, per diem physician for Kaleida Health. The patient later sued Dr. Kolli and Kaleida for medical malpractice.

In 2011, decedent Dr. Venkateswara Kolli treated a patient as part of his duties pursuant to an on-call, per diem physician employment agreement with defendant Kaleida Health. The patient subsequently sued Dr. Kolli and Kaleida. Dr. Kolli sought indemnity from his primary medical malpractice insurer, MLMIC Insurance Company (MLMIC), as well as his excess insurer Healthcare Professionals Insurance Company (HPIC).

The underlying medical malpractice action settled after Dr. Kolli’s death. Kaleida, MLMIC, and HPIC agreed to fund the settlement while reserving their rights to determine insurance coverage and priority of coverage.

The insurers funded a settlement while reserving their rights concerning coverage and priority. This declaratory judgment action followed.

LAW

Unambiguous insurance plans and employment agreements are enforced according to their plain terms and construed so that no provision is rendered meaningless. A self-insurance plan may constitute insurance — or equivalent coverage — when it protects covered persons against risk, requires claim reporting, and establishes exclusions and priority rules.

Competing “other insurance” provisions determine whether coverage is primary, excess, or shared pro rata.

ANALYSIS

Kaleida’s self-insurance plan covered physicians employed to provide patient care. Dr. Kolli’s employment agreement likewise covered him when acting under that agreement.

Specifically, Kaleida’s proposed interpretation would mean that Dr. Kolli was never covered under the SIP, despite the unambiguous terms to the contrary in the employment agreement.

The Court of Appeals agreed with the Appellate Division that the only reasonable interpretation of the contract is that it applied when Dr. Kolli treated his private practice patients at a Kaleida facility, as opposed to patients he treated for the first time while performing his on-call duties for Kaleida.
DISCUSSION

The Appellate Division treated Kaleida’s plan as insurance because it transferred risk and contained claim, exclusion, and priority provisions.

MLMIC’s and HPIC’s “other insurance” clauses expressly reached insurance equivalents. MLMIC therefore provided primary coverage; Kaleida’s coverage was excess, and Kaleida and HPIC shared the excess layer pro rata.

CONCLUSION

The New York Court of Appeals unanimously affirmed the Appellate Division without costs and did not answer the certified question because doing so was unnecessary. The order of the Appellate Division should be affirmed, without costs, and the certified question not answered as unnecessary.

With respect to priority of coverage, the Court of Appeals rejected Kaleida’s contention that its SIP falls outside the “other insurance” clauses in the policies issued by MLMIC and HPIC. Kaleida’s SIP was an insurance policy: it protected physicians such as Dr. Kolli and others against risk, required reporting of claims, and contained terms regarding priority of coverage and coverage exclusions. It was not merely a “self-insurance mechanism” for Kaleida to pay its own judgments.

Moreover, the “other insurance” clauses contained within the MLMIC and HPIC policies expressly encompassed “insurance equivalent[s]” or “equivalent coverage.” Even if the SIP was not “insurance,” it was at a minimum an “equivalent” thereto.

The Court of Appeals agreed with the Appellate Division, for the reasons stated by that Court, that Kaleida’s coverage is excess to MLMIC’s coverage, and that Kaleida and HPIC are responsible for excess coverage on a pro rata.

Order affirmed, without costs, and certified question not answered as unnecessary, in a memorandum. Chief Judge Wilson and Judges Rivera, Garcia, Singas, Cannataro, Troutman and Halligan concur.

ZALMA OPINION

A Health Care Provider can create insurance by promising to defend and/or indemnify its employees is creating a type of insurance contract. Dr. Kolli was sued for malpractice while employed by Kaleida Health who, by an employment contract, to defend and indemnify him acted as insurance and by application of clauses in his primary and excess insurance policies could treat the Kaleida contract as excess insurance and require Kaleida to share in the settlement as an excess insurer.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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