Where a hospital had inadequate surgical-sterilisation procedures affecting thousands of patients, a US Court of Appeals interpreted the hospital’s medical malpractice excess of loss policies, which covered medical incidents in furnishing services to any one patient, as indemnifying per patient, and not one claim for all patients harmed by single cause.

After notification by a whistleblower to a hospital-accreditation organisation, and the Public Health Department, it was found that there was a failure to implement and oversee sterilisation policies, a failure to train, hire and supervise employees, and a failure to properly sterilise equipment. The hospital underreported patient infections, overworked staff and understaffed operating rooms. Following these findings, the hospital group notified the thousands of patients who might have been affected. They paid patients who suffered infection as well as 6 000 patients who were not infected but allegedly suffered emotional distress from the exposure to infection about which they were now informed. The total payments exceeded the aggregate policy limit of $40 million. The insured had a liability self-insurance retention of $2 million for each claim.

The policy covered a “medical incident” meaning “any act or omission in the provision of or failure to provide professional healthcare services to the participant’s patients”. But “any such act or omission, together with all related acts or omissions in the furnishing of such services to any one patient, shall be considered one medical incident”. In plainer language, a single medical incident included any act or omission arising from the conduct described that results in injury to one person.

The parties disputed whether the term “medical incident” covered injuries to multiple patients from an ongoing but common cause, or covered injuries for each individual patient so harmed. The court found that the second half of the definition provides the answer in referring to services to “any one patient” considered to be “one medical incident”. The court held that the language unambiguously says that each patient’s claim is a separate medical incident. As no single claim exceeded the self-retention of $2 million, the first and second layer excess policies did not have to respond to the claim for $40 million for multiple patients.

The same result on that wording would follow in South Africa. Similar wording is not common. Individual occurrences are frequently covered as events arising from one common cause. But excess of loss policies, by definition, may use wording that covers more narrowly defined excess losses.

Adhealth, Limited v. PorterCare Adventist Health Systems, No. 24-1273 (10th Cir. 2025) :: Justia