Wrongful Business Practices and Wrongful Death Lawsuits Against Nursing Facility Alleging Understaffing Held Not Related Claims

The United States District Court for the Central District of California, applying California law, has held that wrongful business practices and wrongful death lawsuits against a nursing facility both alleging understaffing by the facility did not constitute related claims. Oxnard Manor LP v. Hallmark Specialty Ins. Co., 2023 WL 9502069 (C.D. Cal. Dec. 21, 2023).

In a 2014 lawsuit against the insured nursing facility, the underlying plaintiffs alleged that the facility conceived and implemented a plan to wrongfully increase business profits through understaffing and underfunding patient-resident services. In a subsequent 2018 lawsuit, the underlying plaintiffs asserted a wrongful death claim against the facility following the death of a bedbound patient who sustained injuries and died after being repositioned and cleaned, alleging, among other allegations, that the facility was understaffed. The insured sought coverage for the 2018 lawsuit under a professional liability policy providing coverage for claims first made during the 2018-2019 policy period. The insurer denied coverage for the 2018 lawsuit, concluding that the 2018 lawsuit related back to the 2014 lawsuit such that it was first made prior to the policy period. The insured sued the insurer for coverage for the 2018 lawsuit, and the parties filed cross-motions for summary judgment.

The court granted summary judgment to the insured, holding that the 2018 lawsuit was a claim first made during the 2018-2019 policy period triggering coverage. The court concluded that the policy’s definition of “Related Claims” as “two or more Claims arising out of a single act, error or omission that are logically or causally connected by any common fact, circumstance, situation, transaction, event, advice, or decision” did not refer to a “series of acts” but instead required that the claims “have some loose causal nexus to one, single, ‘act, error or omission.’” The court reasoned that, although both the 2014 and 2018 actions were logically connected by allegations of the insured’s understaffing, the specific patient incident underlying the 2018 lawsuit was insufficiently connected to the wrongful business practices alleged in the 2014 lawsuit.

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