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Ballow v. Phico Insurance Co.11/15/1993
Colorado on February 1, 1982. By November 1, 1984, PHICO had ceased accepting new independent physician business but continued to write new policies for hospitals. In 1985, PHICO established a plan to reduce the number of independent physicians insured but maintained its stance that it would continue to insure the doctors already receiving coverage. Also in 1985, PHICO increased the percentage of the fourth-year mature rate required to buy a tail policy. On June 18, 1986, PHICO decided not to renew any of the independent physician business. On July 12, 1986, PHICO sent a letter to its insured independent physicians providing notice of its decision to withdraw from the Colorado market. Most of the doctors had a renewal date of July or earlier so they had already renewed when they were informed of the withdrawal and the increased cost to purchase a tail policy.
III
In order to determine if the insurance policy provided by PHICO to the independent physicians was breached by PHICO, it is first necessary to analyze the type of policy written by PHICO and the purpose behind this type of liability policy. I would not interpret the contract in favor of the insureds and then find a breach, as the majority does, but would address the nature of the policy and conclude that there was a purpose and intent shared by both parties and that a breach occurred. The examination of the type of policy written by PHICO yields essential insight into why this type of policy must be treated as a continuous policy.
A. Types of Medical Malpractice Coverage
As the majority points out, there are two general types of medical malpractice insurance available to individual doctors-occurrence" and "claims-made." Generally, "an 'occurrence' policy protects the policyholder from liability for any act done while the policy is in effect, whereas a 'claims-made' policy protects the holder only against claims made during the life of the policy." St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531, 535, 57 L. Ed. 2d 932, 98 S. Ct. 2923 n.3 (1978). The act which triggers coverage under an occurrence policy is the act or omission itself--if the liability inducing event occurs during the policy period, the insured is indemnified regardless of when the claim is brought. Conversely, the act which determines coverage under a claims-made insurance policy is the assertion of the claim during the policy period. One type of claims-made policy provides coverage for claims made during the policy period no matter when the alleged act or omission occurred. See Mutual Fire, Marine & Inland Ins. Co. v. Vollmer, 306 Md. 243, 508 A.2d 130, 134-35 (Md. 1986) (stating that claims-made policies provide indemnity during the policy term no matter when the alleged error or omission or act of negligence occurred); Stine v. Continental Cas. Co., 419 Mich. 89, 349 N.W.2d 127, 130 (Mich. 1984) (same). See also Gereboff v. Home Indem. Co., 119 R.I. 814, 383 A.2d 1024 (R.I. 1978) (involving a policy written to cover all claims made during the policy period regardless of when the event giving rise to the liability claim occurred). An insurer may modify a claims-made policy and limit coverage only to a certain range of occurrences by creating a "retroactive date." All events that occur prior to the retroactive date are outside the scope of coverage even if the claim is made while the policy is in force.
Some insurers offer policies that have a retroactive date identical to the beginning of the coverage with the insurer. This type of policy is a combination of claims-made and occurrence policies. This type of claims-made coverage (hybrid claims-made policy) covers negligent acts or omissions which occur and are the sub
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