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GENERAL CONF. OF SEVENTH-DAY ADVENTISTS v. AON REI

July 22, 1994

GENERAL CONFERENCE OF SEVENTH-DAY ADVENTISTS (RISK MANAGEMENT SERVICES), formerly known as, GENCON RISK MANAGEMENT SERVICES, ADVENTIST HEALTH SYSTEMS/U.S. and ADVENTIST HEALTH SYSTEMS/U.S. LIABILITY TRUST, Plaintiffs,
v.
AON REINSURANCE AGENCY, INC., formerly known as COLE, BOOTH, AND POTTER, INC., formerly known as ALEXANDER & ALEXANDER OF NEW YORK, INC., formerly known as REED STENHOUSE INC. OF NEW YORK, formerly known as STEN-RE, COLE, AND ASSOCIATES, INC., RICHARD COLE and THOMAS SIMONE, Defendants.


Conner


The opinion of the court was delivered by: WILLIAM C. CONNER

CONNER, D.J.:

 Plaintiffs, General Conference of Seventh-Day Adventists Risk Management Services, f/k/a/ Gencon Risk Management Services ("Gencon"); Adventists Health Systems/U.S. ("AHS"); and Adventists Health Systems/U.S. Liability Trust ("AHS-Trust") bring this action for indemnity and contribution against AON Reinsurance Agency, Inc., f/k/a/ Sten-Re, Cole and Associates, Inc. ("Sten-Re"), Richard Cole, and Thomas Simone. In an Opinion and Order dated July 16, 1993 ("Gencon I"), this Court granted defendants' motion to dismiss Gencon's contribution claim, but denied the remainder of defendants' motion. Familiarity with Gencon I is presumed. The action is presently before the Court on defendants' motion for summary judgment pursuant to Rule 56, Fed. R. Civ. P. For reasons explained below, defendants' motion is granted.

 BACKGROUND

 Plaintiff AHS is an affiliate of the General Conference of Seventh-Day Adventists Church ("the Church") responsible for the supervision and maintenance of the Church's health care staff and facilities. Plaintiff Gencon is another affiliate of the Church which for all relevant periods served as AHS's insurance agent. Defendant Sten-Re was an insurance broker whose services were utilized by AHS and Gencon to help obtain excess retroactive insurance coverage for AHS and its insured entities; Sten-Re has since been acquired by defendant AON.

 The gravamen of plaintiffs' Complaint is that Sten-Re failed to procure an insurance policy with sufficient breadth of coverage, i.e., one that covered staff physicians, and therefore must indemnify or contribute to an uninsured liability that was incurred by an AHS doctor and was paid by plaintiffs. The undisputed facts are as follows.

 Prior to 1975 the various hospitals owned by the Church were grouped by regions, each of which regional group turned to Gencon, a separate division of the Church, for insurance and risk management services in obtaining medical malpractice coverage. In the mid-1970s, Gencon implemented a self-insurance program and designed a Malpractice Advisory Committee (the "Committee") composed of the executive heads of the regional hospital groups to manage the Medical Malpractice Program. Generally the hospitals themselves would determine their insurance needs, and then communicate these needs to the Committee; Gencon representatives, acting as insurance agents, would participate in Committee meetings and then enter the marketplace to obtain the necessary coverage. In 1982 AHS was incorporated and assumed the duties of the Committee. *fn1"

 In 1981, the Committee decided to attempt to obtain retroactive excess medical malpractice coverage. Hence Gencon began contacting various insurance brokers, including Sten-Re, to obtain proposals from insurance companies for the excess coverage. These brokers would submit the proposals to Gencon, who, after reviewing the policies and negotiating any changes, would summarize them and make a recommendation to the Committee as to which policy to accept.

 In late 1981 or early 1982, Sten-Re obtained a favorable proposal from St. Paul Surplus Lines Insurance Co. ("St. Paul Insurance"). The policy insured AHS for its liabilities in excess of its existing policy coverage for the years in question and a $ 1,000,000 self-insurance retention, up to a maximum of $ 10,000,000. AHS accepted the St. Paul policy based on the recommendation of Gencon.

 In 1984, judgment was entered against Dr. Nancy Rich, an AHS staff physician at Hinsdale Hospital, for the wrongful death of Renee Barenbrugge for failure to diagnose breast cancer. Hinsdale had previously contracted with Dr. Rich to provide certain medical malpractice insurance coverage for her. Because AHS's primary insurance coverage for the relevant period had been exhausted, AHS submitted the claim to St. Paul Insurance. St. Paul, however, refused to cover the claim because the policy did not extend to licensed physicians or surgeons acting within the scope of their duties. As a result, on November 13, 1986, AHS paid $ 2,268,811.03 on behalf of Dr. Rich to satisfy the judgment against her; *fn2" $ 1,268,811.03 of this amount would have been paid by St. Paul Insurance had the policy acquired by Sten-Re covered liabilities incurred by physicians.

 In August, 1989, AHS accepted $ 800,000 from Gencon in settlement of its claims arising out of the refusal of St. Paul Insurance to cover the Barenbrugge judgment. Now AHS and Gencon unite to bring this action for indemnity against Sten-Re and the individual defendants; AHS also submits a claim for contribution.

 DISCUSSION

 Summary judgment is to be granted when "there is no genuine issue as to any material fact and [] the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). Summary judgment is appropriate only when, after drawing all reasonable inferences in favor of the party opposing the motion, no reasonable trier of fact could find for the nonmoving party. Lund's, Inc. v. Chemical Bank, 870 F.2d 840, 844 (2d Cir. 1989). However, the nonmoving party cannot avoid summary judgment by resting solely on the contentions in its pleadings. Rather, if the moving party puts ...


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