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Lab Testing Contractor Not Covered By Health Center’s General Liability or Excess Policy


A university and a clinical laboratory testing contractor entered into an agreement under which the clinical laboratory testing contractor, as an independent contractor, would be responsible for performing certain clinical laboratory testing for students and employees at the university’s health center. The agreement set forth standards for the performance of certain tests, and required both parties to procure four types of insurance coverage: workers' compensation insurance, general liability insurance, “All   additional insured. Both were also required to obtain professional liability coverage, but there was no obligation to name the other party as an additional insured. The university secured general liability insurance and professional liability insurance through one insurer and excess insurance through another insurer. The general liability insurance policy had an exception that stated that the policy did not apply to bodily injury arising out of any service or treatment conducive to health conducted at or performed in a hospital setting or a student healthcare facility.

 

A student sought treatment at the university's health services clinic. At the time, she was experiencing a sore throat, nausea, and ear pain. She was seen by a physician's assistant (PA) who was employed by the university. The PA ordered a rapid strep test, to be performed by the clinical laboratory testing contractor. The test was not performed promptly, and results were not returned to the health center. When the student returned to the health center two days later she was diagnosed with toxic shock syndrome—an illness that resulted in a prolonged hospital stay and permanent injuries.

 

The university notified its primary insurer and its excess insurer of the incident and the potential claim. The student sued the university, the PA, and the clinical laboratory testing contractor. The suit alleged, inter alia, that the clinical laboratory testing contractor failed to exercise the degree and skill expected of a reasonably competent provider of laboratory services in failing to process the test and in failing to provide the results of the testing in a timely manner. The university and the PA filed a cross-claim against the clinical laboratory testing contractor alleging that it negligently failed to properly process the rapid strep test, and to communicate the results of the test to the health center. In addition to the negligence claim, the university asserted claims for breach of contract, indemnification, and contribution.

 

The student settled her claims with the university and its insurers. The clinical laboratory testing contractor did not participate in the settlement, and the university cross-claim was not resolved. The clinical laboratory testing contractor sent a letter to the university's counsel, demanding a complete defense and indemnification from the university’s primary insurer and requesting that the university's counsel forward the letter to the primary insurer and provide the relevant contact information to the clinical laboratory testing contractor. When the clinical laboratory testing contractor did not receive a reply, it sent a follow-up letter. The excess insurer never received a copy of these letters.

 

Subsequently, the clinical laboratory testing contractor filed an action to determine its legal rights seeking a judgment that it was entitled to a defense from the primary insurer and indemnification under the primary and excess policies. The Providence County Superior Court entered summary judgment in favor of the insurers. The trial court held that the clinical laboratory testing contractor was not entitled to a defense and indemnification from either insurer.

 

The Supreme Court of Rhode Island affirmed. The court held that the contractor was not an insured covered by the university’s commercial general liability or excess liability policies.

 

The clinical laboratory testing contractor was not an insured covered by the university’s professional liability insurance policy or excess policy. The insurers had no duty to defend or indemnify the student's action or medical center's and PA’s cross-claims. Although it was an additional insured under the commercial general liability insurance policy, all aspects of testing were excluded from the commercial general liability policy.

 

Specifically, bodily injury arising out of any service or treatment conducive to health conducted at or performed in a hospital setting or a student healthcare facility was exempted from the commercial general liability insurance policy. The clinical laboratory testing contractor’s performance of a test was a service conducive to health. The action that allegedly led directly to the student’s injury—the placing of her test sample in a wrong bag, thus sending it to the wrong facility—occurred at the health center. The allegations that the clinical laboratory testing contractor failed to test promptly, and to notify the university as required by the agreement, all flowed from that first error. All aspects of testing, including routing the sample to the appropriate laboratory, were a professional service. The court concluded that the actions alleged in the initial complaint and in the university's cross-complaint fell within the professional liability exclusion from the general liability coverage.

 

There was no agreement for center to provide professional liability coverage to the contractor. The excess policy was conditioned on the existence of primary insurance for a claim. As there was no primary coverage, there was no excess coverage.

 

The Supreme Court of Rhode Island affirmed the trial court’s grant of summary judgment in favor of the insurers.

 

See: Quest Diagnostics, LLC v. Pinnacle Consortium of Higher Educ., 2014 WL 2917036 (R.I., June 27, 2014) (not designated for publication).

 

See also Medical Law Perspectives, March 2014 Report: Blood Draws, Testing, Transfusions: Venipuncture Injury, Inaccurate Results, Tainted Blood - The Liability Risks

 

 

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