Allstate Ins. Co. v. Vitality Physicians Grp. Practice P.C.

537 F.Supp.3d 533

ALLSTATE INSURANCE COMPANY, Plaintiff,

v.VITALITY PHYSICIANS GROUP PRACTICE P.C., a/k/a/ Vitality Psychiatry Group, Mitchell Cabisudo, Sean Cavanaugh, Jane Doe, a fictitious name, Sarah Perlik, Jessica Schaefer, Danielle Semisa, and Jessalyn Suo, Defendants.

No. 20-CV-4132 (CS)

United States District Court, S.D. New York.

Signed May 4, 2021

Rosa M. Feeney, Lewis Johs Avallone Aviles, LLP, Islandia, New York, Counsel for Plaintiff.

Michael D. Brown, Ross J. Kartez, Ruskin Moscou Faltischek, P.C., Uniondale, New York, Counsel for Defendants Vitality Physicians Group Practice P.C. and Mitchell Cabisudo.

OPINION & ORDER

Seibel, U.S.D.J.

On May 29, 2020, Plaintiff Allstate Insurance Company ("Allstate" or "Plaintiff") filed a declaratory judgment action in this Court against Defendants Vitality Physicians Group Practice P.C., a/k/a Vitality Psychiatry Group ("Vitality"), Mitchell Cabisudo (together with Vitality, the "Vitality Defendants"), Sean Cavanaugh, and several women who had asserted claims against Cavanaugh and the Vitality Defendants. (Doc. 1.) Before the Court is Plaintiff's Motion for Judgment on the Pleadings. (Doc. 75.) For reasons discussed below, Plaintiff's motion is GRANTED.

I. BACKGROUND

A. Facts

The following facts are undisputed.¹ Vitality is a medical practice licensed in the State of New York. (Doc. 33 ("AC") ¶ 4; Doc. 42 ("Vitality Answer") ¶ 4; Doc. 50 ("Cavanaugh Answer") ¶ 2.) Dr. Cabisudo is Vitality's principal physician, and Cavanaugh was employed by Vitality as a physician's assistant at all times relevant to this action. (AC ¶ 24; Vitality Answer ¶ 24; Cavanaugh Answer ¶ 2.) Prior to the events at issue, Allstate issued two insurance policies to Vitality: a Businessowners Policy, (AC ¶ 16; see id. Ex. A), and a Commercial Umbrella Liability Policy ("Umbrella Policy," and together with the Businessowners Policy, the "Insurance Policies" or "Policies"), (id. ¶ 20; see id. Ex. B). Both Policies were effective March 1, 2018, (id. Ex. A at 2; id. Ex. B at 2),² and were renewed on March 1, 2019, (id. Ex. A.II at 2; id. Ex. B at 64). Both Policies listed "VITALITY PHYSICIANS GROUP PRACTICE P.C." as the named insured. (Id. Ex. A at 7; id. Ex. A.II at 9; id. Ex. B at 5.)

1. The Insurance Policies

a. Businessowners Policy

The Businessowners Policy provides in pertinent part:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" ... to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages even if the allegations of the "suit" are groundless, false or fraudulent. However, we will have no duty to defend the insured against any ‘suit’ seeking damages for "bodily injury" ... to which this insurance does not apply.

(Id. Ex. A at 36.) The policy's definition of an "insured" includes, as to Vitality, its executive officers and directors, "but only with respect to their duties as [such]," as well as its employees, "but only for acts within the scope of their employment [by Vitality] or while performing duties related to the conduct of [Vitality's] business." (Id. Ex. A at 90.) Furthermore, the policy applies only to " ‘bodily injury’ ... caused by an ‘occurrence.’ " (Id. Ex. A at 81.) "Bodily injury" is defined as "bodily injury, sickness or disease sustained by a person." (Id. Ex. A at 92.) "Occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Id. Ex. A at 94.)

This coverage is limited by a number of policy exclusions. First, the policy does not apply to any injury that is "expected or intended from the standpoint of the insured." (Id. Ex. A at 83.) Second, the policy does not apply to any injury that is "caused by the rendering or failure to render any professional service." (Id. Ex. A at 86.) This provision is followed by a non-exhaustive list of examples of excluded professional services, including "[m]edical, surgical, dental, x-ray or nursing services treatment, advice or instruction" and "[a]ny health or therapeutic service treatment, advice or instruction." (Id. ) In addition, the definition of an insured excludes employees to the extent that any bodily injury arises out of an employee's "providing or failing to provide professional health care services." (Id. Ex. A at 90.) Finally, the Businessowners Policy includes an abuse or molestation exclusion, (id. ¶ 19), which provides:

This insurance does not apply to "bodily injury" ... arising out of: (a) [t]he actual or threatened abuse or molestation by anyone of any person while in the care, custody or control of any insured, or (b) [t]he negligent: (i) [e]mployment; (ii) [i]nvestigation; (iii) [s]upervision; (iv) [r]eporting to the proper authorities, or failure to so report; or (v) [r]etention; of a person for whom any insured is or ever was legally responsible and whose conduct would be excluded by (a) above.

(Id. Ex. A at 105.)

b. Umbrella Policy

The Umbrella Policy's relevant coverage and exclusion provisions are substantially the same as those in the Businessowners Policy. The policy provides in pertinent part:

We will pay on behalf of the insured the "ultimate net loss" in excess of the "retained limit" because of "bodily injury" ... to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking damages for such "bodily injury" ... when the "underlying insurance" does not provide coverage or the limits of "underlying insurance" have been exhausted.... However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" ... to which this insurance does not apply.

(Id. Ex. B at 22.) The Umbrella Policy's definition of an "insured" is substantially the same as the definition in the Businessowners Policy.³ (See id. Ex. B at 31.) Like the Businessowners Policy, the Umbrella Policy only covers injuries resulting from an "occurrence." (Id. Ex. B at 22.) The Umbrella Policy contains the same exclusions for intentional injury, (id. Ex. B at 23), professional services, (id. Ex. B at 26-27), and abuse or molestation, (id. Ex. B at 46). The parties do not raise any differences between the Policies that need to be addressed to resolve the issues presented here.

2. The Underlying Actions

a. Patricia Murphy

Plaintiff alleges that Patricia Murphy contacted Vitality at an unstated time, claiming that while she was a Vitality patient, Cavanaugh sent her inappropriate and sexually explicit text messages, which included nude photographs of Cavanaugh and propositions for sex. (Id. ¶¶ 26-27; see id. Ex. C at 6.)⁴ Cavanaugh and the Vitality Defendants sought coverage from Allstate, which denied and disclaimed the obligation to defend or indemnify any party under the Umbrella Policy. (AC Ex. C at 2.) In doing so, Allstate stated its position that Cavanaugh was not an "insured" under the policy, as he was not acting within the scope of his employment, and, moreover, that his acts were barred by the intentional injury exclusion. (Id. Ex. C at 6.) Allstate also stated that Murphy's injuries did not constitute bodily injury as defined by the policy. (Id. ) Allstate characterized Murphy's claim as arising from allegations of "sexual harassment." (Id. )

Plaintiff represents that no litigation has been brought by Murphy against Cavanaugh or the Vitality Defendants, (Doc. 76 ("P's Mem.") at 3), and accordingly, Allstate has voluntarily dismissed Murphy from this suit without prejudice, (Doc. 57).

b. Jane Doe

Several other women commenced litigation against Cavanaugh and the Vitality Defendants. (AC ¶¶ 2, 24; Vitality Answer ¶¶ 2, 24; Cavanaugh Answer ¶ 2.)⁵

A plaintiff using the name Jane Doe sued Cavanaugh and the Vitality Defendants in the Supreme Court of the State of New York, Orange County, for events that occurred while she was a Vitality patient from August 2018 to July 2019. (AC ¶¶ 29-31; see id. Ex. D.) Doe alleged that Cavanaugh diagnosed her with bipolar disorder without any scientific basis and that he used medically unnecessary heart rate checks with a stethoscope as a pretense to force Doe to remove portions of her clothing and to allow Cavanaugh to fondle her breasts. (Id. Ex. D ¶¶ 20-22, 25-34.) Accordingly, Doe brought claims for sexual battery and professional negligence against Cavanaugh. (Id. Ex. D ¶¶ 59-60, 65.) She further alleged that Vitality knew or should have known of Cavanaugh's propensity for sexual misconduct prior to hiring him, and that Vitality failed to investigate or terminate Cavanaugh's employment after learning, in July 2019, that he had sent inappropriate sexual text messages to at least one former patient. (Id. Ex. D ¶¶ 35-43, 46-49.) Accordingly, Doe brought claims for negligent hiring, investigation, and retention against the Vitality Defendants, (id. Ex. D. ¶¶ 39, 43, 48-49), and for professional negligence against Dr. Cabisudo, (id. Ex. D. ¶ 55).

Allstate has been providing a defense to the Vitality Defendants in Doe's action, (id. ¶ 45; Vitality Answer ¶ 45), but is now seeking a declaration that neither the Businessowners Policy nor the Umbrella Policy provides coverage for the defense or indemnification of either Cavanaugh or the Vitality Defendants on Doe's claims, and that its assigned counsel may withdraw, (AC ¶¶ 48-49).⁶ It previously denied and disclaimed the obligation to defend or indemnify Cavanaugh or the Vitality Defendants on these claims under either the Businessowners Policy, (see id. Ex. E), or the Umbrella Policy, (see id. Ex. F). Allstate maintained that Cavanaugh is not an insured for the purposes of the alleged acts, (see, e.g. , id. Ex. E at 6), and additionally relied on the policy exclusions for injuries resulting from intentional acts, professional services, and abuse or molestation, (id. ¶ 46).⁷

c. Sarah Perlik

Sarah Perlik sued Cavanaugh and Vitality in the Supreme Court of the State of New York, ...