Claims Made and Reported Policies Limited to One Claim

There Can Only be one Policy Covering Claims Made Loss

Dr. Kyrsten E. Sutton reported a potential loss to her insurer; on expiration of that policy she acquired insurance with another insurer; and when a formal claim was reported presented a claim to the new insurer. The Fourth Circuit Court of Appeal required the first insurer to defend and indemnify the doctor. She wanted to double down and tried to get the court to require the second insurer to defend and indemnify her.

In First Professionals Insurance Company v. Kyrsten E. Sutton, M.D., U.S.Ct. of Appeals 4th Cir., No. 15-239,  2016 WL 7413529 (12/22/16), the Fourth Circuit concluded that this case, like a bad penny, returned to the Fourth Circuit Court of Appeal after a prior appeal and remand.

It is a multiparty insurance coverage dispute arising under the diversity of citizenship jurisdiction involving two professional liability insurance policies issued to Appellant, Dr. Kyrsten E. Sutton. [First Prof’ls Ins. Co. v. Sutton, 607 F. App’x 276 (4th Cir. 2015).


These cross-appeals arise out of an insurance coverage dispute related to claims for alleged birth injuries resulting from professional negligence. Dr. Kyrsten Sutton attended the birth of Richard and Amy Moore’s son, Nathan. The Moores filed suit in state court for medical malpractice against Dr. Sutton.

Dr. Sutton’s former insurers, First Professional Insurance Company (“FirstPro”) and the Medical Protective Company (“MedPro”) disagree as to which, if either, insurer owes Dr. Sutton a duty to defend the lawsuit. FirstPro filed a declaratory judgment action in federal court. After a bench trial, the district court ruled that MedPro, but not FirstPro, has a duty to defend Dr. Sutton and pay damages as may be required under the MedPro policy.


Back before the court, after having substantially prevailed in the prior appeal by securing coverage under one of the two policies at issue, Dr. Sutton presents the following issues (as rephrased) for our review from the district court’s adverse coverage determination as to the second of the two policies:

  1. Whether the district court erred, under South Carolina law, in its interpretation of an exclusion in the second insurance policy;
  2. Whether the district court erred in its failure to find that the absence of expert testimony precluded a finding in favor of First Professionals Insurance Company;
  3. Whether the district court erred, under South Carolina law, in its interpretation of a question contained in the application for insurance in respect to one of the policies at issue; and
  4. Whether the district court erred insofar as its findings and conclusions contradicted a conclusion contained in this Court’s prior opinion.

The Fourth Circuit affirmed for the reasons stated by the district court in its thorough memorandum opinion setting forth its findings of fact and conclusions of law. First Prof’ls Ins. Co. v. Sutton, No. 2:12-cv-00194-RMG (D.S.C. Oct. 7, 2015).


The decision is simple, short and sweet. A claims made insurer is obligated to defend or indemnify the insured who reports a claim or a potential claim during the policy period. If reported to one insurer in effect at the time of the report the coverage of the subsequent insurer is specifically excluded and should have been warranted on the application for insurance.

ZALMA-INS-CONSULT                      © 2016 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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