In Reardon Case, Tens Of Millions Ride On Fine Print In St. Francis' Insurance Policies
In this 1993 photograph, Dr. George Reardon listens to testimony at the Legislature Office Building on allegations that he sexually abused two people, a brother and sister, several years ago. (Michael McAndrews, Hartford Courant File Photo / October 26, 1993)
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St Francis Hospital, 114 Woodland St, Hartford, CT 06105, USA
The showdown among insurers over the terms of their coverage is another impediment to efforts by the hospital — which just finished a $180 million overhaul of its Hartford campus — to divert attention from the legal nightmare Reardon created. The new dispute now has one of Connecticut's premier medical institutions fighting a war on two fronts.
On one side are the 60 or so Reardon victims, approaching the fifth year of a bitter fight to be compensated for abuse inflicted on them as children by the hospital's former chief endocrinologist. On the other are three insurers — beneficiaries of millions of dollars in hospital premiums and each prepared to argue that someone else should pay most of whatever the victims ultimately are awarded.
If the insurers succeed in reducing their obligations to fund damage awards, responsibility for the difference could fall to the hospital, an outcome that victim lawyer Steven Ecker called "catastrophic." If St. Francis is stripped of coverage it counted on, Ecker argues, a string of multimillion-dollar damage awards could push the hospital into bankruptcy, leaving victims nowhere to turn for compensation.
The hospital considers that scenario remote and overwrought, according to a source familiar with its position. Barring an astronomical jury award, St. Francis is unlikely to be left "naked" of coverage because of the way it layered insurance across the years Reardon was at his abusive worst.
But, depending on the outcome of the coverage dispute, the hospital's share of Reardon costs could rise. On their side, the insurers have tens of millions of dollars at stake.
The coverage dispute is unfolding in federal court in New Haven and could take a year or more to resolve. Already, it has demonstrated how exigencies of litigation can forge unlikely alliances.
The Travelers Cos., which carries most of the hospital's insurance, has indicated to other parties in the Reardon cases that its effort to limit its coverage will involve arguing that St. Francis contributed to the abuse by failing to supervise Reardon. That is the same position Reardon's victims take and one the hospital rejects.
Should St. Francis challenge efforts by any insurer to limit coverage, it will join forces with the victims, who are opposed to anything that reduces the insurance pot on which they can draw for damages.
In the simplest terms, the coverage dispute turns on a single question: Does serial abuse of children by a doctor in his hospital office trigger the hospital's general liability coverage or its malpractice coverage?
U.S. District Judge Mark R. Kravitz will have to decide, if mediation fails in October. His answer could be worth huge savings or losses among Hartford-based Travelers and the two other insurers involved, Pacific Employers Insurance Co. of Philadelphia and Evanston Insurance Co. of Deerfield, Ill.
The hospital will not discuss its coverage from 1963 to 1993, the years during which Reardon used a growth study as a pretext to abuse hundreds of children.
"St. Francis will not comment on the specific issues raised in the litigation," hospital lawyer Kevin O'Connor said. "The hospital has, however, paid a substantial amount of money in premiums over many years to various insurers and believes strongly that, regardless of the outcome of the coverage litigation, it will have sufficient insurance coverage in place for any anticipated judgments or settlements in the underlying Reardon cases."
The three insurers also declined to comment. But an outline of the coverage over the years has emerged through the litigation.
Travelers, which inherited St. Francis as a client from Aetna, has the bulk of the insurance, both primary and excess, from 1963 to 1985. Excess insurance is coverage that is triggered after primary coverage is exhausted. After 1985, St. Francis became self-insured.
Pacific and Evanston appear in the hospital insurance picture for relatively brief periods. Evanston has what amounts to primary coverage from 1984 to 1985. Pacific has excess coverage from 1981 to 1985. There is a perplexing gap in the excess coverage from 1971 to about 1975, apparently because of missing documents.
"There is another dispute going on there," said a source familiar with the insurance issues. "They cannot find evidence of the excess coverage. No checks, nothing. The hospital has an affidavit from the broker who placed this insurance with Travelers for years, saying that in his opinion it must have been there. But they cannot find any record. It is just odd."
What Kind Of Coverage?