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D.D. v. Insurance Company of North America (11/24/95), 905 P 2d 1365
NOTICE: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers
are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501; (907) 264-0607.
THE SUPREME COURT OF THE STATE OF ALASKA
) Supreme Court No. S-5884
) U.S. District Court
v. ) No. A92-327 Civil
INSURANCE COMPANY OF NORTH ) O P I N I O N
) [No. 4284 - November 24, 1995]
Certified Question from the United States
District Court for the District of Alaska,
James K. Singleton, Jr., Judge.
Appearances: A. Richard Dykstra, Stafford,
Frey, Cooper & Stewart, Seattle, Washington,
and Richard H. Friedman, Friedman, Rubin &
White, Anchorage, for Plaintiff. Mark A.
Sandberg, Sandberg, Smith, Wuestenfeld &
Corey, Anchorage, for Defendant.
Before: Moore, Chief Justice, Rabinowitz,
Matthews, and Eastaugh, Justices. [Compton,
Justice, not participating.]
EASTAUGH, Justice, with whom MOORE, Chief
Justice, joins, concurring in part and
dissenting in part.
I. FACTS AND PROCEEDINGS
The United States District Court for the District of
Alaska certified the following question to this court:
Where a physician practices medicine in a
building he owns, and has elected not to
procure medical malpractice insurance but has
procured a business owners policy of
insurance with a medical treatment or
services exclusion, is the physician entitled
to coverage and a defense under the terms of
his business owners insurance when he refers
a prospective patient to a colleague for a
physical examination and the colleague
sexually assaults the patient while
performing a gynecological examination of
her, if the assault occurs in the building
where both physician and his colleague
practice medicine and the patient sues the
physician on the theory that as a building
owner he had a duty to protect her from a
colleague whom he had reason to know might
sexually assault a patient?
We granted the District Court's request for
The United States District Court summarized the facts
of this case in the following manner:
Dr. John Erkmann ("Erkmann") specializes in
obstetrics and gynecology. He practices in a
building that he owns. Dr. Erkmann
considered purchasing medical malpractice
insurance but felt that it was too expensive.
He did purchase a Business Owners Policy of
Insurance from the defendant, Insurance
Company of North America ("INA"), which
generally provides coverage for claims
against Erkmann for bodily injury occurring
on his business premises. The policy
contains an exclusion which provides as
[T]his insurance does not apply to
"bodily injury" . . . "personal
injury" . . . arising out of
1. The rendering or failure to
a. Medical, surgical, dental,
x-ray or nursing service or
treatment, or the related
furnishing of food or beverages;1
b. Any health service or
D.D. came to Erkmann's office seeking
medical care. Erkmann's nurse informed D.D.
that Erkmann was not taking additional
patients, but that Dr. Burton Ake, M.D., who
also specialized in gynecology and
obstetrics, could see her. D.D. agreed to
become Dr. Ake's patient and on October 10,
1989, submitted to a gynecological
examination by him in the suite of offices
owned by Erkmann where Erkmann practiced
medicine. Dr. Ake sexually assaulted D.D. in
the course of the examination. D.D.
discovered the assault and complained to the
police, and Ake was later convicted of
sexually assaulting D.D. and was sent to
D.D. sued Erkmann alleging, inter alia,
that Erkmann was negligent in referring her
to a colleague whom Erkmann knew, or in the
exercise of reasonable care should have
known, had a history of sexually
inappropriate behavior with patients.
Furthermore, D.D. alleged that Erkmann, as
owner of the building in which he and Ake
practiced medicine, had a duty to exercise
reasonable care to protect her against a
criminal sexual assault on the premises, and
that he had breached that duty. Erkmann
tendered the defense of the claim to INA,
which declined coverage and refused to defend
Erkmann. INA reasoned that all of D.D.'s
causes of action depended on a finding that
she had suffered "bodily injury" arising out
of, i.e., suffered during, the "rendering or
failure to render" medical services or
treatment. Erkmann then settled with D.D.
for $300,000 and allowed judgment to be taken
against him in that amount on condition that
he would loan D.D. $20,000 interest free and
she would agree not to execute against him on
her judgment. In addition, Erkmann assigned
his rights against INA to her. D.D. sued INA
in the Alaska Superior Court and INA removed
the case to this Court.
The parties have completed discovery and
have filed cross-motions for summary
judgment. It appears that the matter is ripe
for decision and that there are no disputed
issues of material fact.
1D.D.'s primary argument is that she is suing
Dr. Erkmann as a landowner and not as a
physician. This argument seems to miss the
point since the exclusion refers to the cause
of the bodily injury "arising out of . . .
medical services or treatment," not the
plaintiff's theory of recovery or the status
of the person sued. There is clearly a
causal nexus between Dr. Ake's provision of
medical treatment and his sexual assault of
D.D. The more difficult question, which is
the one certified, is how close a causal
nexus this Court will require on policy
grounds between the medical treatment and the
bodily injury before the exclusion applies.
II. THE PARTIES' ARGUMENTS
D.D. makes three arguments. First, she argues that a
rape does not "arise out of medical services." Second,
she contends that the medical treatment exclusion
applies only to the conduct of the insured, not to the
conduct of the rapist. Third, she maintains that Dr.
Erkmann owed her a duty of care as landlord. INA first
argues that "Erkmann's exposure was for medical
malpractice." This argument appears to mean that (1)
none of the facts implicate Dr. Erkmann's duty as
landlord, and (2) D.D. believed her suit to be based on
Dr. Erkmann's professional conduct. INA's second main
contention is that a landlord has no duty to protect
patients from doctors who are tenants. INA's third
main argument is that the medical treatment or services
exclusion precludes coverage for Dr. Erkmann's
allegedly negligent referral.
The parties seem to agree that Dr. Erkmann can be sued
either as landlord or doctor, and there appears to be
agreement regarding the boundaries between the two:
Referral is professional, building safety is not.2 The
only real disagreement concerns in which circumstances
a landlord has a duty to prevent his tenants from
injuring their guests. The areas of dispute between
the parties differ from the United States District
Court's analysis of the issue raised in this case.
Whereas the parties tend to focus on Dr. Erkmann, the
District Court appears to believe that the controlling
issue is the effect of the setting of the sexual
assault. We proceed to address the question posed by
the District Court.
In the circumstance where D.D., a patient, sues Dr.
Erkmann on the theory that as a building owner he had a
duty to protect her from a tenant whom he had reason
to know might sexually assault her, we hold that INA
had a duty to legally defend Dr. Erkmann under the
business owners policy of insurance it issued to him.3
We further hold that the medical treatment or services
exclusion contained in INA's business owners policy is
inapplicable in the factual context presented here.
A. Duty to Defend
Dr. Erkmann purchased from INA a business owners policy
of insurance. This standard commercial liability
policy generally provides coverage for claims against
Dr. Erkmann for bodily injuries occurring on his
business premises, i.e. third party liability coverage.
In part, D.D. in her complaint alleged:
[Dr. Erkmann] had a duty of care towards
plaintiff based on [his] ownership of the
office and plaintiff's status as an invitee
on the premises of the office. . . .
Defendant was negligent and/or reckless in
referring plaintiff to Ake and in failing to
investigate the claims against Ake, failing
to warn the plaintiff or inform her of the
charges against Ake, or alter office
procedures to protect her.4
Regarding an insurer's duty to defend, in Afcan v.
Mutual Fire, Marine and Inland Ins. Co., 595 P.2d 638,
645 (Alaska 1979), we said:
We believe the position taken in Flesher
[National Indem. Co. v. Flesher, 469 P.2d 360
(Alaska 1970)] is sound. An insurer's
obligation to defend and the obligation to
indemnify are separate and distinct
. . . .
Depending upon the nature of the claim
against the insured, the insurer may have an
obligation to defend although it has no
ultimate liability under the policy. We
believe that the language of the standard
duty to defend clause creates a reasonable
expectation on the part of the insured that
he will be defended by the insurer whenever a
complaint states a cause of action within, or
potentially within, the policy coverage.
. . . .
[I]f the complaint on its face alleges facts
which, standing alone, give rise to a
possible finding of liability covered by the
policy, the insured has the contractual right
to a proper defense at the expense of the
In the case at bar we conclude that on its face D.D.'s
complaint alleges facts, which standing alone, give
rise to a possible finding of liability under the
coverage provisions of INA's business owners policy.
We therefore hold that Dr. Erkmann has the contractual
right under the business owners policy issued to him by
INA to receive a legal defense at the expense of INA.
B. The Medical Treatment Exclusion
As mentioned previously, D.D. claims that Dr. Erkmann
breached his duty as a landlord. The commercial
liability policy issued by INA to Dr. Erkmann does not
cover injuries "arising out of . . . [m]edical,
surgical, dental, x-ray or nursing service or
treatment." As noted above, the injuries in this case
occurred during a visit between D.D. (as a patient) and
Dr. Ake. Thus, the key issue before this court is
whether D.D.'s injuries arose out of medical treatment.
We have not previously addressed this precise point in
terms of policy coverage or exclusion.
The context in which we address this point is an
exclusion from policy coverage. "Where a clause in an
insurance policy is ambiguous in the sense that it is
reasonably susceptible to more than one interpretation,
the court accepts that interpretation which most favors
the insured. . . . Grants of coverage should be
construed broadly 3while exclusions are interpreted
narrowly . . . .3" Bering Strait School District v.
R.L.I. Insurance Co., 873 P.2d 1292, 1295 (Alaska
1994). Thus in approaching the problem presented by
this case we give a narrow meaning to the exclusionary
language and note that if the same problem were
presented in the context of an inclusive coverage
clause the rule of broad construction applied to such a
case might mandate a different result.
In a number of ways, D.D.'s appointment was the source
of her injuries. The appointment was the chronological
source: the injury occurred at the time she was present
in Dr. Ake's office for treatment. It was also the
geographical source: the injury occurred at the place
of treatment. Additionally it was the "but for"
causative source: were it not for the appointment, the
injury would not have occurred.
However, D.D.'s injury did not result from Dr. Ake's
treatment per se. That is, Dr. Ake did not injure D.D.
by treating her; he injured her during the time he was
supposed to be treating her. Under our decisions,
physical setting alone is insufficient to implicate
"arising out of" language. Criterion Ins. Co. v.
Velthouse, 751 P.2d 1 (Alaska 1986). That case
involved a gunshot wound that occurred when two people
were "horsing around" with a shotgun in a parked
vehicle. We held that the injury was outside the scope
of a policy that covered injuries "arising out of the .
. . use" of the vehicle. In summarizing the outcomes
of similar cases from other jurisdictions we stated:
"[C]ourts do not require proximate cause in its strict
legal sense. Rather, most courts only require that the
vehicle be more than the mere situs of the accident and
that the use of the vehicle relate to its inherent use
as a motor vehicle." Id. at 3. We concluded that the
facts of the case could not meet that requirement:
Harman's injury resulted from Velthouse's
negligent use of the gun, not the use of his
truck. Velthouse's handling of the gun had
no connection with the use of the vehicle.
As a matter of law the accident could have
occurred out in the field or in the home.
The truck's status as situs of these injuries
is insufficient to extend coverage."
Id. at 5.
Thus, by analogy, for the sexual assault to "arise out
of" medical treatment or service, the medical treatment
or service must be more than just the site of the
D.D. contends that analysis of the relevant case law
from other jurisdictions that have considered whether a
sexual assault during a medical visit is "medical
services or treatment" demonstrates that only when a
therapist mishandles the "transference phenomenon" is
the injury part of "professional services."6 In
support of her position D.D. cites the "Minnesota
Trilogy," three cases construing "medical services"
exclusions in the context of sexual relations between
doctor and patient. Smith v. St. Paul Fire & Marine
Ins. Co., 353 N.W.2d 130 (Minn. 1984); St. Paul Fire &
Marine Ins. Co. v. Love, 459 N.W.2d 698 (Minn. 1990);
St. Paul Fire & Marine Ins. Co. v. Mori, 486 N.W.2d 803
(Minn. App. 1992).
There does appear to be a rough consensus that "medical
services or treatment" provisions encompass cases in
which a therapist mishandles transference.7 And there
is also consensus that when a physician causes an
injury that is wholly unrelated to the treatment, he
has not rendered "medical services or treatment" to the
patient. In particular, courts which have considered
cases involving sexual assaults by health care
providers held that such assaults do not "arise out of"
There appear to be several factors that courts have
found relevant when deciding whether or not an injury
and medical treatment are related. In the sexual
assault cases, the physician abuses the patient's trust
and exploits the patient's vulnerability. Although it
might be inferred that these factors strengthen the
casual relationship between treatment and injury, the
cases indicate that they are not sufficient. This is
true even if the physician uses an anesthetic to make
the patient more compliant.9 Some courts are, however,
more likely to find the harm to be part of the
treatment if the physician not only takes advantage of
the patient's drugged state, but also enhances it
beyond what is necessary for the medical procedure,
thus causing injury independent of the sexual assault.10
Another factor is whether the physician tells the
patient that the tortious act is part of the treatment.
When the physician says nothing, but simply commits a
sexual assault, courts have unanimously found the
assault not to be part of treatment. When, however,
the patient consents to "treatment" that ultimately
proves to be based on the doctor's salacious impulses
rather than medicine, courts often find that the injury
does "arise out of" medical care. Cf. St. Paul Fire &
Marine Ins. Co. v. Jacobson, 826 F. Supp. 155 (E.D. Va.
1993) (case of fertility doctor who impregnated
patients with his own semen). Closely related to this
is consent: when the physician disguises his misdeeds
in the cloak of treatment, the patient usually
In our view the acts out of which D.D.'s injuries arose
are outside of the traditional scope of malpractice,
which generally includes negligent or inadvertent
failure to employ professional skill and judgment.
Under the majority rule, a gynecologist's sexual
assault of his patient is not "medical treatment." We
think the rule is sound. Based on the rule that
exclusionary language is to be narrowly construed and
on the basis of our study of the case law, we conclude
that D.D.'s injury did not "arise out of" medical
treatment. We therefore hold that the medical
treatment exclusion does not operate to bar coverage in
In response to the question certified to this court by
the United States District Court for the District of
Alaska, we hold as follows: Given the allegations of
D.D.'s complaint, in which she alleges, in part, that
as a building owner Dr. Erkmann had a duty to protect
her from a tenant-colleague whom he had reason to know
might sexually assault a patient, INA had a duty under
the policy it issued to Dr. Erkmann to provide him with
a legal defense at its expense. We further hold that
the "medical treatment" coverage exclusion contained in
Dr. Erkmann's policy is inapplicable since D.D.'s
injuries caused by Dr. Ake's assault did not "arise out
of" medical treatment.
EASTAUGH, Justice, with whom MOORE, Chief Justice,
joins, concurring in part and dissenting in part.
I agree with the result reached by the court. I also
agree with its reasons for reaching that result, with one
exception. In my view, it is unnecessary, and potentially
incorrect, to suggest that we might reach a "different result" if
the same language found in I.N.A.'s exclusionary clause were
instead found in a clause granting coverage. Opinion at 8. In
support of that suggestion, the court cites Bering Strait School
District v. R.L.I. Insurance Co., 873 P.2d 1292, 1295 (Alaska
1994), and asserts that "we give a narrow meaning to the
exclusionary language," but a "broad construction" to language
granting coverage. Opinion at 8. The court implies that it will
always read identical language in coverage and exclusionary
clauses to find coverage, even when the language is unambiguous.
This case involves an exclusion which is not ambiguous,
but which we unanimously hold does not apply to the actual
dispute before us. It is therefore unnecessary to discuss how
the court "might" interpret identical language in a coverage
provision which grants, rather than excludes, coverage.
Barring ambiguity or circumstances that would justify a
different rule, identical language in coverage parts and
exclusionary parts in insurance contracts should be read
consistently, and it is unnecessary to consider or resort to
rules of construction to reach a result contrary to the express
language of the insurance policy. See 2 George J. Couch,
Cyclopedia of Insurance Law ' 15:70, at 320 (2d ed. 1984) ("When
the contract is clear, precise, and unambiguous in its terms, and
the sense is manifest and leads to nothing absurd, there is no
proper scope for a resort to the rules of construction."). Cf.
U.S. Fire Ins. Co. v. Colver, 600 P.2d 1, 4 (Alaska 1979)
(finding no policy ambiguity and reversing the trial court's
holding against the insurer based on its finding of ambiguity);
Guin v. Ha, 591 P.2d 1281, 1284-85 (Alaska 1979) (stating that
"'an insurance policy may be considered a contract of adhesion,
and as such, should be construed to provide the coverage which a
layperson would have reasonably expected' . . . . This approach,
however, is not to be used as an instrument for ignoring or
rewriting insurance contracts. An insurance policy is
essentially contractual in nature." (quoting Stordahl v.
Government Employees Ins. Co., 564 P.2d 63, 65-66 (Alaska
The case the court now cites in support, Opinion at 8,
Bering Strait School District v. R.L.I. Insurance Co., involved
ambiguous exclusions and circumstances which the court held to
give rise to reasonable expectations of coverage. 873 P.2d at
1295, 1297-98. Those circumstances are absent here. "The rule
that the policy is construed most strongly against the insurer
applies only to the language of the contract and not to the facts
of the case. . . . [T]hese strict construction rules . . . are
rules of last resort and are not applicable to frustrate any
clear intentions of the parties." Couch, ' 15:74, at 357.
In short, the court's intimation is unnecessary, and
may prove to be incorrect. We should leave to another day
exploration of the validity and boundaries of the rule of
construction cited by the court.
1 We also granted D.D.'s motion to supplement the record
by adding D.D.'s complaint, the umbrella policy, and a number of
documents that supported D.D.'s motion for summary judgment.
2. This case does not call for us to discuss whether D.D.
may also have a valid malpractice claim against Dr.
Erkmann on the basis of his referral.
3. This certified question presents a pure question of law.
Our consideration is thus de novo. "Our duty is to
adopt the rule of law that is most persuasive in light
of precedent, reason, and policy." Guin v. Ha, 591
P.2d 1281, 1284 n.6 (Alaska 1979).
4. In an additional cause of action, D.D. alleged:
Defendant had a duty of care towards
plaintiff based in part on the foreseeability
of harm to the plaintiff.
Defendant was negligent and/or grossly
reckless in referring plaintiff to Ake and in
failing to investigate the claims against
Ake, failing to warn the plaintiff or inform
her of the charges against Ake, or alter
office procedures to protect her.
5. More recently, in Alaska Pacific Assur. Co. v. Collins,
794 P.2d 936, 945 (Alaska 1990), we further stated that
in addition to its obligation to defend as articulated
in Afcan, an insurer is additionally obligated to
defend against a claim based on allegations not within
the policy coverage if "the true facts are within, or
potentially within, the policy coverage and are known
or reasonably ascertainable by the insurer." (Citation
6. Transference occurs when the visits create a sense of
intimacy between the therapist and patient which causes
the patient to fall in love with the therapist. See
St. Paul Fire & Marine Ins. Co. v. Love, 459 N.W.2d
698, 700 (Minn. 1990).
7. See McNicholes v. Subotnik, 12 F.3d 105, 108 (8th Cir.
1993); St. Paul Fire & Marine Ins. Co. v. Mitchell, 296
S.E.2d 126 (Ga. App. 1982); Vigilant Ins. Co. v.
Kambly, 319 N.W.2d 382 (Mich. App. 1982); L.L. v.
Medical Protective Co., 362 N.W.2d 174 (Wis. App.
1984), rev. denied, 367 N.W.2d 223 (Wis. 1985); cf. Doe
v. Samaritan Counseling Ctr., 791 P.2d 344 (Alaska
1990) (counseling center could be liable as employer
for counselor's sexual relationship with his
counselee); Anclote Manor Found. v. Wilkinson, 263 So.
2d 256, 258 (Fla. App. 1972) (breach of contract
malpractice claim that psychiatrist induced patient to
engage in sexual relations); Cotton v. Kambly, 300
N.W.2d 627 (Mich. App. 1980) (malpractice claim against
psychiatrist); Houg v. State Farm Fire & Casualty Co.,
509 N.W.2d 590 (Minn. App. 1993) (when minister
allegedly abused a congregant, the injury arose out of
8. See Hirst v. St. Paul Fire & Marine Ins. Co., 683 P.2d
440 (Idaho App. 1984); Collins v. Covenant Mut. Ins.
Co., 604 N.E.2d 1190, 1195-96 (Ind. App. 1992), vacated
on other grounds, 644 N.E.2d 116 (Ind. 1994); St. Paul
Fire & Marine Ins. Co. v. Quintana, 419 N.W.2d 60
(Mich. App. 1988); Niedzielski v. St. Paul Fire &
Marine Ins. Co, 589 A.2d 130, 133 (N.H. 1991); Smith,
353 N.W.2d at 132; New Mexico Physicians Mut. Liab. Co.
v. LaMure, 860 P.2d 734 (N.M. 1993); South Carolina
Medical Malpractice Liability Ins. Joint Underwriting
Ass'n v. Ferry, 354 S.E.2d 378 (S.C. 1987); Washington
Ins. Guar. Ass'n v. Hicks, 744 P.2d 625 (Wash. App.
Gynecology appears to present an unusually difficult
problem. In many of the cases the patient "consents"
to the improper sexual contact after the doctor informs
her it is part of the "treatment" and will be effective
in remedying her symptoms. In Mori, the three patients
went to Dr. Mori for pelvic exams, and Mori told them
that what he was doing was part of the treatment. 486
N.W.2d at 805. Because there was no transference, the
Minnesota Court of Appeals held that the malpractice
policy did not cover the claims. Id. at 809. Other
courts have come to similar conclusions. See St. Paul
Ins. Co. v. Cromeans, 771 F. Supp. 349 (N.D. Ala.
1991); cf. Jure v. Raviotta, 612 So. 2d 225, 228 (La.
App. 1992) (sexual assault by gynecologist not covered
by malpractice statute, the clear intent of which was
to "exclude from its scope conduct unrelated to the
promotion of a patient's health or to the provider's
exercise of professional expertise or skill"), writ
denied, 614 So. 2d 1257 (La. 1993). But other cases
have reached the opposite result. The most notable is
St. Paul Fire & Marine Ins. Co. v. Asbury, 720 P.2d 540
(Ariz. App. 1986).
9. See Snyder v. Major, 789 F. Supp. 646 (S.D.N.Y. 1992),
reh. granted in part, 818 F. Supp. 68 (1993) (plastic
surgeon's sexual abuse of partially sedated patient was
not "medical incident," even though misconduct and
surgery both related to breasts); Hirst, 683 P.2d at
444; Roe v. Fed. Ins. Co., 587 N.E.2d 214 (Mass. 1992)
(dentist, used novocaine); Ferry, 354 S.E.2d at 380-81
(oral surgeon removing wisdom teeth); Standard Fire
Ins. Co. v. Blakeslee, 771 P.2d 1172, 1177 (Wash. App.)
(dentist giving patient nitrous oxide), rev. denied,
781 P.2d 1320 (Wash. 1989); Steven G. v. Herget, 505
N.W.2d 422 (Wis. App.) (dentist gassed children then
abused them), rev. denied, 510 N.W.2d 136 (Wis. 1993).
10. See St. Paul Fire & Marine Ins. Co. v. Shernow, 610 A.2d
1281 (Conn. 1992) (dentist negligently administered
nitrous oxide, then assaulted patient; gas caused
brain damage); Snyder v. Major, 818 F. Supp. 68
(S.D.N.Y. 1993) (doctor could be liable for malpractice
if he negligently chose or administered the