Fortuity is Permanent Protection

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Homeland Insurance Company of New York (“Homeland”) sued Clinical Pathology Laboratories, Inc. (“CPL”) is CPL’s parent company, Sonic Healthcare USA, Inc. (“Sonic USA”) (collectively, the “Defendants”) to claim that they are not liable to reimburse Defendants for defending numerous medical malpractice lawsuits filed in Ireland. Homeland Insurance Company Of New York v. Clinical Pathology Laboratories, Inc. And Sonic Healthcare USACIVIL No. 1-20-CV-783-RP, United States District Court, WD Texas, Austin Division (July 19, 2022)


CPL is an Austin, Texas-based provider of medical laboratory services. CPL and Sonic USA are subsidiaries of Sonic Healthcare Limited (“Sonic”), a global healthcare company headquartered in Sydney, Australia. Sonic also owns Sonic Healthcare (Ireland) Limited (“Sonic Ireland”) and MedLab Pathology (“MedLab”), both Irish providers of clinical pathology services.

The Great Controversy

On June 30, 2013, Homeland issued a Medical Facilities and Providers Professional Liability, General Liability and Employee Benefit Liability Policy to Sonic USA and CPL for the policy period from June 30, 2013 to June 30, 2014. (“2014 Policy”). . The 2014 Act contained some claims of wrongdoing and personal injury. The parties revised the 2014 Policy for 2015-2016. In particular, the 2014 and 2015 Regulations only addressed products made in the United States, its territories, or Canada.

In August 2015, the family of a woman (“Ms. OI”) who died of cervical cancer filed a negligence lawsuit in Ireland against CPL, Sonic USA, and other entities, based on what they say was a faulty pap smear slide. When the CPL was filed with the lawsuit, it insured Homeland. On July 7, 2016, Homeland rejected the decision on the grounds that the 2014 Policy did not cover cases filed in Ireland.

Closing the Gap in Coverage

When the opposition realized their differences in the publication, “they tried to get international protection from Homeland from the time of the 2016-17 policy so that if similar claims come up in the future, they will be covered.” The home country agreed to provide such support. On August 30, 2016, the parties executed a Worldwide Territory Endorsement (“WTE”) (Endorsement No. 12, Policy No. MFL-004062-0616) to the 2016 Policy, which expanded the definition of what was called “outside the United States”. States of America,” from June 30, 2016.

Homeland is said to have agreed to further expansion only after requiring the Plaintiffs to agree to certain “assurances” in a letter dated July 27, 2016, written by Stephen Shumpert, President and Director of CPL and Sonic USA’s Chief Executive Director and Director who promised there. there were no expectations.

Homeland also provided the same WTE to the Defendants’ 2017 policy, which ran from June 30, 2017 to June 30, 2018.

In August 2018, the family of “Ms. S” filed a negligence lawsuit in Ireland against MedLab alleging that a pap smear slide was misread. Sonic Ireland and CPL were added as defendants in May 2019. CPL settled the lawsuit in October 2019. MedLab and Sonic Ireland did not file a motion to settle. On July 10, 2020, Homeland denied the CPL claims on the grounds that: (1) the 2016 and 2017 prior notice and prior notice exclusions precluded filing because MedLab provided notice of Ms. , in 2016; and (2) the 2016 letter was inaccurate and contained false statements.


On July 24, 2020, Homeland sued CPL, Sonic USA, Sonic Ireland, Sonic Limited, and MedLab, seeking a declaratory judgment stating that “there is no provision for Ms. S’s Claim under the Primary Policy or the Excess Policy” based on prior notice and exclusion of notices. , and because the 2016 Letter was correct.


Because the purpose of insurance is to protect the insured against unknown, or random, risks, chance is an important part of any insurance policy. The doctrine of privilege frees insurers from having to do certain things that the insured did before purchasing the policy. Under the doctrine, the insured cannot obtain coverage for something that has already begun and is known (or should have been known) to have begun. The doctrine of privilege precludes the provision of known losses or actual losses. A “known loss” is one that the insured knew had occurred before entering into the insurance contract. An actual loss is an ongoing loss that the borrower knows about, or should know about at the time the policy is purchased.

The doctrine of chance does not require the insured to have actual knowledge of the loss. Instead, the doctrine precludes coverage when the borrower has or should have known of the ongoing or known loss at the time the policy was purchased. In addition, it has been recognized that the theory of known loss does not work if the insurer also knew the events that trigger the protection. The insurer is responsible for proving that the doctrine of fortuity prevents coverage.

The Doctrine of Fortuity Is a Fixed Defense

In recent years, the well-known rules of the doctrine of fortuity known as loss and loss-progress have become a powerful defense in the cases that carriers turn to frequently.

The doctrine is based on the prevention of fraud; because insurance policies are designed to ensure that people will get more money, fraud occurs when the policy is misused to ensure the truth. Fraud is a valid defense under Texas law. For these reasons, the Court concluded that the privilege doctrine is an affirmative defense under Texas law.

Their Country Abandoned Security

Based on the facts of this case, the Court finds that Homeland’s delay in raising the privilege defense is unfairly surprised. Homeland did not request and was not granted permission to assert the defense of the fortuity doctrine.

Homeland filed it because it did not address the privilege doctrine until its Response to Plaintiffs’ Summary Judgment.

The matter of privilege is one of many that have been brought before the court and have been resolved by the opinion of the Magistrate Judge. The District Judge can accept or reject the long term recommendation of the Magistrate. Since there is a need for access as a requirement of the insurance and as an unknown exclusion in any policy, it seems that the Magistrate Judge was wrong when he said that saying that the late defense is “extraordinary” for the insured because the insurers must have them. known that luck is always unwritten and could not, therefore, be surprised, fairly or unfairly. Since almost every answer in a suit has an affirmative defense of failure to state a cause of action the privilege defense was asserted. It is always there and cannot be hidden.

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(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to working as an insurance consultant specializing in insurance, insurance administration, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He has practiced law in California for over 44 years as an insurance and claims attorney and over 54 years in the insurance business. He can be reached at

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