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A Pennsylvania judge has rejected a hospital's efforts to seal a bad-faith lawsuit it filed against its excess insurance carrier, dismissing arguments that opening the record up to the public could reveal confidential details about settlement talks and valuation methods.

Lackawanna County Court of Common Pleas Judge Terrence Nealon on May 8 denied Moses Taylor Hospital's efforts to seal from the public all the records associated with the lawsuit it recently brought against its excess insurance carrier, Coverys, and the company's underwriter, ProSelect Insurance Co.

The spat between Moses Taylor and the excess carrier defendants stems from a medical malpractice lawsuit that settled for more than $19 million following an arbitration last spring, with the Moses Taylor defendants contributing a significant portion. Moses Taylor contended that its bad-faith lawsuit would expose parts of the settlement agreement that were meant to be confidential.

Nealon, however, determined that the court was not bound by the confidentiality agreement, and the hospital failed to give any justification that would overcome the courts' presumption of openness.

"The existence of a confidentiality agreement among the parties in the malpractice suit does not control the court's determination of whether sealing of the record in this case is appropriate under the circumstances," Nealon said. "The secrecy interests cited by the hospital and trust simply do not supersede the presumption in favor of open access to judicial records so as to justify court-sanctioned closure of the record."

According to Nealon, the underlying case brought claims against an OB-GYN, as well as Wilkes-Barre Hospital and Moses Taylor Hospital, which is self-insured through a foundation for its primary insurance coverage. The case involved a baby born with spastic cerebral palsy, and made allegations that the doctor failed to properly interpret fetal heart tracings, or promptly perform a Cesarean section.

That case resulted in an $11.5 million settlement with the doctor and Wilkes-Barre Hospital defendants, Nealon said. The Moses Taylor defendant soon after agreed to arbitrate the claims against them, with a binding high-low agreement between $2.5 million and $7.75 million. Nealon said the arbitrator ended up finding for the plaintiff, so Moses Taylor contributed the full $7.75 million ceiling on the agreement.

According to Moses Taylor Hospital, the parties agreed to keep the high-low and arbitration result confidential.

Nealon noted that Moses Taylor's foundation provided for $500,000 toward the settlement in primary coverage, the MCARE Fund provided $500,000 and Coverys provided the rest. However, according to Moses Taylor, the amount the excess carrier paid for the settlement was then deducted from the aggregate excess coverage available to the hospital through Coverys. Since three other lawsuits were also pending stemming from conduct during the same period, the dedication greatly increased the hospital's chances of having to pay for those lawsuits out-of-pocket, the facility claimed.

Moses Taylor sued, alleging the carrier's actions significantly depleted its available funds under its policies, and raising claims of breach of implied contractual duties of good faith and fair dealing, as well as statutory bad faith. Specifically, the hospital contended that, during arbitration, the plaintiff in the underlying medical malpractice case had offered to settle for less than the ceiling on the high-low, but the excess carrier refused the demand. The hospital further said the rep the carrier sent to the settlement talks and pretrial conference was unprepared to negotiate and didn't have the authority to negotiate. The hospital also contended that the rep's boss, who had the authority to negotiate, refused to appear for settlement talks until the court entered an order threatening contempt.

In seeking to seal the case, Moses Taylor contended that the complaint outlines the high-low, the settlement talks, the results of the case, and other aspects the parties had agreed to keep confidential.

Nealon, however, ultimately determined that many aspects of the case the hospital wanted to keep under wraps had already been outlined in the court record, including the settlement amount, which he said is on the case docket. The judge said the foundation also didn't cite any precedent supporting the notion that closing records is routine in bad-faith cases, and further said there is Pennsylvania Superior Court case law saying the public and medical community has an interest in "observing and learning from medical malpractice actions."

"The existence of an agreement among the parties to maintain confidentiality of the details of their settlement does not bind the court which must independently determine whether sealing of the record is indicated because an interest in secrecy trumps the common law presumption of openness," Nealon said.

Neither Michael Perry of O'Malley, Harris, Durkin & Perry, who represented the hospital, nor the excess carrier's attorney, Thomas Hurd of McElroy, Deutsch, Mulvaney & Carpenter, returned a call for comment.