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Court Will Not Seal Record in Malpractice Litigation (PA)

July 2, 2020

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<p style="text-align: justify;">A Pennsylvania trial court recently denied a plaintiff’s attempt to seal the entire record in a breach of contract and bad faith litigation against an insurer and its underwriter.<span>  </span>In<em> <a href="https://www.wcmlaw.com/wp-content/uploads/2020/07/Moses-Taylor-Foundation-v.-Coverys.pdf">Moses Taylor Foundation v. Coverys</a>,</em> a hospital and its self-insurance trust filed a motion to seal its complaint and the entire record in order to preserve the confidentiality of its settlement negotiations and outcome.</p>
<p style="text-align: justify;">The lawsuit was commenced against a hospital’s excess liability coverage insurer and its underwriter alleging breach of contract and bad faith liability claims for refusing to provide coverage in an underlying malpractice case.<span>  </span>The hospital claimed that it was required to deplete its excess coverage funds which resulted in less aggregate excess coverage being available for the hospital in other malpractice lawsuits.<span>  </span></p>
<p style="text-align: justify;">The hospital filed a motion seeking to seal its complaint and the entire record arguing that it was necessary to preserve the confidentiality of its settlement negotiations, valuation methods, and payments in the malpractice case, as well as the terms and outcome of the binding arbitration proceeding which was subject to a confidentiality provision contained in the accompanying arbitration agreement.<span>  </span>In response, the insurer contended that the hospital failed to identify a “clearly-defined” and “serious injury” that may be suffered by the hospital from public access to the records.</p>
<p style="text-align: justify;">The Court of Common Pleas of Pennsylvania, Lackawanna County opined that to “warrant the closure of the entire judicial record, the hospital and trust must establish that their interest in secrecy outweighs the longstanding common law presumption in favor of public access to the records of the taxpayer-subsidized judicial system.”<span>   </span>Furthermore, the Court pointed out that the terms of the arbitration agreement, the result of the arbitration hearing, the amounts paid by the trust and the excess insurers, and much of the conduct by the excess insurer which was the basis of the hospital’s bad faith claim were already matters of public record in the underlying malpractice litigation.<span>  </span>Additionally, the Court emphasized that settlement discussions, valuation methods, and claims handling practices that the hospital argued should be confidential were all frequently disclosed in bad faith liability actions against insurers.</p>
Finally, the Court addressed the confidentiality agreement among the parties in the underlying malpractice lawsuit.<span>  </span>Specifically, the Court determined that the existence of a confidentiality agreement among the parties did not control the Court’s determination of whether sealing of the record was appropriate.<span>  </span>The Court decided that the secrecy interests cited by the hospital did not supersede the presumption in favor of open access to judicial records so as to justify court-sanctioned closure of the record.<span>  </span>As such, the hospital’s motion to seal the record was denied.

One of the risks inherent with protracted bad faith litigation is the potential that otherwise private communications or activity could be made public.

Thanks to Zhanna Dubinsky for her contribution to this post.  Please contact <a href="mailto:vterrasi@wcmlaw.com">Vincent Terrasi</a> with any questions or comments.<span></span>

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