Insurer fights USC’s attempt to arbitrate gynecologist coverage dispute

An insurance company says its liability policy does not cover legal costs stemming from sex abuse allegations against a USC gynecologist and has asked a federal court to stop the university's attempt to arbitrate a lawsuit between them.

A memorandum filed in the Central District Monday by Paul H. Burleigh of Klinedinst PC argues Arch Specialty Insurance Company never agreed to arbitrate with USC. Burleigh also argued the arbitration terms introduced by USC are not appropriate for resolving the issue presented in the insurance company's lawsuit. Arch Specialty Insurance Company v. University of Southern California, 2:19 CV-6964 (C.D. Cal., filed Aug. 9, 2019).

The insurance company's suit is one of hundreds USC has faced since allegations of sexual misconduct by George Tyndall, a former campus gynecologist, surfaced last year.

The company said in its original lawsuit, filed by Jeffrey R. Groendal of Klinedinst, when USC applied for a health care professional liability policy that covered the period of 2017 to 2018, it never disclosed it forced Tyndall to resign in January 2017.

USC recently reached a $215 million federal class action settlement with former patients and faces more lawsuits.

On Wednesday, Gov. Gavin Newsom signed urgency legislation allowing former students to move forward with legal claims even though the statute of limitations on their cases has run out. USC opposed the legislation, saying the class action settlement covered all possible claimants.

USC filed its motion to compel arbitration in early September.

Arch is one of several companies that provide USC with excess liability coverage for medical professionals. In the event USC is sued and coverage from the university's primary insurance provider, BETA Risk Management Authority, runs out, the university then turns to its next insurance provider until that coverage runs out, and so on. After BETA, Arch is fifth in line to provide coverage.

USC said Arch is supposed to "follow form" to the provisions of the insurance policies that precede it, including the primary BETA policy. Because the BETA contract requires all disputes to be submitted to an internal arbitration process, USC argued Arch is contractually obligated to bring its dispute with the university to the same process.

But Arch argues it never consented to arbitration, and the process required under the BETA contract is customized for BETA members. Arch is not a BETA member.

Arch filed its lawsuit more than a year after it became public that Tyndall had been repeatedly accused of sexual misconduct toward his patients, with complaints stretching back to the 1990s.

USC purchased two health care excess professional liability policies from Arch, which provides $10 million in coverage.

The insurance company said in its lawsuit the policies it issued to USC included an "abuse or molestation exclusion," which withholds protection in cases where the policyholder has been accused of those violations. Arch claimed that USC's broker tried to convince the company to remove the exclusion once the university understood lawsuits would likely result from Tyndall's alleged behavior.