Key Points

  • The New York Court of Appeals unanimously affirmed the Appellate Division, Fourth Department, in a memorandum decided October 22, 2026.
  • Dr. Venkateswara Kolli was covered by Kaleida Health's self-insurance plan under the plan's unambiguous terms and section 6 (a) of his employment agreement, and Kaleida's reading of section 6 (b) (ii) was unreasonable because it would nullify other provisions.
  • Kaleida's self-insurance plan is an insurance policy, or at minimum an insurance equivalent, within the other-insurance clauses of the MLMIC and HPIC policies.
  • Kaleida's coverage is excess to MLMIC's, and Kaleida and HPIC share excess coverage pro rata.
  • The court did not address HPIC's arguments about MLMIC's or Kaleida's policy limits because HPIC did not appeal.

New York's highest court ruled Thursday that Kaleida Health's self-insurance plan covered an on-call physician sued for malpractice, and that the plan counts as insurance when the doctor's settlement is divided among Kaleida and the doctor's two insurers.

The Court of Appeals affirmed, without dissent, a 2024 decision of the Appellate Division, Fourth Department, in an unsigned memorandum. Chief Judge Wilson and Judges Rivera, Garcia, Singas, Cannataro, Troutman and Halligan concurred. Under the ruling, the doctor's primary insurer, MLMIC Insurance Company, pays first. Kaleida and the doctor's excess insurer, Healthcare Professionals Insurance Company, or HPIC, then share the excess layer on a pro rata basis.

Kaleida lost two arguments. The court held that the doctor was covered by the plan, rejecting Kaleida's reading of its own employment contract. The court also held that the plan falls within the "other insurance" clauses of the commercial policies. Kaleida had argued that its plan stood outside those clauses.

The dispute began in 2011, when Dr. Venkateswara Kolli treated a patient under an "on-call, per diem physician employment agreement" with Kaleida, according to the opinion. The patient sued Dr. Kolli and Kaleida for malpractice. Dr. Kolli filed a claim with MLMIC, his primary malpractice insurer, and with HPIC, his excess insurer.

The malpractice case settled after Dr. Kolli's death. Kaleida, MLMIC and HPIC agreed to fund the settlement while reserving their rights to fight later over who was covered and in what order the coverage applied. A declaratory judgment action to determine those coverage issues followed. The plaintiffs, listed in the caption as Ajay Kolli and others, and Kaleida each appealed to the high court. HPIC took part as a third-party respondent.

On coverage, the court agreed with the lower courts that the terms of the plan, which the opinion calls the SIP, were unambiguous. The plan, the memorandum said, "expressly stated that physicians employed by Kaleida for the purpose of providing patient care are 'covered persons' while 'acting on behalf of, or at the direction of' Kaleida." Section 6 (a) of Dr. Kolli's employment agreement provided that he would be covered by the plan when acting under the agreement. He was acting under it when he treated the patient at a Kaleida facility as an on-call physician, the court said.

Kaleida relied on a different provision, section 6 (b) (ii) of the employment agreement. The court held that "Kaleida's proposed reading of section 6 (b) (ii) of the employment agreement is not reasonable because it would render other provisions of the employment agreement a nullity." Kaleida's interpretation, the court wrote, "would mean that Dr. Kolli was never covered under the SIP, despite the unambiguous terms to the contrary in section 6 (a)."

The court adopted the Appellate Division's narrower reading. Under that reading, section 6 (b) (ii) applied "when Dr. Kolli treated his private practice patients at a Kaleida facility, as opposed to patients he treated for the first time while performing his on-call duties for Kaleida."

The priority question turned on whether a self-insurance plan could be treated as insurance. The court held that Kaleida's plan was insurance. "Kaleida's SIP was an insurance policy: it protected physicians such as Dr. Kolli and others against risk, required reporting of claims, and contained terms regarding priority of coverage and coverage exclusions," the memorandum said.

The court cited its 1976 decision in Guercio v. Hertz Corp. for comparison. Kaleida's plan, it wrote, "was not merely a 'self-insurance mechanism' for Kaleida to pay its own judgments."

The court also relied on the wording of the commercial policies. The "other insurance" clauses in the MLMIC and HPIC policies, the court noted, "expressly encompassed 'insurance equivalent[s]' or 'equivalent coverage.'" That language supplied a second ground for the result. "Even if the SIP was not 'insurance,' it was at a minimum an 'equivalent' thereto," the court wrote.

On the order of payment, the court adopted the Appellate Division's reasoning without restating it. The court agreed "for the reasons stated by that Court, that Kaleida's coverage is excess to MLMIC's coverage, and that Kaleida and HPIC are responsible for excess coverage on a pro rata basis." It cited the Fourth Department's 2024 decision and its own 1980 ruling in Lumbermens Mutual Casualty Co. v. Allstate Insurance Co. The court said the parties' remaining arguments lacked merit.

The court declined to reach HPIC's arguments about the policy limits of MLMIC and Kaleida. HPIC had not appealed, and the court cited its 1983 decision in Hecht v. City of New York in setting those contentions aside.

Kaleida was represented by Mark D. Taticchi. Steven E. Peiper represented the plaintiffs.

The Court of Appeals affirmed the Appellate Division's order without costs. The court also declined to answer the certified question as unnecessary. The affirmance leaves the Fourth Department's coverage and priority rulings in place. The Law Reporting Bureau's text notes that the decision is uncorrected and subject to revision before publication in the Official Reports.