In a closely watched case for healthcare insurers and risk managers, the Tenth Circuit Court of Appeals ruled on May 2 that an excess insurer isn’t responsible for covering more than $40 million in patient claims tied to sterilization failures at a Colorado hospital. The court sided with AdHealth, Ltd., affirming a lower court’s finding that the policy clearly limits coverage to individual patient injuries - not systemic failures affecting thousands.
The dispute stems from a two-year period during which PorterCare Adventist Health Systems - doing business as Centura Health-Porter Adventist Hospital in Denver - failed to maintain proper surgical sterilization procedures. The issue came to light in February 2018 when a whistleblower contacted an accrediting body, prompting an immediate threat designation and a series of investigations.
Regulators uncovered widespread problems. The hospital had failed to properly sterilize surgical instruments, didn’t adequately train or supervise staff, underreported patient infections, and ran operating rooms with dangerously low staffing levels. In April 2018, the hospital shut down its operating rooms for a week and began notifying thousands of patients who had undergone orthopedic or spine surgeries that they might have been exposed to infections or blood-borne pathogens.
Lawsuits followed. PorterCare ultimately settled four consolidated actions - two involving actual surgical-site infections and two involving about 6,000 patients claiming emotional distress from exposure risks. The hospital’s total liability exceeded $40 million.
PorterCare sought full coverage from AdHealth under its excess-liability insurance. Its position was that the wave of patient claims arose from a single “medical incident” - namely, its systemic breach of sterilization protocols. But AdHealth pushed back, pointing to the specific language in the policy.
The definition of “medical incident” under PorterCare’s policy included “any act or omission… which results in injury to a patient,” and crucially, stated that “all related acts or omissions… to any one person” would be considered a single incident. That wording, according to AdHealth, made it clear that each patient’s claim had to be treated individually. Since PorterCare was self-insured for the first $2 million of liability per claim, and no individual patient’s claim exceeded that threshold, AdHealth said it owed nothing.
The district court agreed and granted summary judgment to AdHealth in May 2024. On appeal, the Tenth Circuit affirmed, concluding that the language of the policy was unambiguous. The court emphasized that the definition clearly ties a “medical incident” to injury suffered by a single person—not to a group or a systemic event. It also pointed to similar rulings in other jurisdictions interpreting near-identical policy terms.
PorterCare had argued that the policy should be read to account for the systemic nature of its sterilization failures, but the court found that the contractual language didn’t support that view. If PorterCare had wanted coverage for aggregated claims stemming from a systemic failure, it could have negotiated for that kind of policy - but it didn’t.
For insurers, the ruling is a win for contract certainty and a reaffirmation that policy language - especially in defining covered events - will be enforced as written. For hospitals and other large insureds, it’s a reminder to carefully scrutinize how coverage triggers are defined, especially when facing the risk of multiple similar claims from a single operational breakdown.
The ruling is final unless further appealed. For now, AdHealth won’t be paying out on the hospital’s multi-million-dollar settlements - each patient’s claim, the court ruled, stands alone.
