Medical Protective Company of Fort Wayne Indiana The v. American International Specialty Lines Insurance Company

Filing 150

OPINION AND ORDER: The Court accepts 148 STIPULATION re 146 Opinion and Order, by Plaintiff Medical Protective Company of Fort Wayne Indiana The, which will govern the presentation of evidence for purposes of trial. The Court finds that the Bra mletts' lawsuit against MedPro in 2009 is deemed made during the July 1, 2006 - July 1, 2007, Policy Period because MedPro gave AISLIC timely and appropriate notice of an "occurrence" pursuant to the Special Reporting Clause. AISLIC has preserved its appellate rights with respect to this finding and will be permitted to make an offer of proof at trial. Signed by Judge Holly A Brady on 1/21/2020. (lhc) Modified on 1/21/2020 to add text (lhc).

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
THE MEDICAL PROTECTIVE
COMPANY OF FORT WAYNE
INDIANA,
Plaintiff,
v.

CAUSE NO.: 1:13-CV-357-HAB

AMERICAN INTERNATIONAL
SPECIALTY LINES INSURANCE
COMPANY,
Defendant.
OPINION AND ORDER
In this litigation, Plaintiff Medical Protective Company of Fort Wayne, Indiana
(MedPro or Plaintiff), has sued Defendant American International Specialty Insurance
Company (AISLIC or Defendant), now known as AIG Specialty Insurance Company, for
breach of the terms of a 2006 policy AISLIC issued to MedPro (the Policy). MedPro alleges
that AISLIC breached the Policy when it refused to cover MedPro’s extra-contractual
liability and eventual settlement of a third party’s claim against MedPro based on
MedPro’s alleged breaches of duties owed to its insured, which were committed during
MedPro’s defense of a medical malpractice action against that insured. The breach of
contract claim is scheduled for a jury trial to begin on January 28, 2020.
This matter is before the Court on the Stipulation [ECF No. 148] of the parties, filed
on January 17, 2020.

ANALYSIS
Interpretation and construction of contract provisions are questions of law. Bar
Plan Mut. Ins. Co. v. Likes Law Office, LLC, 44 N.E.3d 1279, 1285 (Ind. Ct. App. 2015). When
the facts of the case are not in dispute, what constitutes proper notice under a claimsmade policy is a question of law for the court to decide. Id.; see also Imperial Cas. & Indem.
Co. v. Chi. Hous. Auth., 987 F.2d 459, 461 (7th Cir. 1993) (“If the facts surrounding notice
are not disputed, a question of law is presented that may be answered on summary
judgment.”).
The Policy contained a Special Reporting Clause, which provides:
If during the Policy Period . . . . , the CFO, General Counsel or CEO of the
Insured shall become aware of any occurrence which may reasonably be
expected to give rise to a claim against the Insured for a Wrongful Act
which first occurs during or prior to the Policy Period, and provided the
Insured gives written notice to the Company during the Policy Period . . .
of the nature of the occurrence and specifics of the possible Wrongful Act,
any claim which is subsequently made against the Insured arising out of
such Wrongful Act shall be treated as a claim made during the Policy
Period.
ALL OTHER TERMS, CONDITIONS, AND EXCLUSIONS SHALL
REMAIN THE SAME.
(ECF No. 148-1 at 28.) The parties have stipulated that the Policy, containing the above
provision, is admissible.
On June 28, 2007, MedPro gave notice to AISLIC of a potential claim against it
arising out of an underlying medical malpractice lawsuit in Texas against MedPro’s
insured, Dr. Phillips. The notice provided the basic facts of the medical malpractice
action, and advised that MedPro had not settled two demands at the $200,000 policy

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limits and that plaintiffs had suggested that MedPro had been “Stowerized” under Texas
law. MedPro stated that a verdict for $11 million in compensatory damages and $3
million in punitive damages had been entered in August 2005, and that the case was on
appeal to the Texas Supreme Court for the enforcement of the Texas wrongful death cap.
The parties have stipulated that the June 28, 2007, General Liability Notice of
Occurrence/Claim document with attachments is admissible.
In a verified response to an interrogatory asking MedPro to identify all facts
supporting its contention that the Policy provides coverage for the extracontractual claim
as alleged in its Complaint, MedPro stated the following:
Tim Kenesey, the CEO of MedPro, became aware of an occurrence which
reasonably may be expected to give rise to a claim for a Wrongful Act
against MedPro in approximately March or April 2007 after the Texas Court
of Appeals affirmed the trial court judgment in the Bramlett Malpractice
Action with respect to the application of medical negligence cap, Medical
Liability and Insurance Improvement Act of 1977 (TEX. REV. CIV. STAT.
art. 4590i) (repealed) (“Article 4590i”).
(ECF No. 148-3.) For purposes of the Stipulation, AISLIC does not dispute that Mr.
Kenesey first became aware of the Texas Court of Appeals opinion during the Policy
Period (July 1, 2006–July 1, 2007).
This Court previously determined that Endorsement No. 16, the Special Reporting
Clause, is sufficiently broad to encompass developments in an underlying medical
malpractice claim when reporting that an occurrence was reasonably expected to give
rise to a claim. (1-16-20 Order, ECF No. 146.) MedPro was not, as AISLIC argued, limited
to providing notice of when the General Counsel, CEO or CFO learned about MedPro’s
failure to settle within policy limits.
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Given the Court’s January 16, 2020, Order interpreting Endorsement No. 16,
AISLIC stipulates and agrees that MedPro’s submission of Trial Exhibit 51 complied with
the requirements of Endorsement No. 16 as it has been interpreted by the Court.
However, AISLIC objects to and preserves its appellate rights with respect to the Court’s
January 16, 2020 Order, and will make an offer of proof at trial based on an alternative
interpretation of Endorsement No. 16.
CONCLUSION
For the reasons stated above, the Court accepts the parties Stipulation [ECF No.
148], which will govern the presentation of evidence for purposes of trial. The Court finds
that the Bramletts’ lawsuit against MedPro in 2009 is deemed made during the July 1,
2006 – July 1, 2007, Policy Period because MedPro gave AISLIC timely and appropriate
notice of an “occurrence” pursuant to the Special Reporting Clause. AISLIC has
preserved its appellate rights with respect to this finding and will be permitted to make
an offer of proof at trial.
SO ORDERED on January 21, 2020.
s/ Holly A. Brady
JUDGE HOLLY A. BRADY
UNITED STATES DISTRICT COURT

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