Continental Cas. Co. v. Hartford Fire Ins. Co.

Decision Date01 July 1997
Docket NumberNo. 96-7194,96-7194
Citation116 F.3d 932
PartiesCONTINENTAL CASUALTY COMPANY, Appellant, v. HARTFORD FIRE INSURANCE COMPANY, Appellee.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeal from the United States District Court for the District of Columbia (No. 94cv02335).

William D. Hopkins, Washington, DC, argued the cause for appellant, with whom Sean M. Hanifin, Washington, DC, and James M. Lichtman, Irvine, CA, were on the briefs.

William J. Bowman, Washington, DC, argued the cause for appellee, with whom David G. Leitch and James P. Ruggeri were on the brief.

Before: SILBERMAN, RANDOLPH and ROGERS, Circuit Judges.

ROGERS, Circuit Judge:

In this insurance coverage dispute, Continental Casualty Company ("Continental") seeks to recoup from Hartford Fire Insurance Company ("Hartford") a portion of a settlement of a medical malpractice lawsuit against The Yater Medical Group and Dr. Howard Smith which were insured by the two companies during consecutive time periods. The district court granted summary judgment for Hartford upon concluding that no reasonable jury could find that the proximate cause of Dr. Smith's decision to deliver a baby prematurely was testing performed when Hartford's insurance policy was in effect. Continental contends that the district court ignored substantial evidence showing that negligence occurring during Hartford's policy period substantially contributed to the doctor's decision to deliver the baby prematurely, and failed to recognize that such negligence could, and in fact did, constitute a concurrent proximate cause of the injuries. We agree, and accordingly reverse and remand the case to the district court to determine the proper apportionment of liability for the settlement.

I.

Both Continental and Hartford issued medical malpractice policies to The Yater Medical Group ("Yater"), for which Dr. Howard Smith, an obstetrician, was a named insured. The policies covered consecutive periods of time and included different exposure provisions as well as different "other insurance" provisions. Continental issued both a primary policy and a separate excess policy for the period of January 1, 1981, to January 1, 1982. The primary policy limited coverage to $1 million per claim and $1 million in the aggregate for Yater and its insured physicians. The primary policy provided that Continental would

pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of ... [i]njury arising out of the rendering or of failure to render, during the policy period, professional services....

(emphasis added). It did not contain an "other insurance" provision. The excess policy, however, which provided $10 million coverage jointly to Yater and Dr. Smith over the limits of the primary policy, contained an "other insurance" provision that denied coverage if the insured had other insurance to cover a loss. 1

Hartford's policy covered the eight-month period from May 1, 1980, to January 1, 1981, which immediately preceded the Continental policy period. The limit of liability under Hartford's policy was $2 million for each medical incident and $2 million in the aggregate. Hartford's policy provided that Hartford would pay on behalf of the insured

[a]ll sums which the insured shall become legally obligated to pay as damages because of injury, to which this insurance applies, to any person caused by a medical incident which occurs during the policy period....

(emphasis added). The policy defined the term "medical incident" as "any act or omission in the furnishing of professional or dental services to any person...." Its "other insurance" provision included a pro rata limitation. 2

The instant insurance coverage litigation arises from a medical malpractice action brought by Tracina Woods and her parents against Yater and Dr. Howard Smith, the obstetrician who delivered Tracina by cesarean section on February 19, 1981, after monitoring her development in utero from the early months of Mrs. Woods' pregnancy. 3 The Woods alleged in their complaint that Dr. Smith had negligently delivered their baby prematurely and that, as a result, she had developed serious and permanent injuries, including cerebral palsy, spastic diplegia, and brain damage. The complaint also alleged that during his care and treatment of Mrs. Woods and the baby, Dr. Smith failed to take a thorough medical history, to conduct appropriate and careful physical examinations, to utilize appropriate laboratory and ancillary procedures, and to interpret accurately physical examinations and findings.

Shortly after the Woods filed their complaint, Yater gave notice of the action to Hartford. In response, Hartford informed Yater that it would join with Continental in providing a defense. 4 Acknowledging that the Woods "may be able to tie in both liability and causation" during Hartford's policy period, Hartford agreed with Continental to pay 50% of the defense costs. Hartford also stated that if after the Woods' experts were deposed the Woods were "unable to tie in both liability and causation during [its] period of coverage," Hartford would "withdraw from paying any additional attorneys fees and related expenses and of course [would] not indemnify."

The undisputed evidence produced during discovery showed that Dr. Smith first saw Mrs. Woods as a patient on September 8, 1980. At that time, he confirmed that she was pregnant and recorded her last menstrual period as May 2, 1980, a date suggesting that the fetus was at least seventeen weeks old. Based on a pelvic examination, however, Dr. Smith found the size of the uterus to be consistent with a 12-week fetus. Because Dr. Smith was unsure of Mrs. Woods' date of conception, he ordered a sonogram. The sonogram, which was performed two days later, indicated that the fetus was approximately six weeks old. The discrepancy between Mrs. Woods' menstrual period and the sonogram led Dr. Smith to have "concerns" about the pregnancy, particularly that Mrs. Woods was "small for [the] dates" and the fetus thus might suffer from Intrauterine Growth Retardation ("IUGR"), a condition marked by lagging growth throughout the pregnancy. 5 Nevertheless, Dr. Smith did not order any additional tests at that time, and provided routine prenatal care during three additional visits in 1980.

In January 1981, Dr. Smith ordered a second sonogram from which he concluded that there was a strong possibility that the fetus suffered from IUGR. Dr. Smith began to see Mrs. Woods with greater frequency, examining her on six occasions between January 9, 1981, and February 11, 1981, and ordering a third sonogram during this period. His concern about IUGR also led him to monitor Mrs. Woods' serum estriol level. 6 Three samples collected on February 4, 6, and 11 indicated a constant estriol level of 3.3 NG/ML. On February 13 there was a thirty percent drop to 2.3 NG/ML. Concerned that the fetus might be in jeopardy, Dr. Smith admitted Mrs. Woods to the Washington Hospital Center on February 18 for additional monitoring and bed rest, so that he could deliver the baby "if there were other further reasons to be concerned regarding [IUGR]."

Upon her admission to the hospital, Dr. Smith directed Dr. Henry Sobel to perform a fourth sonogram and an amniocentesis. Dr. Sobel reported that the sonogram indicated the presence of a low level of amniotic fluid, which prevented the successful performance of the amniocentesis. "On the basis of the falling estriols and the decrease in the amniotic fluid," Dr. Smith concluded that "we, indeed, had [IUGR] and that this baby was very compromised and should be delivered the following morning." Believing that the fetus was approximately thirty-six to thirty-seven weeks old (i.e., three to four weeks short of full term), Dr. Smith delivered the baby by cesarean section on February 19, 1981. After birth, the baby experienced respiratory problems, and several years later, she was diagnosed as having cerebral palsy, spastic diplegia, and other physical disorders.

Expert evidence produced during discovery highlighted the parties' differing interpretations of the evidence. The Woods presented experts who disputed Dr. Smith's conclusion that the fetus was not developing properly and suffered from IUGR. In these experts' opinion, the baby's premature delivery caused her to develop cerebral palsy and other serious disorders. The experts identified a number of errors by Dr. Smith that led him to deliver the baby prematurely. First, because Dr. Smith failed to ascertain that Mrs. Woods' periods were irregular, he placed undue emphasis on the date of her last menstrual period in assessing fetal age. Second, given the conflicting signals as to fetal age provided by the last menstrual period, the initial sonogram, and a pelvic examination, as well as the fact that the best time to evaluate fetal age is early in the pregnancy, Dr. Smith should have taken additional steps early on to determine the age of the fetus with greater accuracy. This included ordering follow-up sonograms in the first month after Mrs. Woods' initial visit and carefully monitoring early "landmarks" in fetal development, such as the first detection of fetal heartbeat and fetal movement. Third, Dr. Smith erroneously concluded that the fourth sonogram showed a low level of amniotic fluid corroborating an IUGR diagnosis. Fourth, in focusing on the falling estriol levels, Dr. Smith relied on an "insufficient basis" to perform an elective cesarean section.

Yater and Dr. Smith responded with their own expert evidence that the baby's injuries had nothing to do with Dr. Smith or the cesarean section, but instead resulted from a genetic defect, IUGR, or care provided after birth by the Washington Hospital Center. One expert opined that the baby's disabilities resulted from developmental problems in utero and that she suffered...

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