St. Paul Fire & Marine Ins. v. Engelmann

• Decision Date: 16 January 2002
• Docket Number: No. 21357.,21357.
• Citation: 639 N.W.2d 192,2002 SD 8
• Parties: ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a Minnesota Corporation, Plaintiff and Appellant, v. Gary ENGELMANN, Defendant, Natasha Baloun, Natalie Bertsch, Brian Bertsch, Nancy Froning, Greg Froning, Audra K. Martinmaas, Defendants and Appellees.
• Court: South Dakota Supreme Court

639 N.W.2d 192

2002 SD 8

ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a Minnesota Corporation, Plaintiff and Appellant, v. Gary ENGELMANN, Defendant, Natasha Baloun, Natalie Bertsch, Brian Bertsch, Nancy Froning, Greg Froning, Audra K. Martinmaas, Defendants and Appellees.

No. 21357.

Supreme Court of South Dakota.

Argued September 21, 2000.

Reassigned March 12, 2001.

Reassigned October 9, 2001.

Decided January 16, 2002.

Rehearing Denied February 22, 2002.

Bethany K. Kulp, David M. Wilk of Oppenheimer, Wolff & Donnelly, St. Paul, MN, Cheryle Wiedmeier Gering of Davenport, Evans, Hurwitz & Smith, Sioux Falls, for plaintiff and appellant.

Steven J. Andreasen, N. Richard Willia of Gildemeister, Willia & Keane, Sioux City, IA, for defendant and appellee Natasha Baloun.

A. Russell Janklow, Ronald A. Parsons, Jr. of Johnson, Heidepriem, Miner, Marlow & Janklow, Sioux Falls, Sheila S. Woodward of Johnson, Heidepriem, Miner, Marlow & Janklow, Yankton, for defendants and appellees Natalie Bertsch, Brian Bertsch, Nancy Froning, Greg Froning, and Audra K. Martinmaas.

KONENKAMP, Justice (on reassignment).

¶ In this declaratory judgment action brought to contest medical malpractice insurance coverage, the circuit court granted summary judgment against the insurer, reasoning that the general verdict in the doctor's malpractice trial was conclusive on the coverage question. The jury in that trial heard two tort theories, one that would permit coverage and another that would not. Because the insurer reserved its right to contest coverage and a question of fact remains on what, if any, part of the damages are allocable to the covered acts of the doctor, coverage must be decided in a separate trial. We affirm in part, reverse in part, and remand for trial.

A.

Background

¶ The events leading to this appeal began in Miller, South Dakota. Gary Engelmann practiced medicine there at the Hand County Clinic. In July 1994, he performed a pelvic examination on Natasha Baloun. During the exam, she became suspicious of his unusual motions and his closeness to her. When she abruptly sat up, she saw his penis. She fled the room and later contacted the police. After her experience became public, other women came forward. Plaintiffs Audra Martinmaas, Natalie Bertsch, and Nancy Froning lodged similar complaints against Engelmann. He was charged with multiple counts of raping his patients.

¶ In an agreement with the prosecutor, Engelmann pleaded guilty to one count of second degree rape, but before sentencing, he sought to withdraw his plea. The circuit court refused his request. He appealed. In State v. Engelmann, 541 N.W.2d 96 (S.D.1995), we reversed, concluding that he had a nonfrivolous reason to withdraw his plea because at the time he entered it his thought processes were blunted by prescription medications and severe depression. He proceeded to trial. A jury acquitted him of all charges.

¶ Plaintiffs Martinmaas, Bertsch, and Froning brought civil actions against Engelmann. After a consolidated trial, the jury awarded $450,000 damages to each plaintiff and $50,000 each to Bertsch's and Froning's husbands. We affirmed in Martinmaas v. Engelmann, 2000 SD 85, 612 N.W.2d 600. There, a majority of this Court held that Engelmann's improper sexual contact constituted "malpractice" because it breached the physician's duty to use care and skill in the practice of medicine. Id. at ¶ 31. Natasha Baloun also sued. Her case is still awaiting trial.

¶ St. Paul Fire & Marine Insurance Company insures Engelmann and the Hand County Clinic under two different policies: a commercial general liability policy and a professional liability policy. In this declaratory judgment action, St. Paul contends that it has no duty to indemnify Engelmann for the jury verdict in the consolidated trial and no duty to defend or indemnify him in the pending Baloun case. After both sides moved for summary judgment, the circuit court agreed that rape and sexual exploitation are not covered, but held nonetheless that the insurer had not "shown that the facts found by the jury as the basis of the award [were] the alleged rape and/or sexual abuse...." Concluding that the tort verdict was susceptible to two different constructions, and that one was sustainable for coverage purposes, the court ruled that St. Paul failed as a matter of law in its burden of proving noncoverage and was therefore obligated to indemnify Engelmann for the entire verdict. Lastly, the court held that St. Paul must defend the pending Baloun suit against Engelmann and the Clinic, but declined to decide before the verdict in that case whether St. Paul must indemnify Engelmann and the Clinic for any award Baloun may obtain.

¶ St. Paul appeals on the following issues: (1) Are the damages awarded in the consolidated trial covered under the St. Paul policies? (2) Is St. Paul obligated to defend Engelmann against the Baloun action? (3) Is St. Paul obligated to defend the Clinic against the Baloun action under the professional liability policy? (4) Does public policy preclude St. Paul from defending and indemnifying Engelmann against the Baloun action or indemnifying him against the consolidated action? We restructure these issues for better analysis, but we need not address the last question because we conclude that neither policy insures Engelmann's intentional misdeeds.

B.

The Commercial General Policy

¶ The commercial general policy contains several provisions applicable here. It covers "bodily injury" caused by an "event," defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The policy specifically excludes coverage for "bodily injury or property damage ... expected or intended by any protected person." More particularly, the policy does not insure Clinic employees, including Engelmann, for "bodily injury or personal injury that results from sexual abuse committed by that person...." In the policy, "sexual abuse means any physical, mental or moral harassment or assault of a sexual nature against any person." Finally, the policy carries a "professional services" exclusion.¹ Under related circumstances, the Louisiana Supreme Court ruled that a comprehensive business liability insurance policy excluding personal injury arising out of professional services furnished no coverage for medical malpractice. McCarthy v. Berman, 668 So.2d 721, 725 (La.1996). Likewise, we conclude that St. Paul's commercial general liability policy provides no coverage for personal injuries from sexual assaults or from rendering or failing to render professional services. Hence, medical malpractice, in any form, is not a covered occurrence. St. Paul is under no duty to defend or indemnify Engelmann and the Clinic under this policy.

C.

The Professional Policy

¶ Engelmann's professional liability policy covers "damages resulting from" the "providing or withholding of professional services." A duty to indemnify arises only on a showing that the insured contingency occurred. Headlee v. New York Life Ins. Co., 69 S.D. 499, 504, 12 N.W.2d 313, 315 (1943). The policy does not specifically define "professional services." For guidance on this term, we look to other jurisdictions. In Marx v. Hartford Accident and Indemnity Company, the Nebraska Supreme Court ruled that to find whether an act constitutes a professional service, courts look "not to the title or character of the party performing the act, but to the act itself." 183 Neb. 12, 157 N.W.2d 870, 872 (1968). Thus, coverage encompasses "professional" acts or services, those entailing the performance of a vocation, calling, or occupation requiring learning and intellectual skill. The professional nature of an act qualifies it as "professional service." A physician who sexually assaults a patient on the pretense of rendering medical care performs no professional service. Many courts follow the Marx blueprint. Simply put, sexual assaults of medical patients by physicians are not covered functions contemplated within the rendering of professional services.²

¶ In contrast, a minority view persists in a few courts. The lead decision in this area is St. Paul Fire & Marine Ins. Co. v. Asbury, 149 Ariz. 565, 720 P.2d 540 (Ariz.Ct.App.1986). There, the court ruled that all tortious acts professionals commit that are intertwined and inseparable from the services provided are covered occurrences. Unlike the Marx formulation, Asbury declares that malpractice insurance covers the physician, not the conduct of the physician. In Asbury, a gynecologist improperly manipulated his patients' clitorises during routine pelvic exams. The court found this misconduct inseparable from professional services.

¶ Although we reject the Asbury rationale because St. Paul's policy language speaks plainly of coverage for professional services, we believe that even Asbury's rule would not permit coverage here. Perhaps a doctor's hand inappropriately touching part of a patient's genitals may in some way be inseparable from the function of performing a pelvic examination. But a doctor's penis in no way belongs in, much less intertwines with, a gynecological exam. All but one of the plaintiffs testified that they were raped when Engelmann inserted his penis into them.³ Under the professional liability policy, injury from sexual misconduct cannot be considered as having been incurred from the "providing or withholding of professional services." See David S. Florig, Insurance Coverage for Sexual Abuse or Molestation, 30 Tort & Ins. L.J. 699, 724 (1995). St. Paul is under no obligation to indemnify Engelmann for such acts. But our analysis does not end here.

¶ If the question were only whether Engelmann's professional liability policy covers rapes and sexual assaults, then, as we have seen, the answer is clearly no. Rape and sexual exploitation in the course of a pelvic exam are intentional acts situated well outside the ambit of failure...