St. Paul Fire & Marine Ins. v. MEDICAL PROTECTIVE
| Decision Date | 21 November 1980 |
| Docket Number | Civ. A. No. 78-1316. |
| Citation | 504 F. Supp. 877 |
| Parties | ST. PAUL FIRE & MARINE INSURANCE COMPANY, a corporation, Plaintiff, v. The MEDICAL PROTECTIVE COMPANY, a corporation, Defendant. |
| Court | U.S. District Court — District of Kansas |
H. W. Fanning, of Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, Kan., for plaintiff.
William Tinker, of McDonald, Tinker, Skaer, Quinn & Herrington, Wichita, Kan., for defendant.
This matter comes on for decision now on the parties' respective motions for summary judgment. This action is between a primary liability insurance carrier and an excess liability insurance carrier disputing the division of their respective financial responsibilities for a sizable malpractice judgment against their insureds. The issue before the Court is whether the defendant's three primary liability policies should be exhausted before the plaintiff is legally obligated to pay under its two excess liability policies. This case is in the nature of a declaratory judgment action, as stated in the pretrial order, although the plaintiff's prayer claims money damages only. An informal hearing was held in chambers on October 20, 1980, and at which time counsel argued their respective positions—the matter now ripe for disposition.
After careful consideration of the parties' briefs and the helpful oral argument of counsel, the Court hereby grants plaintiff's motion, overrules the defendant's motion, consistent with the following:
Background
Both the plaintiff and defendant in this action, St. Paul Fire & Marine Insurance Company and The Medical Protective Company (hereinafter referred to as St. Paul and as Medical Protective), are large insurance companies. The basic facts presented in the case are undisputed. The instant lawsuit had its beginning in 1971 when a medical malpractice action was filed against Doctors Linhardt, McCoy and Kendrick, the Women's Clinic, P.A., and the Wesley Medical Center. When the 1971 malpractice action was filed Medical Protective had in force professional liability policies for each of the individual doctors named above, providing primary liability coverage with $100,000 limits on each policy. At this same time St. Paul had in force two policies of excess liability insurance for Dr. McCoy and Dr. Kendrick. Although the doctors' professional association was originally named Kendrick, Nyberg & McCoy, P.A., and is denoted as such in the five policies in question, it changed its corporate name to Women's Clinic, P.A., after the malpractice case was filed in 1971. The parties have stipulated this change of corporate name is of no significance in the present case. St. Paul provided its insureds with coverage for liability in excess of $100,000 up to $1,000,000.
The medical malpractice action in state district court was eventually settled in 1977. Since Doctors McCoy and Kendrick had never rendered the plaintiffs any medical services, they were dismissed as defendants on May 26, 1977. After a settlement was agreed, judgment in the sum of $300,000 was judicially approved and entered against Wesley Medical Center on July 5, 1977. Finally, on October 24, 1977, pursuant to a settlement agreement, judgment in the sum of $400,000 was approved and entered against Dr. Linhardt and the Women's Clinic, P.A. At this time St. Paul assented to paying $300,000 of the judgment, and Medical Protective paid the remaining $100,000 upon the understanding that the two insurance companies would later litigate the issue of how the $400,000 would be divided between them. Both carriers then agreed their payments to settle the state court action would not prejudice their right to present their respective claims against each other in the present lawsuit.
The question for this Court's determination is whether the primary liability coverage provided in the two Medical Protective policies of Doctors Kendrick and McCoy should be exhausted, i. e., "stacked" on top of Dr. Linhardt's Medical Protective policy, before St. Paul became legally responsible to provide excess coverage. An affirmative answer means Medical Protective should have contributed $300,000 towards satisfaction of the 1977 malpractice judgment. In the interest of clarity, an analysis of the Medical Protective and St. Paul insurance policies is necessary:
As mentioned above, Medical Protective had issued three separate and individual policies affording primary liability coverage to the three doctors in the professional association (hereinafter Women's Clinic, P.A. and Kendrick, Nyberg and McCoy, P.A. will be referred to as the professional association unless referred to specifically). In each Medical Protective policy the individual doctor was the named insured. In this regard, each Medical Protective policy also contained the following endorsement (R-1):
This policy extends to and covers the professional association in any claim hereunder.
As relates to who was the insured, i. e., Dr. Linhardt or the professional association— the endorsement cannot be ignored. The maximum amount payable under each Medical Protective policy was $100,000 per occurrence. When judgment was entered in the malpractice action against Dr. Linhardt and the professional association, Medical Protective paid $100,000 as compelled by Linhardt's policy (No. 479564). The endorsement extending coverage to the professional association in the Linhardt and other Medical Protective policies was incorporated in the policies when put in force and was not included as a subsequent endorsement.
The two St. Paul policies issued to McCoy and Kendrick clearly provide excess liability coverage. Each St. Paul policy also contained the following endorsement making the professional association an insured under each policy:
Other language in the St. Paul insurance contract crucial to plaintiff's argument regards its liability limit:
The significance of this section is that St. Paul would only be responsible for liability of the insured in excess of the $100,000 primary coverage provided by Medical Protective plus the maximum limits of any other collectible primary liability insurance. Schedule A of both Kendrick and McCoy's St. Paul policies listed their respective Medical Protective policies and no other professional liability policies. Dr. Linhardt had no excess coverage whatsoever.
The basic contentions of the parties are simple and involve interpretation of their respective insurance contracts. St. Paul's interpretation of the Medical Protective policies is that by amendment, the professional association is an insured under each of the Medical Protective policies, and that since judgment in the malpractice case was entered against the professional association as well as Dr. Linhardt, Medical Protective should have paid $100,000 pursuant to each of its primary policies. On the other hand, Medical Protective's position is that it was only liable for $100,000 pursuant to Dr. Linhardt's Medical Protective policy and that its other two policies should not be "stacked". Medical Protective's reasoning is that the Medical Protective policies of Doctors McCoy and Kendrick are not applicable since they are not liable as employees of the professional association for Dr. Linhardt's negligence, and that consequently their individual Medical Protective policies were not triggered by the judgment against Linhardt and the professional association. The defendant also argues that under each Medical Protective policy, the professional association was only covered by virtue of the respective doctors' liability, i. e., that no additional coverage was provided the professional association by the amendment.
Both St. Paul and Medical Protective agree the laws of Kansas govern this case. The situation presented this Court is unique. This Court's legal research has produced no cases containing facts resembling those at hand. Nor have the litigants provided any. Consequently, basic contract law has been utilized to reach the Court's decision. Neither side argues any of the insurance contracts are ambiguous, and the Court agrees. "The construction and interpretation of a contract unambiguous in its terms is a question of law for the Court case cites omitted and the intention of the parties and the meaning of such a contract are to...
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