96 1044 La.App. 1 Cir. 3/27/97, Hedgepeth v. Guerin

• Decision Date: 27 March 1997
• Citation: 691 So.2d 1355
• Parties: 96 1044 La.App. 1 Cir
• Court: Court of Appeal of Louisiana — District of US

Page 1355

691 So.2d 1355

96 1044 La.App. 1 Cir. 3/27/97

Julia R. HEDGEPETH, et al. v. Dr. Gerard GUERIN, et al.

No. 96 CA 1044.

Court of Appeal of Louisiana First Circuit.

March 27, 1997.

Rehearing Denied April 25, 1997.

Ron S. Macaluso, Hammond, for Plaintiffs/Appellees Julia R. Hedgepeth, et al.

Henry D. Salassi, Jr., Keith C. Armstrong, Baton Rouge, for Defendant/Appellant Pacific Insurance Company.

Gerard Guerin, Hammond, in Proper Person.

Before CARTER, LeBLANC and PARRO, JJ.

[96 1044 La.App. 1 Cir. 2] CARTER, Judge.

This is an appeal from a trial court judgment in a medical malpractice action.

BACKGROUND

Pacific Insurance Company (Pacific) issued an individual professional liability policy to Dr. Gerard G. Guerin, a Hammond podiatrist. The policy was a "claims made" policy covering the period between January 31, 1985, and January 31, 1986.

On October 2, 1985, Julia Hedgepeth, a diabetic, consulted Dr. Guerin for treatment of a callous on her right foot. On that same day, Dr. Guerin surgically removed the callous from Ms. Hedgepeth's foot and sutured the incision under local anesthesia. Thereafter, a severe infection developed, resulting in diabetic gangrene, which ultimately required the amputation of the upper left portion of Ms. Hedgepeth's right foot. Ms. Hedgepeth was left with permanent scarring and disfigurement.

On November 10, 1985, Pacific cancelled its policy of professional liability insurance covering Dr. Guerin. Thereafter, on January 31, 1986, the policy expired by its own terms.

On July 23, 1986, Ms. Hedgepeth and her husband, William, filed a medical malpractice action against Dr. Guerin and Pacific. Dr. Guerin answered the petition, denying the allegations and averring extinguishment of the obligation by virtue of a discharge in bankruptcy granted to Dr. Guerin on May 1, 1986.

Pacific filed a motion for summary judgment, contending that it did not receive notice of plaintiffs' claim against Dr. Guerin until after coverage had been cancelled on November 10, 1985, and/or had expired on January 31, 1986. Pacific reasoned that, as a result, Ms. Hedgepeth's claim was made outside the policy period, and the Pacific "claims made" policy afforded no coverage to Dr. Guerin. The trial court denied Pacific's motion for summary judgment, finding that genuine issues of material fact remained.

[96 1044 La.App. 1 Cir. 3] Pacific also filed a dilatory exception pleading the objection of prematurity. In its exception, Pacific contended that the suit for medical malpractice was filed prematurely because an opinion had not been rendered by a medical review panel. ¹ On June 14, 1989, the trial court rendered judgment, sustaining the exception pleading the objection of prematurity and dismissing, without prejudice, plaintiffs' claims against Pacific.

On June 19, 1991, the medical review panel rendered an opinion, finding that Dr. Guerin failed to comply with the appropriate standard of care in his treatment of Ms. Hedgepeth.

On November 25, 1991, Ms. Hedgepeth, individually and on behalf of her minor child, Jonathan, ² and her late husband, William, ³ filed a medical malpractice action against Dr. Guerin and Pacific. ⁴ Pacific answered the petition, denying coverage and averring that the "claims made" policy covering Dr. Guerin had been cancelled by Pacific, effective November 10, 1985. Dr. Guerin answered, alleging that he had filed for bankruptcy and that this debt had been discharged.

On September 27, 1995, trial on the merits was held. On November 21, 1995, a judgment was signed, ordering that Pacific pay to the Succession of Julia Hedgepeth $236,957.79 for medical expenses and general damages; to Jonathan Hedgepeth $25,000.00 for his loss of consortium; and to plaintiffs $1,862.08 for trial expenses, with legal interest thereon from date of judgment. The judgment also awarded legal interest on the awards for medical expenses, general damages, and loss of consortium from the date of judicial demand in the original suit, July 23, 1986. Pacific filed a motion for new trial which the trial court denied. Thereafter, the trial court issued an amended [96 1044 La.App. 1 Cir. 4] judgment ⁵ in favor of the Succession of Julia Hedgepeth for medical expenses and general damages in the amount of $236,957.79, in favor of Jonathan Hedgepeth for his loss of consortium in the amount of $25,000.00, in favor of the plaintiffs in the amount of $1,862.08 for trial expenses with legal interest thereon from date of judgment. The judgment also provided that the awards for the medical expenses, general damages, and loss of consortium bear legal interest from the date of the filing of the complaint with the medical review panel, July 23, 1986. The judgment further ordered that Pacific pay plaintiffs its policy limits of $100,000.00, plus legal interest on the full amount of the judgment from July 23, 1986, until paid, and the trial expenses which had been awarded. In its written reasons for judgment, the trial court noted, in part, as follows:

The policy is a so-called "claims made" policy.

The facts are rather clear in so far as the liability of Dr. Guerin. Dr. Guerin was clearly guilty of malpractice in his treatment of Julia Hedgepeth.

There is no dispute to the fact that defendant, Pacific Insurance Company issued a policy to Dr. Guerin. There is also no dispute regarding the fact that the treatment of Mrs. Hedgepeth by Dr. Guerin took place during the period of policy coverage.

The dispute is over "notice" to the company. There was no proof that Dr. Guerin notified Pacific Insurance Company in writing on [sic] otherwise running [sic] the coverage period.

The coverage portions of the policy provide coverage for sums which the insured shall be legally obligated [to pay].

The failure of Dr. Guerin to notify his insurer is not a failing of the claimant. The failure of Dr. Guerin may very well make him liable to his insurer, but would not in the opinion of this court relieve the said insurer of any liability to claimant for "sums which the insured shall be legally obligated [to pay"].

Pacific appealed from the trial court judgment, assigning the following specifications of error:

1. The trial court erroneously ignored the unambiguous terms of the "claims made" policy in concluding that notice was not required for coverage to exist under Pacific Insurance Company's policy.

2. The trial court erred in awarding judicial interest on the full amount of the judgment with judicial interest to accrue from July 23, 1986, until paid.

[96 1044 La.App. 1 Cir. 5] ENFORCEABILITY OF "CLAIMS

MADE" POLICY PROVISIONS

Pacific contends that the language in its "claims made" policy, which limits coverage to acts discovered and reported during the policy term, is clear and unambiguous and that the trial court erred in finding that coverage existed.

In the portion of the policy entitled "COVERAGE PART," the Pacific policy provides the following "Notice":

This is known as a "claims made" policy. Except to the extent as may be provided herein, this coverage is limited generally to claims arising from the performance of professional services subsequent to the retroactive date stated in the declarations and first made against the company while the policy is in force. Please read the policy carefully.

The "Coverage Agreement" for "Coverage M--Individual Professional Liability" provides as follows:

The company will pay on behalf of the insured:

All sums which the insured shall become legally obligated to pay as damages because of injury to which this insurance applies caused by a medical incident, occurring subsequent to the retroactive date, ⁶ for which claim is first made against the insured and reported to the company during the policy period, arising out of the practice of the insured's profession as a podiatrist. (Footnote added.)

The policy addresses "When Claim Is to Be Considered as First Made" as follows:

A claim for injury shall be considered as being first made at the earlier of the following times:

(a) when the insured first gives written notice to the company that a claim has been made, or

(b) when the insured first gives written notice to the company of specific circumstances involving a particular person which may result in a claim. Reports of incidents made by the insured to the company as part of engineering or loss control services shall not be considered notice of claim.

All claims arising out of the same medical incident shall be considered as having been made at the time the first claim is made.

[96 1044 La.App. 1 Cir. 6] Clearly, the Pacific policy is a "claims made" or "discovery" policy. Under a "claims made" policy, coverage is effective only if the negligent harm is discovered and reported within the policy term. This is to be contrasted with an "occurrence" policy, where the coverage is effective if the negligent harm occurs within the policy period, regardless of the date of discovery. Livingston Parish School Board v. Fireman's Fund American Insurance Company, 282 So.2d 478, 481 (La.1973).

An insurance policy is a contract and has the effect of law between the parties. LSA-C.C. art.1983; Spurrell v. Ivey, 25,359, 25,360, p. 8 (La.App. 2nd Cir. 1/25/94), 630 So.2d 1378, 1383. As a general rule, where a policy unambiguously and clearly limits coverage to acts discovered and reported during the policy term, such limitation of liability is not per se impermissible or invalid. Livingston Parish School Board v. Fireman's Fund American Insurance Company, 282 So.2d at 481; Murray v. City of Bunkie, 96-297, p. 4 (La.App. 3rd Cir. 11/6/96), 686 So.2d 45, 48; Williams v. Lemaire, 94-1465, pp. 3-4 (La.App. 4th Cir. 5/16/95), 655 So.2d 765, 767, writ denied, 95-1514 (La.9/22/95), 660 So.2d 481. This is in accordance with the general principle that, in the absence of conflict with statutory provision or public policy, insurers may by unambiguous and clear notice provisions limit their liability and...