Arizona Property and Cas. Ins. Guar. Fund v. Helme, 1

• Decision Date: 08 May 1986
• Docket Number: CA-CIV,No. 1,1
• Parties: The ARIZONA PROPERTY AND CASUALTY INSURANCE GUARANTY FUND, a subdivision of the Department of Insurance of the State of Arizona, Plaintiff-Appellant, v. William B. HELME, M.D. and Jane Doe Helme, husband and wife; Neurological Surgeons, P.C., an Arizona corporation; Glenda Worsham, surviving spouse of Linward A. Worsham, and Chanita Lin Engelke and Choya Lynn Worsham, surviving children of Linward A. Worsham, Defendants-Appellees. 7644.
• Court: Arizona Court of Appeals

Page 445

735 P.2d 445

153 Ariz. 123

The ARIZONA PROPERTY AND CASUALTY INSURANCE GUARANTY FUND, a subdivision of the Department of Insurance of the State of Arizona, Plaintiff-Appellant, v. William B. HELME, M.D. and Jane Doe Helme, husband and wife; Neurological Surgeons, P.C., an Arizona corporation; Glenda Worsham, surviving spouse of Linward A. Worsham, and Chanita Lin Engelke and Choya Lynn Worsham, surviving children of Linward A. Worsham, Defendants-Appellees.

No. 1 CA-CIV 7644.

Court of Appeals of Arizona,

Division 1, Department B.

May 8, 1986.

[153 Ariz. 124] Holloway & Thomas, P.C. by Benjamin C. Thomas and Grant H. Goodman, Phoenix, for plaintiff-appellant.

Leonard & Clancy, P.C. by Kenneth P. Clancy, Phoenix, for defendants-appellees.

OPINION

JACOBSON, Presiding Judge.

This appeal arises from an action for declaratory relief, filed by the Arizona Property and Casualty Insurance Guaranty Fund (Fund) against William B. Helme, M.D., his wife, Neurological Surgeons, P.C. (NSPC) and the plaintiffs in an underlying medical malpractice suit for wrongful death.

Drs. Helme and Eisenbeiss and their corporation, NSPC, obtained an insurance policy for professional negligence from Imperial Insurance Company of California. This policy was in effect when the allegedly negligent acts giving rise to the malpractice suit occurred. Imperial Insurance subsequently became insolvent, and the Fund assumed responsibility for adjusting and defending claims under its policies, pursuant to A.R.S. § 20-661 et seq.

On April 26, 1975, Linward Worsham sustained serious injuries from an automobile accident. He was ultimately transferred to Good Samaritan Hospital in Phoenix, where he underwent a neurological consultation conducted by Dr. Eisenbeiss and surgery performed by Dr. Helme. Drs. Eisenbeiss and Helme were each agents, employees and shareholders of NSPC at this time.

For purposes of this appeal, the facts are undisputed that Drs. Eisenbeiss and Helme failed to review x-rays of Linward Worsham's spine during the course of the neurological consultation and subsequent surgery. These x-rays would have revealed a fracture dislocation of a cervical vertebra, which resulted in Mr. Worsham's quadriplegia and ultimate death.

In April of 1977, before Mr. Worsham died, he and his wife, Glenda Worsham, instituted a medical malpractice suit alleging that numerous doctors and hospitals, including Dr. Eisenbeiss and NSPC, had negligently and proximately caused Linward Worsham's injuries by failing to immobilize his cervical area. After Mr. Worsham died, his statutory heirs, including Glenda Worsham and her two children, filed an amended complaint alleging wrongful death. Dr. Helme was never named individually or served as a defendant in this litigation. Discovery ensued, and the case was set for trial on March 31, 1981.

The Fund obtained defense counsel for Dr. Eisenbeiss and NSPC pursuant to the policy with their insolvent insurer. During settlement negotiations, the plaintiffs asserted the purportedly negligent acts of Drs. Eisenbeiss and Helme were two separate "occurrences," laying the foundation for two separate claims under the Imperial Insurance policy. Such a construction of the policy would lead to a total, possible recovery of $199,800 from the Fund under A.R.S. § 20-667. In contrast, the Fund maintained the omissions of the two doctors constituted only one "occurrence" under the policy and thus supported only one claim for $99,900.

As a result of the Fund's position on the definition of "occurrence," Drs. Helme and Eisenbeiss feared personal liability for the malpractice claim and retained personal counsel. In a letter to the Fund, dated March 18, 1981, counsel for the plaintiffs, stated:

... We have ... had some preliminary discussions with personal counsel for Dr. Eisenbeiss and his group. They are concerned about personal exposure for sums in excess of the $100,000 coverage you claim to have. They believe, and we believe, that there is $200,000 in coverage. There is some discussion (preliminary only) that a stipulated judgment be entered in the amount of $350,000 in exchange for a release of any personal liability of Dr. Eisenbeiss or his group.

....

It seems clear, however, that there will have to be a judicial determination made to resolve the issue you and I disagree on--i.e., whether the Fund has $100,000 or $200,000 in coverage in this situation.

On April 22, 1981, Drs. Eisenbeiss and Helme, and NSPC executed a written agreement, stipulating that the doctors were independently and separately negligent and that their negligent omissions constituted two separate "occurrences" as defined by their insurance policy. These defendants further stipulated to a judgment for $199,800, the equivalent of a recovery for two claims. In consideration for these stipulations, the plaintiffs joined in a covenant not to execute against Drs. Eisenbeiss and Helme, and NSPC. The Fund neither authorized, nor took part in these settlement negotiations.

After settling the claim against Dr. Eisenbeiss for $99,900, the Fund filed an action for declaratory relief concerning its obligation to pay the second claim under the Imperial Insurance policy and A.R.S. § 20-667. Dr. Helme, NSPC and plaintiffs in the underlying action were named as defendants. Additionally, the Fund argued that Dr. Helme and NSPC breached their express contractual duty of cooperation and their implied duty of good faith by entering into the settlement agreement without the Fund's authorization. Cross-motions for summary judgment were filed, and on September 29, 1983, the trial court denied the Fund's motion and granted judgment in favor of the present defendants-appellees.

On appeal, the Fund raises the following issues (1) Whether plaintiffs in the wrongful death suit adequately pled their complaint against Dr. Helme, individually, and against NSPC, for Dr. Helme's allegedly negligent acts;

(2) Whether the insurance policy definition of "occurrence," as it relates to the number of claims, is ambiguous so as to necessitate construction based upon common law;

(3) Whether plaintiffs in the wrongful death suit alleged one, or alternatively two, "covered claims" under A.R.S. § 20-661;

(4) Whether the Fund abandoned Dr. Helme's and NSPC's defense in the wrongful death suit so as to justify their unauthorized stipulations to the judgment; and

(5) Whether Dr. Helme and NSPC breached their express duty of cooperation and implied duty of good faith, by executing the settlement agreement, such that plaintiffs in the wrongful death suit may not recover from the Fund for their liability.

ADEQUACY OF COMPLAINT IN STATING CAUSE OF ACTION AGAINST DR. HELME AND NSPC FOR DR. HELME'S NEGLIGENCE

Appellees contend that, under the law of respondeat superior, a complaint need only name the master to plead adequately against the servant as an individual. The Fund responds in asserting that appellees may not rely upon a general allegation of NSPC employee negligence to encompass Dr. Helme's acts, because they narrowed their allegations by specifically pleading the negligence of Dr. Eisenbeiss alone. In our opinion, neither assertion adequately addresses the issue.

A complaint must specifically name those individuals whom the plaintiff intends to sue personally, so as to provide sufficient notice to such individuals that they must stand ready to defend the litigation. Adams v. School Board, 53 F.R.D. 267 (M.D.Pa.1971) (where only school board named in caption of complaint, individual board members were not defendants). See Kepner v. Western Fire Insurance Co., 109 Ariz. 329, 509 P.2d 222 (1973) (complaint serves notice function). Here, Dr. Helme was not named individually in the complaint or amended complaint. Plaintiffs in the underlying, wrongful death suit thus failed to state a cause of action against Dr. Helme in his personal capacity.

In contrast, under the law of respondeat superior as it regards pleading practice, a complaint that generally alleges the employer's negligence need not specifically identify each employee involved to hold the employer liable for such employees' negligent acts. 57 C.J.S., Master and Servant, § 614 (1948 & Supp.1985); Hartford Accident & Indemnity Co. v. Transport Indemnity Co., 242 Cal.App.2d 90, 51 Cal.Rptr. 168 (1966); Vendrell v. School District, 226 Ore. 263, 360 P.2d 282 (1961); Wiebe v. Seely, 215 Ore. 331, 335 P.2d 379 (1959); Dillard v. Kern County, 23 Cal.2d 271, 144 P.2d 365 (1943). Here, the wrongful death complaint stated:

... Defendant Neurological Surgeons, P.C., acting through its agents and/or servants and/or employees caused an event to occur in the State of Arizona which is the subject of this lawsuit.

To require more in terms of specific employee names would be to contradict the great weight of authority. The Fund cites Hall v. Delvat, 95 Ariz. 286, 389 P.2d 692 (1964), for the proposition that specific pleadings as to negligent conduct limit and control general averments of negligence. The rule set forth in Hall is, however, inapposite to the present case. In Hall, as in other authorities cited by the Fund, the plaintiff was barred from proving negligent acts not mentioned in the complaint. These authorities have no bearing upon the wrongful death complaint here, as the plaintiffs never attempted to prove incidents of negligence other than a failure on the part of various defendants, including employees of NSPC, to review x-rays of Linward Worsham's spine.

As the Fund indicates, the purpose of pleadings is to give notice of opposing claims. Horne v. Timbanard, 6 Ariz.App. 518, 434 P.2d 520 (1967). We hold that NSPC and the Fund had sufficient notice both that the alleged negligent conduct was a failure to look at x-rays and that NSPC would be held responsible for this particular omission on the part of Dr. Eisenbeiss, as well as any other NSPC employee who similarly fell below the requisite standard of care. ...