Big Town Nursing Homes, Inc. v. Reserve Insurance Co., 73-1682.

• Decision Date: 10 April 1974
• Docket Number: No. 73-1682.,73-1682.
• Citation: 492 F.2d 523
• Parties: BIG TOWN NURSING HOMES, INC., Plaintiff-Appellant, v. RESERVE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

492 F.2d 523 (1974)

BIG TOWN NURSING HOMES, INC., Plaintiff-Appellant, v.RESERVE INSURANCE COMPANY, Defendant-Appellee.

No. 73-1682.

United States Court of Appeals, Fifth Circuit.

April 10, 1974.

Walter H. Mizell, Dallas, Tex., for plaintiff-appellant.

B. Thomas McElroy, Dallas, Tex., for defendant-appellee.

Before BROWN, Chief Judge, and GEWIN and GOLDBERG, Circuit Judges.

GOLDBERG, Circuit Judge:

Plaintiff-appellant, Big Town Nursing Homes, Inc.("Nursing Home"), brought this diversity action against its insurer, Reserve Insurance Company("Reserve"), in order to recover a sum alleged to be due under the malpractice endorsement of a general liability policy.The district court held for defendant on the ground that the actions giving rise to plaintiff's loss did not fall within the definition of malpractice under the applicable Texas law.We reverse.

In September of 1968Mr. Howard Newman voluntarily entered Nursing Home in order to receive treatment for alcoholism.On six occasions during the following two months Mr. Newman attempted to quit the premises.Five times he was observed and restrained; on the sixth try he managed a successful escape.Understandably annoyed at Nursing Home's overeager ministrations, Mr. Newman filed suit seeking recovery for false imprisonment.After receiving notice of the suit, Nursing Home tendered the defense to Reserve on the basis of a malpractice rider to its insurance policy.Reserve denied liability under the policy, and plaintiff was forced to proceed with the defense at its own expense.This effort met with less than resounding success, and Nursing Home suffered a $13,000 adverse judgment.Plaintiff claims that this judgment, necessary attorneys fees, and the incidental expenses of litigation, a total of more than $17,000, are properly owed by Reserve under the contract of insurance.

The professional liability endorsement at issue here provides in relevant part:

"It is agreed that such insurance as is afforded by the policy under the liability coverages also applies to damages because of injury, including death, sustained by any person and arising out of malpractice as defined herein committed during the policy period. . . .

"1.`Malpractice\' means malpractice, error or mistake (a) in rendering or failing to render to such person, or to the person inflicting the injury, medical, surgical, dental or nursing care, including the furnishing of food or beverages in connection therewith . . . ."

Appellant contends that its treatment of Mr. Newman clearly amounts to error or mistake in the rendering of nursing care, and is therefore covered by the policy.We find this argument persuasive.

Nursing Home is licensed under the laws of Texas to furnish "food and shelter to . . . persons . . . and . . . to provide minor treatment under the direction and supervision of a physician . . . or services which meet some need beyond the basic provision of food, shelter and laundry."¹Mr. Newman originally sought to avail himself of all of these services during the course of a hoped-for convalescence and rehabilitation.But when he attempted to end his stay, he was restrained.The district court held that under Texas law liability for this action would not be covered by a professional liability endorsement because the restraint resulted from an administrative decision on the part of appellant's management and from mechanical action on the part of its employees, and therefore lacked the necessary exercise of a professional judgment.SeeMaryland Casualty Co. v. Crazy WaterCo., 160 S. W.2d 102(Tex.Civ.App. Eastland, 1942, n. w. h.).This conclusion, however, is directly contradicted by findings of fact appearing in the opinion below.

The district court noted that while "there is some confusion as to who ordered the nurses and other personnel to restrain Mr. Newman . . . there is a general policy among the treating doctors that when a patient is irrational or is apt to hurt himself the nurses are to...