Bramlett v. Med. Protective Co. of Fort Wayne

• Decision Date: 05 March 2012
• Docket Number: Civil Action No. 3:10–CV–2048–D.
• Citation: 855 F.Supp.2d 615
• Parties: Dale BRAMLETT, Individually, and as Independent Administrator of the Estate of Vicki Bramlett, Deceased, et al., Plaintiffs, v. The MEDICAL PROTECTIVE COMPANY OF FORT WAYNE, INDIANA, et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

855 F.Supp.2d 615

Dale BRAMLETT, Individually, and as Independent Administrator of the Estate of Vicki Bramlett, Deceased, et al., Plaintiffs,

v.The MEDICAL PROTECTIVE COMPANY OF FORT WAYNE, INDIANA, et al., Defendants.

Civil Action No. 3:10–CV–2048–D.

United States District Court,

N.D. Texas,

Dallas Division.

March 5, 2012.

Alexander B. Klein, III, J. Todd Trombley, Myriam K. Legge, The Klein Law Firm, Houston, TX, James E. Girards, Girards Law Firm, Dallas, TX, John T. Smithee, Amarillo, TX, for Plaintiffs.

Joseph R. Little, The Little Law Firm, Houston, TX, Deron L. Wade, Dallas, TX, for Defendants.

MEMORANDUM OPINION AND ORDER

SIDNEY A. FITZWATER, Chief Judge.

Defendants' motion to dismiss requires the court to interpret and apply the Texas Supreme Court's decision in Phillips v. Bramlett, 288 S.W.3d 876 (Tex.2009) (“Phillips II ”). Although Phillips II construed § 11.02(c) of the now-repealed Medical Liability and Insurance Improvement Act of 1977 (“MLIIA”), Tex.Rev.Civ. Stat. Ann. art. 4590i (repealed Sept. 1, 2003), ¹and decided a question that appears unlikely to recur due to a statutory change, the correct interpretation of Phillips II is of considerable significance to the parties to this case. This interpretation resolves whether, and to what extent, plaintiffs can bring a direct Stowers-type ² claim against their physician's insurer under § 11.02(c). For the reasons explained, the court concludes that a plaintiff can bring such a direct action against his physician's insurer under § 11.02(c) of the MLIIA when Stowers facts exist, and therefore denies in part the motion to dismiss. The court grants the motion to dismiss as to plaintiffs' other claims.

I

The court has recounted the background facts and procedural history of this litigation in Bramlett v. The Medical Protective Co., 2010 WL 1491422, at *1 (N.D.Tex. Apr. 13, 2010) (Fitzwater, C.J.) (“Bramlett I ”), and Bramlett v. The Medical Protective Co., 2011 WL 248849, at *1 (N.D.Tex. Jan.26, 2011) (Fitzwater, C.J.) (“ Bramlett II ”). It will therefore limit its discussion to what is pertinent to today's decision.

This is a removed state-court lawsuit arising in connection with a medical malpractice lawsuit (the “Underlying Suit”) that plaintiffs ³ filed in Texas state court against Benny P. Phillips, M.D. (“Dr. Phillips”). Dr. Phillips was at one time a defendant in this lawsuit, but the court dismissed the case against him based on plaintiffs' failure to state a claim on which relief could be granted. See Bramlett II, 2011 WL 248849, at *4.

Defendant The Medical Protective Company of Fort Wayne, Indiana insured Dr. Phillips under a medical malpractice policy with limits of $200,000 (the “Policy”). The jury in the Underlying Suit returned a verdict in plaintiffs' favor, and the trial court entered judgment against Dr. Phillips for $9,196,364.50 in actual damages and $2,972,000 in punitive damages. Phillips v. Bramlett, 258 S.W.3d 158, 164 (Tex.App.2007) (“Phillips I ”), rev'd,288 S.W.3d 876 (Tex.2009). On appeal, the court of appeals affirmed in most respects. Id. at 183.⁴ Of particular significance to today's decision, it held that Dr. Phillips could not benefit from Tex.Rev.Civ. Stat. Ann. art. 4590i, § 11.02(a) (repealed Sept. 1, 2003), a provision of the MLIIA that limited a physician's civil liability for damages in an action on a health care liability claim (the “Physician Liability Cap”). Id. at 179.The court of appeals reached this conclusion based on § 11.02(c) of the MLIIA, which provided that § 11.02 did not limit an insurer's liability where facts existed that would enable a party to invoke the Stowers doctrine (the “ Stowers Exception”). Id.

Dr. Phillips petitioned the Supreme Court of Texas for review. See Phillips II, 288 S.W.3d at 878. He argued, inter alia, that the court of appeals erred in not limiting his liability based on the MLIIA. See id. The Texas Supreme Court granted review and held that the court of appeals erred in not limiting Dr. Phillips' liability under the Physician Liability Cap of the MLIIA. The court reversed and remanded the case to the trial court to cap Dr. Phillips' liability and render judgment. Id. at 883. In doing so, it “reserv[ed] for another case any suit against the insurer under section 11.02(c)'s Stowers exception.” Id. at 882.

In 2009 plaintiffs filed such a lawsuit in Texas state court against The Medical Protective Company of Fort Wayne, Indiana, Medical Protective Insurance Services, Inc. d/b/a The Medical Protective Company of Fort Wayne, Indiana (collectively, “MedPro”), and two individuals. After MedPro removed the case to this court, plaintiffs' claims against MedPro were dismissed without prejudice. See Bramlett I, 2010 WL 1491422, at *1.

Plaintiffs subsequently filed the instant case in Texas state court against MedPro and Dr. Phillips,⁵ alleging that MedPro negligently failed to settle their medical malpractice claim against Dr. Phillips within Policy limits. Bramlett II, 2011 WL 248849, at *1. MedPro again removed the case to this court. Id. Plaintiffs thereafter filed an amended complaint asserting causes of action against MedPro.⁶ They allege a statutory claim under the MLIIA for excess liability resulting from MedPro's negligent failure to settle their claim against Dr. Phillips within Policy limits. They also assert that MedPro violated Tex. Ins.Code. Ann. § 541.060(a)(2)(A) (West 2009), that it acted in bad faith and with gross negligence, and that it breached the Policy. MedPro moves to dismiss under Fed.R.Civ.P. 12(b)(1), contending that plaintiffs lack standing to pursue their claims against MedPro. Plaintiffs oppose the motion.

II

Although MedPro moves to dismiss this action under Rule 12(b)(1) for lack of standing, the motion does not challenge whether this court has subject matter jurisdiction.⁷ MedPro's motion challenges on the merits whether plaintiffs have viable claims under the MLIIA, as interpreted in Phillips II, or on any other basis alleged. Accordingly, the court will treat the motion as one brought under Rule 12(b)(6) for failure to state a claim on which relief can be granted.⁸

In deciding a Rule 12(b)(6) motion to dismiss, the court evaluates the sufficiency of plaintiffs' amended complaint by “accept[ing] ‘all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.’ ” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir.2007). To survive MedPro's motion to dismiss, plaintiffs must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.;see also Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (“Factual allegations must be enough to raise a right to relief above the speculative level[.]”). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not ‘shown’—‘that the pleader is entitled to relief.’ ” Iqbal, 129 S.Ct. at 1950 (quoting Rule 8(a)(2)) (alteration omitted). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 1949 (citation omitted).

III

The question whether plaintiffs have a viable claim against MedPro under the MLIIA for excess liability—i.e., the difference between the capped MLIIA amount and the jury verdict ⁹—resulting from MedPro's alleged negligent failure to settle their claim against Dr. Phillips within Policy limits turns on the correct interpretation of Phillips II.

A

In Phillips II the Texas Supreme Court interpreted two provisions of the MLIIA. The first—the Physician Liability Cap—stated: “[i]n an action on a health care liability claim where final judgment is rendered against a physician or health care provider, the limit of civil liability for damages of the physician or health care provider shall be limited to an amount not to exceed $500,000.” Tex.Rev.Civ. Stat. Ann. art. 4590i, § 11.02(a). The second—the “Stowers Exception”—created an exception to the cap: “[t]his section shall not limit the liability of any insurer where facts exist that would enable a party to invoke the common law theory of recovery commonly known in Texas as the ‘Stowers Doctrine.’ ” Id. § 11.02(c). The Phillips II court discussed the opinions of two Texascourts of appeals that had previously addressed the relationship between the Physician Liability Cap and the Stowers Exception but had reached different conclusions. One of the opinions—the decision of the Amarillo Court of Appeals in Phillips I—was the decision being reviewed in Phillips II.

In Welch v. McLean, 191 S.W.3d 147 (Tex.App.2005, no pet.), the Fort Worth Court of Appeals addressed a physician's contention that the trial court had improperly refused to apply the Physician Liability Cap to the damages award against him. Id. at 166. The trial court did not apply the cap because it found facts that enabled the plaintiffs to come under the Stowers Exception. Id. On appeal, the physician argued that the Stowers Exception “merely provides that his insurer's liability is not limited by the [Physician Liability Cap] if facts exist that would enable him to invoke the Stowers doctrine.” Id. at 167 (emphasis added). The Welch court agreed that the Physician Liability Cap applied to the physician's liability and that the Stowers Exception applied only to insurers and did not affect the physician's right to limit his liability under the cap. Id. at 168. But the Welch court...