Chervin v. Travelers Ins. Co.

• Decision Date: 17 January 2006
• Docket Number: No. 04-P-1315.,04-P-1315.
• Citation: 840 N.E.2d 983,65 Mass. App. Ct. 394
• Parties: Paul N. CHERVIN v. The TRAVELERS INSURANCE COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

840 N.E.2d 983

65 Mass. App. Ct. 394

Paul N. CHERVIN v. The TRAVELERS INSURANCE COMPANY.

No. 04-P-1315.

Appeals Court of Massachusetts, Suffolk.

Argued May 12, 2005.

Decided January 17, 2006.

Stanley W. Wheatley, Boston, for the plaintiff.

Scott McConchie, Boston (Thomas F. Maffei with him) for the defendant.

Present: COWIN, BROWN, & MILLS, JJ.

MILLS, J.

After The Travelers Insurance Company (Travelers or the insurer), as a workers' compensation carrier, paid $775,000 in benefits to an injured worker, Edward Mosher (the employee), it commenced a medical malpractice subrogation action against Dr. Paul N. Chervin, a neurologist, on the theory that he may have been liable for the accident in which the employee sustained the injuries.¹ Travelers theorized that Chervin had failed to take certain actions, including warning the employee of the dangers of drinking alcohol while taking Dilantin medication for his seizure disorder. After the insurer's complaint was dismissed, Chervin filed the instant action against the insurer and its attorney, Richard J. Sullivan, claiming that they acted maliciously and without probable cause in bringing the malpractice action against him.

A Superior Court judge allowed the defendants' motion for summary judgment, reasoning that Chervin had no reasonable likelihood of producing evidence to support counts of malicious prosecution, abuse of process, or violation of G.L. c. 93A. Addressing the malicious prosecution claim against the insurer, the judge ruled that the insurer clearly had probable cause to sue Chervin based upon the opinions offered to the insurer by a lawyer who considered suing Chervin on the employee's behalf. The judge also ruled that, because the insurer filed the subrogation action to recover money, rather than for some ulterior purpose, there was no basis for a finding that it acted with malice.² On the element of probable cause, we disagree with the judge that, in the circumstances of this case, the insurer's receipt of communications from counsel established probable cause as matter of law. We nevertheless affirm the judgment for the insurer, concluding that the facts contained in the summary judgment record would not permit a finding that the insurer acted with malice.

The underlying facts. The facts that appear from the summary judgment record, viewed in a light most favorable to Chervin, the nonmoving party, see Wiedmann v. The Bradford Group, Inc., 444 Mass. 698, 708, 831 N.E.2d 304 (2005), are as follows. Chervin treated the employee in 1995 and 1996 relative to a seizure disorder. In July, 1996, over four months after Chervin had last seen him, the employee suffered a seizure while driving and became a quadriplegic as a result of an accident. After Travelers initially refused to pay the employee's claim, he brought it before the Massachusetts Department of Industrial Accidents (DIA). Throughout that case, which lasted approximately two and one-half years, the insurer asserted as a defense that the employee's injuries were the result of his own misconduct in failing to follow the instructions of Chervin and Dr. Howard Richter, the employee's primary care physician, to take the Dilantin and to refrain from consuming alcoholic beverages.³ In the DIA proceeding the employee was represented by Attorney Martin Schneider, and the insurer by Attorney Terrence Reilly. On April 22, 1999, Reilly reported to the insurer that the DIA case was tentatively settled, and that during the settlement negotiations, the possibility of a third party subrogation action against Chervin and Richter was discussed. In his report Reilly also stated:

"The only outstanding issue is how Travelers will handle any lien ... on the employee's potential third party malpractice claim against [the employee's] treating physicians. First, it should be noted that five attorneys who practice in the medical malpractice field have rejected the case. A sixth attorney is reviewing the case now. The statute of limitations runs in July.

"...

"I have suggested to ... Schneider that I will recommend that the insurer agree to divide any proceeds from the prospective litigation equally among [the employee], the attorney handling the case, and the insurer. This agreement would be conditioned on the employee agreeing that the insurer has a valid lien. I recommend this course of action because: a) I do not think that the third party claim is viable in the first place; b) it will be important that the insurer structure the third party suit in a way that will maximize the interest and cooperation of [the employee] (an economic incentive is most effective)[;] and c) while I do not think that the employee has a chance to succeed in a third party action, if he were to succeed, a settlement or judgment would be substantial enough in light of the potential damages that the insurer should recover much of its lien."

Settlement was finalized at the end of May, 1999, and included a lump sum payment of $775,000 to the employee as well as an agreement for division of the proceeds of the possible subrogation action equally between the insurer, the employee, and counsel. On or about June 16, 1999, Reilly reported that Schneider "has finally found a law office that is willing to prosecute the [malpractice] case. However, ... [the employee] has decided that he does not want to pursue [it]." On June 18, 1999, Travelers employee Teresa Pacheco was instructed to investigate the case for "possible subrogation," i.e., whether the insurer would file, in the employee's name, a subrogation medical malpractice action against Chervin. Pacheco's work began on June 24, 1999.⁴ Her investigation included review of the insurer's claim file⁵ and the employee's medical records, as well as conversations, limited in number and content, with Reilly, Schneider, and an Attorney Abrahams, with whom she had no previous contact nor information as to training, background, or experience.

When assigned to investigate, Pacheco was instructed to review Reilly's April 22, 1999, memo, and to contact him. She did both, and on June 30, 1999, telephoned Reilly for her only conversation with him concerning the case.⁶ Reilly reiterated that Schneider had "found someone to take [the employee's] med mal claim but [the employee] has elected not to pursue." Reilly further commented to Pacheco, in contrast to his April 22, 1999, memo, that Travelers "should really think about pursuing [the] claim ... [and that] he feels based on Dr. Richter's testimony at the hearing that Dr. Chervin had some responsibility to his patient taking into consideration the alcohol abuse." When Pacheco asked Reilly why it took six attorneys to review the claim before one decided to take it, and why the employee was not pursuing it, he referred her to Schneider.

The next day, July 1, 1999, Pacheco called and spoke with Schneider, who reported that (1) he had six attorneys look at the claim; (2) the first four rejected the claim because they concluded that a jury would not believe that the incident would not have occurred even if the doctors had intervened correctly; (3) two attorneys believed the claim viable, but one would not handle it because of the employee's ambivalence; (4) he, Schneider, "feels strong about [the] claim"; (5) there are certain protocols doctors must go through when faced with a patient who has an addiction; (6) he understood that the employee's cooperation would be necessary to go forward with the claim but "feels ... that he will be able to talk ... [the employee] into cooperating";⁷ and (7) he, Schneider, would cooperate in the pursuit of the claim. Schneider identified the willing attorney as Abrahams.⁸

On July 1, 1999, Pacheco also had her only telephone conversation with Abrahams. Pacheco did not know Abrahams or anything about her, except that she was the sixth attorney who had been asked by Schneider to evaluate the file and "take the claim." Abrahams was unknown to anyone else at Travelers and the insurer had no information as to Abrahams's experience, if any, in medical malpractice cases. In this conversation Abrahams reported that (1) she had had discussions on a preliminary basis with an expert (without identifying the expert's credentials); (2) certain protocols should have been taken, and were not ("detox," license revocation, and family involvement); (3) she had met with the employee, who told her that if his license had been taken away he would not have driven; (4) she was willing to take the claim with a forty percent fee and "up front" expenses; and (5) the insurer's chances for success were "slightly over fifty percent."

On July 2, 1999, Pacheco reported the results of her investigation to her supervisor, Maureen Bolger. Bolger recorded the following in the claim file: "Atty Linda Abr[ah]ams feels that there is potential relative to a medical malpractice claim. It is my understanding that the atty feels the doctor deviated from the standard of care relative to following protocol in view of employee's alcohol consumption while taking Dilantin, driving. Atty indicated proper protocol would have been family intervention relative to alcohol, notifying R[egistry of] M[otor] V[ehicles] of Dilantin so that license would be suspended."

Before speaking with Abrahams, Bolger conferred with her supervisor, Ted Moscala, and "[b]ased on the paids," they "agreed that we should go ahead and file suit."⁹ Later, on July 7, 1999, Bolger recorded that "[a]fter telephone conversations w/counsel Linda Abr[ah]ams and discussion" with Moscala, "we have opted to go forward w/the filing of the complaint against Dr. Richter and Dr. Chervin." It was further agreed that Abrahams would prepare the complaint, and that Sullivan would sign and file it, but delay service until review by a medical expert and receipt of an opinion supporting the claim.

On July 8, 1999, Sullivan, acting as the insurer's lawyer, signed a complaint, drafted by Abrahams in the...