Fidelity and Casualty Company of New York v. Riley

• Decision Date: 04 August 1967
• Docket Number: No. 23857.,23857.
• Citation: 380 F.2d 153
• Parties: The FIDELITY AND CASUALTY COMPANY OF NEW YORK, Appellant, v. Dr. Wells RILEY and Mrs. Mildred Lillibridge, Appellee. Dr. Wells RILEY, Appellant, v. The FIDELITY AND CASUALTY COMPANY OF NEW YORK, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

380 F.2d 153 (1967)

The FIDELITY AND CASUALTY COMPANY OF NEW YORK, Appellant, v. Dr. Wells RILEY and Mrs. Mildred Lillibridge, Appellee.

Dr. Wells RILEY, Appellant, v. The FIDELITY AND CASUALTY COMPANY OF NEW YORK, Appellee.

No. 23857.

United States Court of Appeals Fifth Circuit.

July 6, 1967.

Rehearing Denied August 4, 1967.

Hamilton Lokey, Atlanta, Ga., Gerald F. Handley, R. Lamar Brannon, Atlanta, Ga., for appellant, Fidelity & Casualty Co. of New York.

Sam F. Lowe, Jr., Smith, Cohen, Ringel, Kohler, Martin & Lowe, Atlanta, Ga., for Dr. Riley.

Mildred Lillibridge, pro se.

Before BROWN and BELL, Circuit Judges, and BREWSTER, District Judge.

GRIFFIN B. BELL, Circuit Judge:

This appeal is from a declaratory judgment entered for Dr. Riley, the defendant in a suit brought by the insurance company to settle coverage under a malpractice endorsement to a public liability insurance policy. Subsequent to the filing of the declaratory judgment action, Dr. Riley prevailed in the three suits which had been brought against him by a former patient and her husband. This obviated all questions except his claim for attorneys fees and costs incurred in defending the three suits and in defending the declaratory judgment action.

Prior to filing the declaratory judgment action, the insurance company had undertaken the defense of the first suit against Dr. Riley. It was filed by the former patient. Some months later the insurance company withdrew from the defense on the ground that no coverage was afforded under the policy. The defense was taken over by Dr. Riley's personal counsel who had been in the case from the beginning to protect the doctor's interest since the suit was for an amount above the limits of the policy. The two additional suits were filed after the declaratory judgment action had been filed; another by the patient, and one by her husband. Dr. Riley's personal counsel also defended these.

The court awarded the attorneys fees and costs incurred in the defense during the period after the insurance company withdrew its defense in the first suit, and in the defense of the other two suits. The insurance company contends that it owed the doctor nothing and this forms the issue on its appeal. The court refused to award attorneys fees and costs to Dr. Riley for his personal representation in the first suit during the period prior to the time the insurance company withdrew, and also refused the prayer for fees and costs incurred in defending the declaratory judgment action. This refusal forms the subject matter of the cross-appeal taken by Dr. Riley. On the appeal, we affirm as to the award on the first suit, and reverse as to the other two suits. We affirm on the cross-appeal.

I.

The controversy centers around coverage and estoppel. The malpractice endorsement was effective on and after December 22, 1958. The patient sued the doctor in January 1960 for allegedly having failed to diagnose her tubercular condition while she was under his care beginning in October 1957. The suit did not set out a treatment termination date but merely alleged that in March 1959 another doctor discovered her tubercular condition. The suit on its face thus indicated that the insurance company owed the doctor at least a defense.

Immediately after service of the first suit, Dr. Riley's personal counsel contacted the Jonesboro, Georgia agent of the insurance company, advised him of the suit, and that the date of the last treatment of the patient by Dr. Riley was the very date that the policy became effective, December 22, 1958. The insurance agent contacted the company's adjuster in Atlanta regarding the suit and advised him that the doctor had last treated the patient on December 22, 1958. There is some evidence that he was told that the treatment on that day was for pleurisy although the testimony could have referred to prior treatment for pleurisy which was the fact. The December 22 treatment was simply to remove sutures following an earlier breast operation which had been performed on the patient in Atlanta by another doctor. There was no treatment whatever for pleurisy. The patient telephoned the doctor a few days after December 22 to learn that a tumor which had been removed in the operation was not malignant. There was no other contact thereafter between the patient and the doctor. The doctor had last given diagnostic treatment to the patient in November 1958 when the tumor was discovered and she was referred to the Atlanta surgeon. With these facts at hand, the insurance company accepted coverage, sought no reservation of rights, and assumed the defense of the suit. Dr. Riley insisted on a letter from the insurance company that it had accepted coverage and such a letter was written on January 25, 1960.

Dr. Riley then employed personal counsel, at his own expense, to assist insurance counsel in the defense of the suit because the damages claimed exceeded the policy limits. There was no discussion of coverage between his lawyer and the insurance company's lawyers and matters went along normally until August 23, 1960 when the deposition of the patient was taken. Her testimony made it crystal clear that her claim against Dr. Riley was based upon his alleged negligence between October 1957 and November 1958, a period outside the coverage of the policy. The insurance company notified Dr. Riley by letter dated August 31, 1960 that there was no coverage under the policy, and that it was withdrawing from further participation in the suit.

Dr. Riley immediately demanded that the company resume the defense and pay any judgment that might be rendered against him up to the limits of the policy. The company refused and its counsel withdrew from the suit.

The suit for declaratory judgment against Dr. Riley was filed on November 8, 1960. As stated, the patient's first suit was then pending. Thereafter the patient's husband sued Dr. Riley for loss of services and consortium and for medical expenses. The insurance company offered to defend the suit under a reservation of rights but its offer was declined. The first suit filed by the patient having been dismissed in the meantime for lack of diversity jurisdiction, she then filed another suit. The insurance company also offered to defend this suit under a reservation of rights but the offer was likewise declined. This suit was dismissed as being barred by the statute of limitations and the husband's suit was dismissed for want of prosecution. At this point, any question of responsibility for a judgment to the patient or her husband was eliminated from the declaratory judgment case. Dr. Riley amended his answer to assert a counterclaim wherein he sought to recover all attorneys fees and expenses incurred by him in connection with the three malpractice suits and the declaratory judgment action. The District Court then entered its judgment as heretofore stated.

II.

We will first dispose of the crossappeal. The insurance company withdrew from the defense of the first suit on ...