Hudgens v. CNA/Continental Cas. Co., 68,483

• Decision Date: 22 January 1993
• Docket Number: No. 68,483,68,483
• Citation: 845 P.2d 694,252 Kan. 478
• Parties: Mary Kay HUDGENS, Appellee, v. CNA/CONTINENTAL CASUALTY COMPANY, Appellant.
• Court: Kansas Supreme Court

Page 694

845 P.2d 694

252 Kan. 478

Mary Kay HUDGENS, Appellee, v. CNA/CONTINENTAL CASUALTY COMPANY, Appellant.

No. 68,483.

Supreme Court of Kansas.

Jan. 22, 1993.

Syllabus by the Court

1. When a case is submitted to the trial court on an agreed stipulation of facts and documentary evidence, this court has the same opportunity to examine and consider the evidence as did the trial court and to determine de novo what the facts establish.

2. Pursuant to K.S.A. 40-3410, when the insurer of a health care provider has agreed to settle its liability on a claim against an insured and the claimant's demand is in excess of such settlement, the claimant and the Insurance Commissioner may negotiate an amount to be paid by the Health Care Stabilization Fund. If the claimant and the Insurance Commissioner agree upon an amount, the claimant must file a petition with the district court requesting approval of the agreement. The district court must set the matter for hearing. At such hearing the district court shall approve the proposed settlement if the court finds it valid, just, and equitable.

3. When there is a conflict between a statute dealing generally with a subject and another statute dealing specifically with a certain phase of it, the specific statute controls unless it appears the legislature intended to make the general act controlling.

4. When the Health Care Stabilization Fund agrees to pay an amount in excess of the liability coverage provided by the insurer of a health care provider, the settlement agreement between the claimant and the insurer of the health care provider is merely a preliminary agreement until the settlement is approved by the district court in accordance with K.S.A. 40-3410. Thus, the requirement of K.S.A.1991 Supp. 40-2,126, that insurance companies pay interest at the rate of 18% per annum on any payment agreed to between the claimant and the insurer not paid within 30 days of their agreement, does not become enforceable when the Fund is involved until 30 days after the district court approves the settlement agreement.

5. In order for an appellee to challenge the district court's decision, the appellee must cross-appeal.

Greer Gsell, of Hershberger, Patterson, Jones & Roth, Wichita, argued the cause and was on the briefs, for appellant.

M. William Syrios, of Post, Syrios & Kinch, Wichita, argued the cause and was on the brief, for appellee.

Wayne T. Stratton, of Goodell, Stratton, Edmonds & Palmer, Topeka, was on the brief, for amicus curiae The Kansas Health Care Stabilization Fund.

HERD, Justice:

This is an action against an insurance company for interest arising out of the delayed payment of a settlement agreement. Pursuant to K.S.A.1991 Supp. 40-2,126, the district court ordered CNA/Continental Casualty Company (CNA) to pay Mary Kay Hudgens $7,957.59 in interest. We reverse.

On February 8, 1990, Hudgens brought a medical malpractice suit against Stephanie F. Nellis, M.D., Joseph R. Miranda, M.D., and The Wichita Clinic, P.A., claiming damages for failing to timely diagnose and treat Hudgens' breast cancer. The doctors' primary professional liability insurance is provided by CNA, which hired Amy Lemley to represent the defendants in that matter.

In September 1991, Hudgens' attorney, Bill Syrios, and Jerry Remick, a claims specialist for CNA, entered into settlement discussions involving amounts in excess of $400,000. CNA's maximum coverage for the suit was $400,000, $200,000 for each doctor. Therefore, any settlement in excess of $400,000 would require a contribution from the Health Care Stabilization Fund (Fund). On September 24, 1991, CNA tendered its $400,000 combined policy limits to the Fund and requested the Fund continue handling the suit. Lemley continued to represent the doctors on behalf of the Fund. On September 26, 1991, Remick and Syrios agreed to a total settlement of $499,940 after the Fund advised Remick it would contribute $99,940 to the proposed settlement. The Fund had no direct contact with Syrios during the settlement negotiations and Lemley was not involved in the discussions regarding the settlement amount.

On October 1, 1991, CNA issued and sent a check, in the amount of $106,614, to an annuity company as provided for by the settlement agreement. CNA also sent a check in the amount of $293,386 to the Fund, thereby expending its $400,000 policy limit. On October 9, 1991, Lemley notified Syrios that before any claim could be paid by the Fund the district court had to hold a hearing and approve the settlement, pursuant to K.S.A. 40-3410(c). On October 25, 1991, the district court conducted the settlement hearing and approved the settlement agreement, approved attorney fees pursuant to K.S.A. 7-121b, and dismissed the case with prejudice. On the same day, the parties executed the settlement agreement, and Hudgens also executed a release of all claims.

On November 12, 1991, the Fund received a certified copy of the journal entry approving the settlement agreement. On November 15, 1991, the Fund issued its check for $393,326 ($293,396 + 99,940 = $393,326) payable to Hudgens and her attorney. On November 18, 1991, the Fund mailed this check to Lemley. On the following day, Lemley presented the check to Hudgens and her attorney, who released CNA at that time. Commencing in November 1991, Hudgens began receiving $600 per month as provided for in paragraph 2 of the settlement agreement.

On November 20, 1991, Syrios wrote to Lemley demanding payment of interest at the rate of 18% per annum because CNA's settlement payment was not made within 30 days of reaching an agreement between Hudgens and CNA. Lemley denied any interest was due because the settlement agreed to on September 26, 1992, was a proposed settlement until the trial court approved it on October 25, 1991, and Hudgens had received payment of the settlement within 30 days of that date. On January 24, 1992, Hudgens filed her petition in this matter, claiming CNA owed her interest at the rate of 18% per annum on the unpaid settlement from the date of the agreement, September 26, 1991, until payment on November 19, 1991. Hudgens also prayed for attorney fees and costs.

The parties waived trial or hearing in this case and submitted the dispute to the trial court based upon stipulated facts. Included in the stipulation is the following statement: "Neither the Fund, nor the Kansas Department of Insurance have written rules or regulations setting forth specific procedures which govern how health care provider claim settlements involving both insurance company and Fund money are to be handled." The district court judge issued a letter opinion stating in part:

"I find that CNA acted as the agent for the Fund in settling the claim and then CNA chose the Fund as its agent for payment of a portion of its obligation under the settlement. Therefore, CNA must bear the results of the failure of the Fund to pay the claimant until November 19, 1991. Interest is awarded to Ms. Hudgens at the rate of 18% per annum from the date of the agreement of September 26, 1991, to November 19, 1991, on $293,386.00."

Thus, CNA was ordered to pay $7,957.59.

Because all the evidence in this matter was submitted to the trial court on an agreed stipulation of facts and documentary evidence, this court has the same opportunity to examine and consider the evidence as did the trial court and to determine de novo what the facts establish. Kneller v. Federal Land Bank of Wichita, 247 Kan. 399, 400, 799 P.2d 485 (1990).

CNA first claims the 30-day payment provision of K.S.A.1991 Supp. 40-2,126 does not start to run until the insurance settlement is approved by the district court pursuant to K.S.A. 40-3410 when the Health Care Stabilization Fund is involved.

K.S.A.1991 Supp. 40-2,126 provides:

"Except as otherwise provided by K.S.A. 40-447, 40-3110 and 44-512a, and amendments thereto, each insurance company ... which fails or refuses to pay any amount due under any contract of insurance within the time proscribed herein shall pay interest on the amount due. If payment is to be made to the claimant and the same is not paid within 30 calendar days after the amount of the payment is agreed to between the claimant and the insurer, interest at the rate of 18% per annum shall be payable from the date of such agreement."

In 1976, the legislature created the Health Care Stabilization Fund "[f]or the purpose of paying damages for personal injury or death arising out of the rendering of or the failure to render professional services by a health care provider" who has qualified for coverage. K.S.A.1991 Supp. 40-3403(a). One of the...