Insurance Co. of North America v. Medical Protective Co., 83-2082
| Decision Date | 25 July 1985 |
| Docket Number | No. 83-2082,83-2082 |
| Citation | 768 F.2d 315 |
| Parties | INSURANCE COMPANY OF NORTH AMERICA, Plaintiff-Appellee, v. The MEDICAL PROTECTIVE COMPANY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Benjamin F. Stapleton, Denver, Colo. (John H. Evans, Owen C. Rouse and Marion A. Brewer, Denver, Colo., with him on the briefs) of Ireland, Stapleton, Pryor & Pascoe, P.C., Denver, Colo., for defendant-appellant.
Frederick K. Starrett, Topeka, Kan. (Eugene B. Ralston, Topeka, Kan., with him on the brief) of Ralston & Frieden, Topeka, Kan., for plaintiff-appellee.
Before BARRETT, BREITENSTEIN and TIMBERS *, Circuit Judges.
Medical Protective Company (Medical Protective) appeals from a judgment entered August 5, 1983 in the District of Kansas, Dale E. Saffels, District Judge, in favor of Insurance Company of North America (INA), holding that Medical Protective, as the primary insurer of one Dr. Peter Torbey, had acted negligently and in bad faith in failing to settle within its policy limits a medical malpractice claim which had been asserted against Dr. Torbey. As a result, the court awarded INA, the excess insurer of Dr. Torbey, $323,121.90, the sum it was required to pay in order to satisfy the judgment for damages against Dr. Torbey in the malpractice action. The court also denied Medical Protective's request that INA be required to contribute a pro rata share of Medical Protective's costs in defending Dr. Torbey.
For the reasons stated below, we affirm.
We shall summarize only those facts believed necessary to an understanding of our rulings on the issues raised on appeal.
In April 1969, Lois Laptad, a married, thirty-seven year old mother of two, entered the Wesley Medical Center in Wichita, Kansas, for diagnostic tests to be performed by Dr. Peter Torbey, a radiologist. Dr. E.J. Fieldman was to administer a general anesthetic. On the day of the procedure, Dr. Fieldman supervised William Mohan, a Certified Registered Nurse and Anesthetist, and Ms. Reese, a student anesthetist, in the administration of the anesthetic Innovar, manufactured by McNeil Laboratories. Once the anesthetic was administered, Dr. Fieldman left the room. While Dr. Torbey was out of the room preparing for the radiological procedure he was to perform, Mohan noticed that Laptad had fallen into an unusually deep state of anesthesia. He left the room to find Dr. Fieldman. Laptad was left alone with the student anesthetist. Dr. Torbey reentered the room and began the radiological procedure. Subsequently he noticed that Laptad had no pulse. Both Dr. Torbey and the student anesthetist became alarmed. The student attempted various emergency measures in an effort to revive Laptad. Dr. Torbey did nothing. Even though Dr. Torbey was the only physician in the room at the time, he was of the opinion that, as a radiologist, he should not involve himself in what appeared to be an anesthesiological problem. Laptad sustained severe brain damage as a result of these actions and inactions. She remained in a semicomatose state in a nursing home for the next seven years--until she died.
The administrator of Laptad's estate commenced a negligence action in the district court against Doctor Fieldman; his assistants, Doctors Glenn Martin and M.M. Tinterow; Doctor Torbey; William Mohan; Laptad's referring general physician, Doctor J.T. Stewart; Wesley Medical Center; and McNeil Laboratories. Prior to trial, the Laptad estate settled with Drs. Fieldman, Martin, and Tinterow for $300,000, and with the Wesley Medical Center for $75,000. The case against Mohan and Dr. Stewart was dismissed. The remaining defendants at the time of trial were Dr. Torbey and McNeil Laboratories.
The first trial in November 1974 ended with the jury unable to reach a verdict. A second trial in July 1975 ended with a verdict in favor of the Laptad estate against Dr. Torbey. McNeil was found not liable. The jury awarded the Laptad estate $750,000, which was reduced by the $375,000 settlement reached with the other defendants. The judgment entered on the jury verdict was affirmed by our Court. Lupton v. Torbey, 548 F.2d 316 (10th Cir.1977). Medical Protective, as the primary insurer of Dr. Torbey, had a policy limit of $100,000. INA, as the excess insurer of Dr. Torbey, had a policy limit of $1,000,000. As a result of the judgment, INA was required to pay $323,121.90, representing the balance remaining due on the judgment after exhaustion of the Medical Protective policy.
INA subsequently commenced the instant action in the district court, claiming that Medical Protective acted negligently and in bad faith in pursuing settlement negotiations in the action between the Laptad estate and Dr. Torbey, and in failing to settle that claim within the limits of the Medical Protective policy. The court found the following facts with regard to the settlement negotiations in the Laptad action, all events being in 1971 unless otherwise stated.
Medical Protective was obligated to defend Dr. Torbey. For that purpose it retained Emmet Blaes, Esq. of Wichita, Kansas. Nearly all of Medical Protective's contacts with Dr. Torbey concerning the Laptad action were through Blaes. Counsel for the Laptad estate, Gerald Michaud, Esq., stated in December 1970 at a pre-trial conference with counsel for all the defendants that Dr. Torbey would be sued for negligence as the "captain of the ship". Dr. Torbey had been the only doctor present in the room when the crisis occurred but had done nothing except stand by while Laptad suffered irreversible brain damage.
On January 4, Michaud, an experienced attorney in medical malpractice cases, offered to settle with all defendants for $500,000. Blaes and counsel for the other defendants considered the offer to be a reasonable one. On January 11, Blaes informed Medical Protective that the case against Dr. Torbey was strong enough to go to a jury and that, on the basis of sympathy alone, a jury might well return a verdict in favor of the Laptad estate. Blaes, however, recommended that Dr. Torbey's contribution to any joint settlement fund be minimal. On February 1, Blaes requested authorization to offer $25,000 as Dr. Torbey's contribution to such a fund. On February 3, Medical Protective agreed to this request.
On January 29, at a meeting of all defense counsel, William Tinker, Esq.--an attorney retained by INA to defend its insured, Dr. Fieldman--stated that experts consulted by him were critical of everyone involved, and especially Dr. Torbey because of his inaction at the critical time.
In February, Medical Protective indicated that it would rather take its chances on winning a jury verdict than offer a very high figure to the Laptad estate to settle the case. Medical Protective told Blaes that they would be willing to increase the $25,000 settlement offer only slowly and reluctantly.
On February 12, Tinker offered Michaud $325,000 to settle the case on behalf of all defendants. Dr. Torbey was never informed of the offer. Michaud rejected the offer. On February 15, defense counsel made an offer of $400,000. Michaud rejected this offer. This latest offer would have included a $50,000 contribution for Drs. Torbey and Stewart, the latter still being a co-defendant. Dr. Torbey was never informed of this offer.
On February 17, Wesley Medical Center settled with the Laptad estate for $75,000. During the negotiations of January and February, INA received personal reports from Blaes concerning some aspects of the negotiations, as well as some of the correspondence between Blaes and Medical Protective.
In April, Dr. Fieldman settled with the Laptad estate for $300,000. During discovery proceedings, Tinker represented to Michaud and the district court that this was the total amount of Dr. Fieldman's insurance coverage. Dr. Fieldman, in fact, actually was insured to the extent of $1,100,000.
On June 9, Michaud offered to settle with Drs. Torbey and Stewart for $75,000--$50,000 of which would be Dr. Torbey's contribution. Medical Protective refused to negotiate on the basis of this offer. The offer was never communicated to Dr. Torbey. On July 12, without authority from Medical Protective, Blaes offered Michaud $37,500. Medical Protective eventually did authorize this amount in November. It never authorized a higher amount.
The court found that, under all the circumstances, Michaud's offer to settle with Drs. Torbey and Stewart for $75,000 was reasonable. Blaes himself testified that he would have been comfortable settling the case for $50,000-$60,000. In August 1972, Michaud received a report highly critical of Dr. Torbey's conduct and withdrew his $75,000 offer. In September 1972, Blaes informed Medical Protective of this report and of his belief that the Laptad estate's damages might be greater than previously had been expected. Medical Protective did not re-evaluate its position. In September 1974, INA informed Medical Protective that it expected Medical Protective to settle the case for an amount within its $100,000 policy limit. On September 23, 1974, Blaes suggested to Medical Protective that it raise its $37,500 offer by $5,000. Medical Protective rejected this suggestion. It stated that it would rather pay Blaes to try the case than pay the Laptad estate any amount. On October 11, 1974, Michaud told Blaes that he would be willing to accept something less than $75,000 to settle the case against Dr. Torbey--the case against Dr. Stewart having been dismissed--but that this offer, and all prospects for settlement, would terminate on October 15 when Michaud made his opening statement to the jury. Medical Protective never responded to this offer.
The court found that Dr. Torbey was not informed or advised of any settlement offers, demands or negotiations prior to October 17, 1974. On that date he was informed that the Laptad estate had offered to settle for around $75,000. He was not told that Medical Protective had...
To continue reading
Request your trial
-
American Centennial Ins. Co. v. Canal Ins. Co.
...noting trend of allowing excess insurer to sue primary carrier under doctrine of equitable subrogation); Insurance Co. of N. Am. v. Medical Protective Co., 768 F.2d 315 (10th Cir.1985) (applying Kansas law); Centennial Ins. Co. v. Liberty Mut. Ins. Co., 62 Ohio St.2d 221, 404 N.E.2d 759 (19......
-
Pacific Employers Ins. v. PB Hoidale Co.
...P.2d 502 (quoting Brown v. Guarantee Ins. Co., 155 Cal.App.2d 679, 689, 319 P.2d 69 (1957)). See also Insurance Co. of N. Am. v. Medical Protective Co., 768 F.2d 315, 321 (10th Cir.1985) (listing factors). "The value of an unlitigated claim must be determined on its own apparent merits, or ......
-
USF&G v. Federated Rural Elec. Ins. Corp.
...Co., 3 Kan. App.2d 245, 593 P.2d 14 (1979), has been expressly disapproved by two federal courts. ¶ 18 In Insurance Co. of North America v. Medical Protective Co., 768 F.2d 315 (1985), the Court of Appeals for the Tenth Circuit agreed with the federal district court's conclusion that the Ka......
-
Bergeson v. Dilworth
...insured." Smith v. Blackwell, 14 Kan. App.2d 158, 162, 791 P.2d 1343 (1989) (citing cases); see also Insurance Co. of N. Am. v. Medical Protective Co., 768 F.2d 315, 321 (10th Cir.1985) (discussing factors relevant to Kansas action for bad faith in settling). A garnishment action is the pro......
-
Bad faith-bad news
...See, e.g., Bohemia, Inc. v. Home Ins. Co., 725 F.2d 506 (9th Cir. 1984) (Oregon law); Insurance Co. of N. Am. v. Medical Protective Co., 768 F.2d 315 (10th Cir. 1985) (Kansas law). Moreover, it is not enough that the liability carrier timely undertakes to investigate and evaluate the claims......
-
Issues for excess insurer counsel in bad faith and excess liability cases.
...OF INSURANCE COMPANIES AND INSUREDS [sections] 5.03 n.23 (2d ed. 1988). (79.)See Ins. Co. of N. Am. v. Medical Protective Co., 768 F.2d 315, 319-10 (10th Cir. 1985) (applying Kansas (80.)360 So.2d 464 (Fla.App 1978), rev'd, 386 So.2d 783 (Fla. 1980). (81.)See WINDT, supra note 78, at [secti......
-
Avoiding "bad faith" in settlement: what are the developments?
...628 (10th Cir. 1942) (applying Oklahoma law); Rova Farms, 323 A.2d at 501. (21.) See, e.g., Ins. Co. of N. Am. v. Medical Protective Co., 768 F.2d 315, 321-22 (10th Cir. 1985) (applying Kansas law) Southern Gen. Ins. Co. v. Holt, 416 S.E.2d 274, 276 (Ga. (22.) Young v. Am. Casualty Casualty......