Med. Protective Co. v. Wiles
| Decision Date | 21 October 2011 |
| Docket Number | NO. 2010-CA-000262-MR,2010-CA-000262-MR |
| Parties | THE MEDICAL PROTECTIVE COMPANY APPELLANT v. AURELIA WILES AND DONALD WILES APPELLEES |
| Court | Kentucky Court of Appeals |
TO BE PUBLISHED
APPEAL FROM KENTON CIRCUIT COURT
The underlying medical malpractice suit arose on July 3, 2000, when Aurelia Wiles (Mrs. Wiles) suffered an injury to her inner ear during a routine procedure performed by her primary care physician, Dr. Del Burchell, at his physicians' group office, Internal Medicine Associates of Northern Kentucky (IMANK). Both Dr. Burchell and IMANK are insured by Medical Protective. Dr. Burchell was performing a lavage procedure to remove wax from Mrs. Wiles's ear when an inadequately secured needle from a pressurized syringe shot into her ear. As a result of this injury, Mrs. Wiles claimed to have suffered permanent injuries to her hearing and balance.
Following her injury, Mrs. Wiles retained attorney Terrence Moore to represent her. In mid-August 2000, Moore sent a letter to Dr. Burchell in connection with Mrs. Wiles's injury and asked that his insurance representative contact him. Thereafter, Moore sent several letters to Gary Duechle, the Branch Manager for Medical Protective's Louisville office, regarding Mrs. Wiles's medical and financial conditions. By letter dated January 12, 2001, Moore demanded the policy limits of $2 million to resolve the claim. He attached several medical reports and test results to support this demand.
Duechle responded by letter dated February 2, 2001, in which he stated that the damages resulting from the injury were complex and that he was not yet in a position to make a final conclusion on the permanent result. Duechle indicated that he was having the matter reviewed by a neurologist and might obtain an independent medical review. He also addressed questions concerning Mrs. Wiles's earnings from her business. By letter dated February 27, 2001, Moore stated that he had not yet received copies of the policies and proof that the syringe had been retained, as he had requested. He stated that he was preparing a lawsuit that he would be filing by the end of March, in which he would be demanding compensatory and punitive damages. In response to that letter, Duechle suggested that future communications be made through attorney Mark Arnzen, who had been retained to represent Dr. Burchell. Correspondence continued between Moore and Arnzen regarding Mrs. Wiles's case.
On May 14, 2001, Mrs. Wiles and her husband, Donald Wiles, (the Wileses) filed suit against Dr. Burchell, IMANK, and Medical Protective seeking damages for negligence as well as punitive damages for an allegation of bad faith on the part of Medical Protective. Mr. Wiles also sought damages for loss of consortium. The malpractice and bad faith claims were bifurcated, with the malpractice claims to be decided first. Medical Protective made its first offer of settlement in October 2002 in the amount of $500,000.00; the Wileses rejected this offer and never backed down from their original demand of $2 million. Although the matter had been set for trial, the parties eventually agreed to binding arbitration, which was tried before a three-judge panel in April 2003. Prior to arbitration, the parties agreed to a high-low range of $1.1 million to $2 million. The arbitration panel ultimately awarded the Wileses $1.65 million, which Medical Protective paid on June 10, 2003.
Once the medical malpractice claims were settled, the matter returned to the trial court's active docket for resolution of the bad faith claim. The parties entered into extensive discovery, and the record is replete with disputes concerning discovery, including numerous motions in limine regarding the designation of witnesses as experts and to what witnesses would testify in general. In an amended complaint, the Wileses requested statutory prejudgment interest and attorney fees on the underlying $1.65 million award. The parties also filed motions for summary judgment or partial summary judgment; the Wileses moved for partial summaryjudgment on the issue of statutory interest, while Medical Protective's motion addressed the sufficiency of evidence to support a claim for punitive damages.
The trial of this matter was held over a six-day period from May 12 through May 20, 2009. At the conclusion of the trial, the jury found that Medical Protective did not lack a reasonable basis to deny or delay payment of the plaintiffs' claims, but that it failed to acknowledge and act reasonably promptly upon communications about their claims or to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies. Specifically regarding the plaintiffs' claims, the jury found that Medical Protective refused to pay their claims without conducting a reasonable investigation; did not make a good faith attempt to effectuate a prompt, fair, and equitable settlement once liability had become reasonably clear; and did not promptly provide a reasonable explanation for the denial of the claims or for the offer of a compromise settlement. Based on these findings, the jury awarded the Wileses $350,000.00 in compensatory damages for emotional pain and suffering, stress, worry, and inconvenience. The jury then awarded $2.2 million in punitive damages.
On May 29, 2009, the trial court granted judgment in accordance with the jury's verdict, and awarded costs as well as 12% post-judgment interest. The court ordered the parties to brief the issues concerning prejudgment interest and attorney fees.
In their motion addressing the above issues, the Wileses contended that they were entitled to 12% statutory interest pursuant to KRS 304.12-235(2)from February 11, 2001, (thirty days from the date Moore provided the documentation to support Mrs. Wiles's claims) through June 10, 2003, (the date the arbitration award was paid) on the $1.65 million awarded in the malpractice action. That amount equaled $501,416.28. The Wileses also requested an award of the attorney fees pursuant to KRS 304.12-235(3) and costs related to the underlying claim. Attorney fees totaled $550,000.00, or a one-third contingency fee, and costs totaled $33,429.02. Finally, the Wileses requested 8% prejudgment interest pursuant to KRS 360.010 on the amounts of interest and attorney fees reflected above, which they claim became liquidated upon the payment of the $1.65 million award.
In response, Medical Protective argued that the Wileses lacked standing to pursue their claims for 12% statutory interest and attorney fees because the provisions permitting those items of recovery were limited to first-party claims. Furthermore, the jury specifically found that Medical Protective did not lack a reasonable basis to deny or delay payment of Mrs. Wiles's claim, and the attorney fees and interest were unliquidated.
By order entered August 17, 2009, the trial court determined that KRS 304.12-235(2), addressing statutory interest, applied to third-party claimants and awarded the Wileses 12% statutory interest on the $1.65 million arbitration award. The court found that the period during which this interest was due began to run thirty days after November 27, 2002, the date that Medical Protective's expert testified by deposition that Mrs. Wiles had trauma-induced Meniere's syndrome.The trial court declined to assess 8% interest on the interest awarded, determining that the amount was not settled and, thus, was unliquidated. The court also determined that the Wileses were entitled to attorney fees pursuant to KRS 304.12-235(3) for the same reason they were entitled to statutory interest, with the appropriate amount to be determined following a later hearing. Finally, the court awarded 12% post-judgment interest to run from the date of the entry of the judgment until paid, as well as taxable costs.
The Wileses moved to reconsider the above order, arguing that the starting date for statutory interest was much earlier than November 27, 2002. Rather, the January 12, 2001, letter with the demand for policy limits should represent the starting date for the thirty-day period. Regarding attorney fees, the Wileses stated those should be the attorney fees paid in the underlying claim. They also argued that the amount of interest and attorney fees became fixed, and therefore liquidated, on June 10, 2003. They argued that a defense to the claim would not make the amounts unliquidated. By order entered September 9, 2009, the trial court clarified that the claim for attorney fees was for the fee received in the underlying case.
In a supplemental response regarding attorney fees filed September 11, 2009, Medical Protective continued to argue that the statute did not apply to third-party claims and that the amount was unreasonable and...
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