Medicus Ins. Co. v. Todd
| Decision Date | 10 May 2013 |
| Docket Number | No. 05–11–01040–CV.,05–11–01040–CV. |
| Court | Texas Court of Appeals |
| Parties | MEDICUS INSURANCE COMPANY, Appellant v. Frederick TODD, II, M.D. d/b/a Arlington Neurological & Spine Association, Appellee. |
OPINION TEXT STARTS HERE
Brian Scott Martin, Thompson Coe Cousins & Irons, LLP, Jamie R. Carsey, Kevin Frank Risley, Houston, TX, for Appellant.
Michael Todd, Michael, Michael J. Todd, P.C. Law Office, Dallas, TX, Michael Scott Thomas, Houston, TX, for Appellee.
Before Justices BRIDGES, FITZGERALD and MYERS.
Medicus Insurance Company appeals the trial court's judgment that Medicus take nothing on its claim for declaratory judgment against Frederick Todd, II, M.D. d/b/a Arlington Neurological & Spine Association. Medicus brings three issues 1 contending the trial court erred by (a) failing to submit Medicus's requested jury questions and instructions, and (b) by refusing to admit certain documents into evidence and then refusing to grant Medicus's motion for mistrial when those documents were viewed by the jurors. We affirm the trial court's judgment.
Medicus provides medical malpractice insurance for physicians and health care practitioners. The company began selling insurance in September 2006. Its business plan is to keep its costs low by offering insurance at low premiums only to physicians with few claims, generally fewer than five claims.
Dr. Todd handled his malpractice insurance through his insurance broker, Larry Zimmer. In 2006, Dr. Todd had malpractice insurance with another company, and Zimmer suggested that Dr. Todd apply to Medicus, which had better coverage and lower premiums. When Dr. Todd applied for insurance in October 2006, Medicus did not ask him to fill out its nineteen-page application. Instead, it permitted him to submit only its two-page application and the Texas Standardized Credentialing Application, a form that physicians use to receive credentials to practice in a particular hospital. Dr. Todd sent Medicus a credentialing application he had signed on May 4, 2005. The credentialing application asked if Dr. Todd had “ever been the subject of an investigation by any ... licensing authority,” and he checked the “No” box. In fact, Dr. Todd had been twice investigated by the Texas Medical Board for having three or more medical malpractice claims in a five-year period. The credentialing application also asked if he had “ever had any malpractice actions within the past 5 years (pending, settled, arbitrated, mediated or litigated[) ],” and appellant checked the “Yes” box and attached a description of four lawsuits filed against him between May 2000 and when he signed the application in May 2005.2 Dr. Todd omitted one lawsuit from the list of claims filed between May 2000 and May 2005. Dr. Todd also failed to disclose another lawsuit filed between his signing the credentialing application and his applying to Medicus.
The underwriter for Medicus reviewing Dr. Todd's application recommended denying coverage “due to severe claims history.” However, the chief underwriter and Medicus's president rejected the recommendation, and Medicus issued a one-year policy to Dr. Todd effective November 16, 2006.
In February 2007, Medicus sent Zimmer its official nineteen-page insurance application, prefilled with the information Medicus had about Dr. Todd. In the claims-history section, the application did not limitits information to the preceding five years but asked, “Has any claim or suit for alleged malpractice ever been brought against you, or are you aware of circumstances that might reasonably lead to such a claim or suit?” The application was prefilled by Medicus listing five claims consisting of the four claims included on the credentialing application and a fifth claim for someone Dr. Todd testified was not a patient of his and who had not filed a claim against him. The application did not list the additional eight lawsuits that had been filed against Dr. Todd or the three letters from lawyers threatening suit, and neither Dr. Todd nor Zimmer added them to the application. However, Dr. Todd signed the application, declaring the information was true and correct.
When the policy came up for renewal in November 2007, Medicus sent Zimmer a prefilled application for Dr. Todd stating that the application “needs to be reviewed, modified if need be, and signed, dated and completed on pages 18 and 19 [].” Like the February application, this application requested Dr. Todd's complete claims history and was prefilled with the same five claims included on the February application. Again, neither Zimmer nor Dr. Todd modified the claims list either to remove the claim that was not against Dr. Todd or to include the eight undisclosed lawsuits filed against Dr. Todd and the three letters threatening suit. Medicus renewed Dr. Todd's insurance for another year.
Dr. Todd testified he usually signed applications without reading them because he relied on Zimmer to make sure the applications contained the correct information. Zimmer testified he had presumed that Medicus's applications requested the same five-year claims history as the credentialing application. Zimmer stated he did not notice that Medicus's applications requested Dr. Todd's complete claims history.
After the 2007 renewal, Dr. Todd was named as a defendant in two more malpractice suits, and Medicus defended him and paid the policy limits to settle one of the suits. In November 2008, Medicus again renewed Dr. Todd's insurance but charged a higher premium. Medicus then received a copy of a letter from the plaintiff's attorney in one of the malpractice suits against Dr. Todd addressed to the attorney provided by Medicus to represent Dr. Todd. In the letter, the plaintiff's attorney stated that Dr. Todd had been a party to fifteen medical malpractice cases and two investigations by the Texas Medical Board. After investigating and discovering the undisclosed claims and Texas Medical Board investigations, Medicus notified Dr. Todd that Medicus “refuses to be bound by the policy” because of material misrepresentations in the insurance application. Medicus returned the premium to Dr. Todd and declared the policy cancelled.
Medicus then brought suit for declaratory judgment that the policy was void, that Medicus was not bound by the policy, and that it had no duty to defend or indemnify Dr. Todd for any claims against him. Dr. Todd filed a counterclaim for unjust enrichment and breach of contract alleging the insurance policy was a valid contract and that Medicus had manifested its intent to repudiate the policy. Both sides requested attorney's fees.
The case was tried before a jury. During its deliberations, the jurors sent a note to the trial court asking for the legal definition of the word “intent,” and the court instructed them without objection that they had all the law and the evidence. Later, the jurors informed the court they were deadlocked “7–5,” and the court instructed them to continue their deliberations.The jurors then asked for instructions “on the procedure providing we are unable to reach a verdict,” and the court instructed them with an “Allen charge.” 3 Thereafter, ten jurors agreed on a verdict.4
The jury determined Medicus failed to prove by a preponderance of the evidence that Dr. Todd made a material false representation in an insurance application with Medicus with the intent to deceive Medicus and that was relied on by Medicus in issuing a policy of insurance to Dr. Todd. The jury also determined that Medicus failed to prove by a preponderance of the evidence that Zimmer and Dr. Todd colluded in not disclosing Dr. Todd's complete claims history for the purpose of obtaining insurance from Medicus.
During the trial, Medicus offered into evidence three exhibits that were applications in Dr. Todd's name for medical malpractice insurance with other insurers. The trial court refused to admit these exhibits. After the jury returned its verdict and was released but before the court signed the judgment, the court reporter contacted the attorneys and told them that the excluded exhibits had been included with the exhibits given to the jury for deliberation. Medicus filed a motion for mistrial asserting the jurors' consideration of the exhibits was jury misconduct. The motion was supported by affidavits from two of the jurors stating those exhibits had been discussed extensively by the jurors during deliberation and the exhibits “were an integral part of the jury deliberations.” After a hearing, the trial court denied the motion for mistrial. Medicus raised this issue again in its motion for new trial, which the trial court denied.
The trial court rendered judgment that Medicus take nothing and awarded Dr. Todd attorney's fees of $86,446.84.
Medicus's second and third issues concern whether an insurer seeking to declare an insurance policy void because of material misrepresentations in the application for insurance must prove the insurance applicant intended to deceive the insurer. Medicus argues that an insurer seeking to have an insurance policy declared void due to misrepresentations in the application has two alternative remedies: the common-law remedy, in which the insurer must prove an insured intended to deceive the insurer, and the statutory remedy under section 705.004 of the Texas Insurance Code, which does not expressly require the insurer to prove the insured had the intent to deceive. Compare Mayes v. Mass. Mut. Life Ins. Co., 608 S.W.2d 612, 616 (Tex.1980), withTex. Ins.Code Ann. § 705.004 (West 2009). Medicus asserts it brought suit under the statutory remedy, not the common-law remedy; therefore, it contends, it was not required to prove Dr. Todd intended to deceive it with the misrepresentations in the application concerning his claims history.
Section 705.004(a) of the Texas...
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