Miller v. Sloan, Listrom, Eisenbarth, Sloan and Glassman

• Decision Date: 23 April 1999
• Docket Number: No. 80,116,80,116
• Citation: 267 Kan. 245,978 P.2d 922
• Parties: Stephen A. MILLER, D.O., Appellant/cross-appellee, v. SLOAN, LISTROM, EISENBARTH, SLOAN AND GLASSMAN, A Kansas Partnership; Thomas L. Theis; Derenda J. Mitchell, Appellees/cross-appellants; St. Paul Fire & Marine Insurance Company, A Minnesota Corporation; The State of Kansas; Kansas Health Care Stabilization Fund; Robert Hayes, Executive Director of Kansas Health Care Stabilization Fund; and Kathleen Sebelius, in her official capacity as Commissioner of Insurance, Appellees.
• Court: Kansas Supreme Court

Page 922

978 P.2d 922

267 Kan. 245

Stephen A. MILLER, D.O., Appellant/cross-appellee, v. SLOAN, LISTROM, EISENBARTH, SLOAN AND GLASSMAN, A Kansas Partnership; Thomas L. Theis; Derenda J Mitchell, Appellees/cross-appellants St. Paul Fire & Marine Insurance Company, A Minnesota Corporation; The State of Kansas; Kansas Health Care Stabilization Fund; Robert Hayes, Executive Director of Kansas Health Care Stabilization Fund; and Kathleen Sebelius, in her official capacity as Commissioner of Insurance, Appellees.

No. 80,116.

Supreme Court of Kansas.

April 23, 1999.

As Modified July 23, 1999.

Syllabus by the Court

1. The rules for a motion to dismiss and the rules for summary judgment are discussed and applied.

2. The Kansas Tort Claims Act, K.S.A. 75-6101 et seq., states that unless a statutory exception to liability applies, a governmental entity shall be liable for damages caused by the negligent or wrongful act or omission of any of its employees while acting within the scope of their employment under circumstances where the governmental entity, if a private person, would be liable under the laws of this state. K.S.A. 75-6103(a).

3. Unlike a private insurance company, the Fund under the Health Care Provider Insurance Act, K.S.A. 40-3401 et seq., is immune from bad faith liability. K.S.A. 40-3412(c).

4. Under the Kansas Health Care Provider Insurance Act, every resident health care provider, including physicians, is required to maintain a policy of professional liability insurance. Subject to certain liability limits, the Fund is responsible for paying that amount of any judgment in excess of the basic coverage of the resident health care provider.

5. To prove the tort of outrage, a litigant must show: (1) The conduct of the defendant was intentional or in reckless disregard of the plaintiff; (2) the conduct was extreme and outrageous; (3) there was a causal connection between the defendant's conduct and the plaintiff's mental distress; and (4) the plaintiff's mental distress was extreme and severe.

6. The tort of outrage has two threshold requirements that the district court must determine: (1) whether the defendant's conduct may reasonably be regarded as so extreme and outrageous as to permit recovery; and (2) whether the emotional distress suffered by the plaintiff was of such extreme degree the law must intervene because the distress inflicted was so severe that no reasonable person should be expected to endure it.

Stephen W. Brown, of Megaffin, Brown & Lynch, Chtd., of Pratt, argued the cause, and Gene E. Schroer, of Schroer, Rice, P.A., of Topeka, was with him on the briefs for appellant/cross-appellee.

Steve A. Schwarm, special assistant attorney general, of Goodell, Stratton, Edmonds & Palmer, L.L.P., of Topeka, argued the cause, and Wayne T. Stratton, of the same firm, was with him on the brief for appellees State of Kansas, Health Care Stabilization Fund, and Robert Hayes.

Paul W. Rebein, of Shook, Hardy & Bacon, L.L.P., of Overland Park, argued the cause, and Kenneth J. Reilly, of the same firm, was with him on the brief for appellee St. Paul Fire & Marine Insurance Company.

Hal D. Meltzer, of Turner and Boisseau, Chartered, of Overland Park, argued the cause, and Gabrielle Rhodes and Gregory N. Pottorff, of the same firm, were with him on the briefs for appellees/cross-appellants Sloan, Listrom, Eisenbarth, Sloan & Glassman, Thomas L. Theis, and Derenda J. Mitchell.

Damian C. Hornick, of Kansas Insurance Department, was on the brief for appellee Kathleen Sebelius, in her official capacity as Commissioner of Insurance.

Joseph R. Colantuono, of Wehrman & Colantuono, of Leawood, and Joshua L. Prober and Rachel M. Krug, of McCullough, Campbell & Lane, of Chicago, appeared on the amici curiae brief for the American Osteopathic Association and Kansas Association of Osteopathic Medicine.

LOCKETT, J.:

Physician, who was alleged to have committed medical malpractice, filed an action against his malpractice insurer, the health care stabilization fund, and his attorneys and the attorneys' firm retained by the insurer to represent him. Physician claimed that the defendants had in bad faith settled the malpractice claim against him without informing him or obtaining his consent to the settlement. The district court granted each of the defendants' motions for dismissal and for summary judgment. Physician appeals the district court's orders: (1) dismissing the fund and the Commissioner of Insurance based on governmental immunity; (2) granting summary judgment to physician's attorneys and the attorneys' law firm, and (3) granting summary judgment in favor of the physician's liability insurance carrier regarding the physician's claim of negligent and wrongful settlement of the patient's malpractice claim. Physician's attorneys and the attorneys' law firm cross-appealed, claiming the district court erred in finding the attorneys had breached their duty to inform a client. The attorneys also argue that the physician's failure to set aside the settlement agreement pursuant to K.S.A. 60-260(b)(6) bars his claim.

This civil action by Stephen W. Miller, D.O., arose out of a medical malpractice claim relating to his patient's injury that occurred in the surgical operating room of the Coffeyville Regional Medical Center, in Montgomery County, Kansas, on January 21, 1992. During the administration of anesthesia by a nurse anesthesiologist, the patient suffered severe brain damage.

Shortly after the injury, the patient's attorney contacted Miller and advised him that the patient intended to file a malpractice suit. Miller advised his professional liability insurance carrier, St. Paul Fire & Marine Insurance Company (St.Paul), of the patient's intention. St. Paul retained Thomas Theis, an attorney with Sloan, Listrom, Eisenbarth, Sloan & Glassman, to defend the claim. St. Paul's investigation of the claim included: a telephone interview with Miller, a peer evaluation of the medical event leading to the claim, an evaluation of pertinent medical records, and a poll of several attorneys to assess the possibility of Miller being found liable for the patient's injuries and to estimate the damages.

Following its investigation and upon determining that the injury presented a significant risk of a verdict far in excess of Miller's policy limits, St. Paul tendered to the Kansas Health Care Stabilization Fund (Fund) payment equal to the policy limits of Miller's liability insurance policy. Theis was then retained to represent the interest of the Fund and to continue his representation of Miller during the settlement negotiations between the Fund and the patient.

K.S.A. 40-3410 provided the authority and procedure for the commissioner of insurance to negotiate and settle claims by a claimant on behalf of the Fund. The settlement agreement in this case provided that Miller did not admit liability for any wrong and that he denied he was negligent in the treatment of the patient. The settlement agreement also provided that the plaintiff released Miller from all claims, present and future. Because there was no pending action in Montgomery County, the petition was filed in Shawnee County.

On November 24, 1992, a settlement hearing was held in the Shawnee County District Court. Because Theis could not attend the hearing, Miller was represented by Derenda Mitchell, another attorney with Sloan, Listrom, Eisenbarth, Sloan and Glassman. Although Mitchell stated to the court that Miller had approved the settlement and did not object to the matter being heard in Shawnee County rather than Montgomery County, Miller had not, in fact, been notified of the settlement hearing or that the hearing was being held in Shawnee County, nor had Miller approved the settlement. The district court approved the settlement, finding it was valid, just, and equitable.

The settlement of the malpractice claim was later reported on the National Practitioner Data Bank in December 1992. Miller's malpractice insurance with St. Paul was terminated on July 30, 1993.

Miller alleged that he first became aware of the malpractice settlement after the settlement was reported to the National Practitioner Data Bank. On March 16, 1995, Miller filed this action alleging: (1) fraud by omission regarding the failure of his attorneys and their law firm to provide him notice of the malpractice claim settlement hearing, (2) fraud on the part of the Fund and the director of the Fund for settling the malpractice claim without giving him notice, (3) negligence on the part of his attorneys and their firm for failing to adequately research the claim and advise him of the settlement, (4) negligence on the part of the Fund and its director for failing to protect the rights and benefits provided to health care providers by the Health Care Stabilization Act, (5) denial of due process by the State, the Fund, and the Fund's director for denying him the right to participate in the settlement hearing, (6) bad faith on the part of St. Paul in failing to protect his interest in settling the malpractice claim, (7) outrageous conduct against all the defendants, and (8) a request for a declaratory judgment regarding whether the Fund had authority to employ attorneys to represent him at the settlement hearing, and if so, whether he and other similarly situated defendants retain the right to employ their own attorneys to represent their interests at such hearings.

Miller's assertion that he was unaware of the settlement of the malpractice claim until it was reported on the National Practitioner Data Bank in December 1992 is not entirely correct. The incident that led to the patient's injuries occurred on January 21, 1992. On June 30, 1992, Miller filed for bankruptcy in the United States Bankruptcy Court, District of Kansas. On October 16, 1992, a month prior to the settlement hearing on November 24, 1992, Miller's attorney in the bankruptcy action filed a stipulation to lift...