Phillips v. Bramlett

• Decision Date: 06 March 2009
• Docket Number: No. 07-0522.,07-0522.
• Citation: 288 S.W.3d 876
• Parties: Benny P. PHILLIPS, M.D., Petitioner, v. Dale BRAMLETT, individually and as Independent Administrator of the Estate of Vicki Bramlett, Deceased, Shane Fuller, and Michael Fuller, Respondents.
• Court: Texas Supreme Court

288 S.W.3d 876

Benny P. PHILLIPS, M.D., Petitioner, v. Dale BRAMLETT, individually and as Independent Administrator of the Estate of Vicki Bramlett, Deceased, Shane Fuller, and Michael Fuller, Respondents.

No. 07-0522.

Supreme Court of Texas.

Argued April 22, 2008.

Decided March 6, 2009.

Rehearing Denied August 28, 2009.

Jim Hund, Hund, Krier, Wilkerson & Wright, John Simpson, Splawn Simpson Pitts, Inc., Dennis R. Burrows, Benjamin H. Davidson II, McClesky Harriger Brazil & Graf, L.L.P., Lubbock, for Petitioner.

John Smithee, Templeton Smithee Hayes Heinrich & Russell, L.L.P., Amarillo, Thomas J. Turner, Turner and Jordan, P.C., Lubbock, Joseph Todd Trombley, Alexander B. Klein III, The Klein Law Firm, Houston, for Respondents.

Justice MEDINA delivered the opinion of the Court, in which Justice WAINWRIGHT, Justice BRISTER, Justice JOHNSON, and Justice WILLETT joined.

We granted the petition for review in this case to consider the relationship between two provisions of the Medical Liability and Insurance Improvement Act of 1977, now repealed. See TEX.REV.CIV. STAT. art. 4590i.¹ The first provision caps the liability of physicians (and other health care providers) above a fixed amount, adjusted for inflation, while the second creates an exception to this cap when the physician's insurer has negligently failed to settle within the meaning of the Stowers Doctrine, that is, has negligently failed to settle a claim within the limits of the physician's liability policy.

The trial court here applied the Stowers exception to permit the rendition of a judgment against the physician in excess of the statutory cap. The court of appeals, in a divided decision, affirmed, concluding that the excess judgment was permissible because there was evidence that the insurer negligently failed to settle the claim against its insured, the physician. 258 S.W.3d 158. In other words, the court concluded that the statutory Stowers exception waived the liability cap for both the insurer and the insured physician. We disagree that this exception applies to the physician and accordingly reverse the court of appeals' judgment and remand the case to the trial court.

I

Vicki Bramlett, a healthy 36-year-old mother of two, died from post-operative complications following a hysterectomy. The procedure was performed at Covenant Medical Center in Lubbock by Dr. Benny Phillips. Bramlett's survivors sued Dr. Phillips and the medical center, alleging negligence in her care and treatment. The medical center settled for $2.3 million; the case against the doctor proceeded to trial.

A jury found the doctor and medical center negligent, awarding $11 million in damages and apportioning responsibility, seventy-five percent to the doctor and twenty-five percent to the medical center. The jury also found the doctor grossly negligent, awarding $3 million in punitive damages. The trial court rendered judgment against the doctor after crediting the medical center's settlement. The trial court also denied the doctor's request to limit his liability under the Medical Liability and Insurance Improvement Act of 1977, formerly article 4590i of the revised civil statutes.

The court of appeals vacated the punitive damages award and suggested a remittitur of certain future damages, but otherwise affirmed the trial court's judgment. 258 S.W.3d at 182-83. One justice disagreed in part, opining that the doctor's liability should have been capped under former article 4590i. Id. at 183 (Campbell, J., dissenting). The doctor brings this issue forward, along with another complaint about certain improprieties during closing argument.

II

Article 4590i limits the liability of physicians (and other health care providers) to $500,000, adjusted for inflation after 1977.² Section 11.02(a) of the statute sets out the cap, providing:

In an action on a health care liability claim where final judgment is rendered against a physician or health care provider, the limit of civil liability for damages of the physician or health care provider shall be limited to an amount not to exceed $500,000.

TEX.REV.CIV. STAT. art. 4590i, § 11.02(a).³ Section 11.02(c) then explains that the cap does not "limit the liability of any insurer" under certain circumstances:

This section shall not limit the liability of any insurer where facts exist that would enable a party to invoke the common law theory of recovery commonly known in Texas as the "Stowers Doctrine."

Id. § 11.02(c). On their face, the two provisions do not conflict. One caps the physician's liability, while the other excepts the physician's insurer from the benefit of the cap when Stowers-like circumstances exist. It is only when one considers the common law's requirements for Stowers liability that the relationship between the two becomes more troublesome.

The common law imposes a duty on liability insurers to settle third-party claims against their insureds when reasonably prudent to do so. See G.A. Stowers Furniture Co. v. Am. Indem. Co., 15 S.W.2d 544 (Tex.1929). For the duty to arise, there must be coverage for the third-party's claim, a settlement demand within policy limits, and reasonable terms "such that an ordinarily prudent insurer would accept it, considering the likelihood and degree of the insured's potential exposure to an excess judgment." Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 849 (Tex.1994). When these conditions coincide and the insurer's negligent failure to settle results in an excess judgment against the insured, the insurer is liable under the Stowers Doctrine for the entire amount of the judgment, including that part exceeding the insured's policy limits. G.A. Stowers Furniture Co., 15 S.W.2d at 548.

Thus, the Stowers Doctrine and the statutory cap both shield the insured physician from excess liability: the first from liability in excess of policy limits, the latter from liability in excess of the legislatively fixed cap. But because the cap limits damages without regard to insurance coverage, its application will always affect Stowers liability to some degree. When the cap is above the amount of insurance coverage, it will simply restrict Stowers liability. When the cap falls below the amount of the policy, however, the cap will eliminate the possibility of any excess liability against the insured and, with that, any common-law claim under the Stowers Doctrine.

Because Stowers is concerned with insurance coverage, and the cap is not, this disconnect between the two creates the following conundrum: the cap does not apply to insurers if Stowers facts exist, but the cap prevents one critical element of Stowers, excess liability, from arising in whole or in part. The two courts of appeals that have considered this conundrum are of different minds about the Legislature's purpose in enacting section 11.02(c)'s Stowers exception. Compare Welch v. McLean, 191 S.W.3d 147, 166-71 (Tex.App.-Fort Worth 2005, no pet.) with Phillips v. Bramlett, 258 S.W.3d 158, 177-81 (Tex.App.-Amarillo 2007, pet. granted). The parties arguments in this case mirror the contrasting views of these two courts.

In Welch, the Fort Worth Court of Appeals, espousing a plain meaning approach, observed that section 11.02(a)'s damages cap applied expressly to physicians and that section 11.02(c)'s Stowers exception applied expressly to insurers. The court then, however, strayed from plain meaning to conclude that the cap also protected the insurer by implication because it placed a ceiling on any excess liability to which Stowers might apply. Thus, in Welch's view, the potential liability of the insurer cannot exceed the cap, although the insurer's liability may exceed its policy limits if those limits are below the cap, and Stowers facts exist. Id. at 168-171. According to Welch then, the Stowers exception applies only when the physician's policy limits are below the statutory cap and only to any excess up to the limit of the statutory cap. Id. at 171.

In contrast to Welch's plain meaning approach, the Amarillo Court of Appeals here concludes that section 11.02(c)'s exception to the cap applies not only to the insurer, which is clearly identified in the subsection, but also to the insured physician, who is not mentioned. 258 S.W.3d at 178. The court deduces this from section 11.02(c)'s opening reference to "[t]his section" which it interprets to include subsection (a)'s liability cap. Id. at 178. The court thus "construe[s] section 11.02(c) to preclude any application of [the cap in] section 11.02(a) in a manner that would limit the liability of an insurer in a subsequent `Stowers' claim." Id. at 178-79.

Neither case gives due regard both to the cap and its exception. The analysis in Welch deprives section 11.02(c) of any meaning, extending the cap to insurers when Stowers facts exist. But the court of appeals here goes to the other extreme, reading subsection (c)'s Stowers exception to defeat the cap generally, despite its internal limitations.⁴

The Dissent adopts Welch's view, concluding that the Stowers exception to the cap was meant only to clarify the continued, but limited, application of the Stowers Doctrine to claims governed by article 4590i. Thus, the Dissent would limit the exception in section 11.02(c) to cases involving insurance policies falling below the cap and would not apply it to other policies. But a Stowers claim, as limited by the cap, would be available to the insured physician, even if section 11.02(c) were not a part of the statute, and thus the Dissent, like Welch, attributes no meaning to the Stowers exception. By doing this, the Dissent is able to disregard section 11.02(c)'s principal purpose: that the cap "not limit the liability of any insurer" when Stowers facts exist. TEX.REV.CIV.STAT. art. 4590i, § 11.02(c). The Dissent instead opts for a more circular interpretation: that the cap does "not limit the liability of any insurer" except when it does. And it does, according to the Dissent,...