Saucedo v. Winger

• Decision Date: 19 April 1996
• Docket Number: No. 73354,73354
• Citation: Saucedo v. Winger, 915 P.2d 129, 22 Kan.App.2d 259 (Kan. App. 1996)
• Parties: Lydia SAUCEDO, Appellee, v. Ray WINGER, M.D., Appellant.
• Court: Kansas Court of Appeals

Page 129

915 P.2d 129

22 Kan.App.2d 259

Lydia SAUCEDO, Appellee, v.Ray WINGER, M.D., Appellant.

No. 73354.

Court of Appeals of Kansas.

April 19, 1996.

Syllabus by the Court

1.Interpretation of an insurance policy, like the construction of any written instrument, is a question of law.The appellate court's review of questions of law is unlimited.

2.The test to determine whether an insurance contract is ambiguous is not what the insurer intends the language to mean, but what a reasonably prudent insured would understand the language to mean.A contract of insurance should not be construed through the magnifying eye of the technical lawyer but rather from the standpoint of what an ordinary person would believe it to mean.

3.Where an insurance policy explicitly reserves the right to settle to the insurer, an insured cannot complain that the insurer settles or refuses to settle within policy limits absent a showing of bad faith or negligence on the part of the insurer.

4.If the insurance policy is silent on an issue of consent to settle or consent to withdraw a consent to settle, the interpretation must be resolved in favor of the insured.

Appeal from Stevens District Court; Tom R. Smith, Judge.

David M. Traster and Stephen M. Kerwick, of Foulston & Siefkin L.L.P., Wichita, for appellant.

No appearance by appellee.

Before RULON, P.J., ROYSE, J., and STEPHEN D. HILL, District Judge, Assigned.

RULON, Presiding Judge:

Ray Winger, M.D., defendant, appeals an order of the district court approving a settlement agreement between his malpractice insurer and the plaintiff.Defendant argues the court erred in approving the settlement because his insurance policy did not expressly grant the insurer the right to settle without defendant's approval and he expressly objected to the settlement.We reverse and remand with directions.

FACTS

The facts of this case are not in dispute.This is the second time this case has been presented to the Kansas appellate courts.The background facts leading up to this dispute are detailed in Saucedo v. Winger, 252 Kan. 718, 850 P.2d 908(1993).

PlaintiffLydia Saucedo originally sued defendant for alleged medical malpractice surrounding the death of her husband, Pablo.The case was tried to a jury which found that, although defendant's actions fell below the required professional standard of care, his actions or lack thereof, did not cause or substantially contribute to Pablo's death.Consequently, the trial court entered a verdict in favor of defendant.

Plaintiff sought to set the judgment aside, claiming juror misconduct.The district court denied her request for a new trial and this court affirmed that decision in an unpublished opinion.Our Supreme Court granted review and reversed and remanded for a new trial.252 Kan. at 733, 850 P.2d 908.

On remand, before a new trial could be held, defendant's malpractice insurance carrier, Medical Protective Company(Medpro), entered into a settlement agreement with plaintiff.Defendant filed a motion asking that the settlement not be approved on the basis that Medpro was not a party to the suit and did not have authority to settle.The district court rejected defendant's argument and approved the settlement.The insurance company agreed to settle for $145,000.The policy limit was $200,000.

THE SETTLEMENT AGREEMENT

"Interpretation of an insurance policy, like the construction of any written instrument, is a question of law....The appellate court's review of questions of law is unlimited."Levier v. Koppenheffer, 19 Kan.App.2d 971, 976, 879 P.2d 40rev. denied255 Kan. 1002(1994).When an insurance policy is not ambiguous, the court may not make another contract for the parties.Catholic Diocese of Dodge City v. Raymer, 251 Kan. 689, 693, 840 P.2d 456(1992).Whether ambiguity exists in a written instrument is a question of law to be decided by the court.251 Kan. at 691, 840 P.2d 456.

"The language of a policy of insurance, like any other contract, must, if possible, be construed in such manner as to give effect to the intention of the parties.Where the terms of a policy of insurance are ambiguous or uncertain, conflicting, or susceptible of more than one construction, the construction most favorable to the insured must prevail.Since the insurer prepares its own contracts, it has a duty to make the meaning clear."251 Kan. at 693, 840 P.2d 456.

"The test to determine whether an insurance contract is ambiguous is not what the insurer intends the language to mean, but what a reasonably prudent insured would understand the language to mean."Farm Bur. Mut. Ins. Co. v. Winters, 248 Kan. 295, Syl. p 1, 806 P.2d 993(1991)."A contract of insurance should not be construed through the magnifying eye of the technical lawyer but rather from the standpoint of what an ordinary [person] would believe it to mean."Wheeler v. Employer's Mutual Casualty Co., 211 Kan. 100, 104-05, 505 P.2d 768(1973).

The outcome of this case turns on what authority the insurance carrier, MedPro, did or did not have under the terms of the policy with defendant.The policy reads in material part:

"In Consideration of the payment of the premium, receipt of which is hereby acknowledged, and subject to the limits of liability and other terms of this policy, the Company hereby agrees to DEFEND and PAY DAMAGES, in the name and on behalf of the Insured or his estate.

....

"B.Upon receipt of notice the Company shall immediately assume its responsibility for the defense of any such claim.Such defense shall be maintained until final judgment in favor of the Insured shall have been obtained or until all remedies by appeal, writ of error or other legal proceedings deemed reasonable and appropriate by the Company shall have been exhausted at the Company's cost and without limit as to the amount expended.However, the Company shall not be obligated to defend any claim after the applicable limit of the Company's liability has been exhausted by payment of judgments or settlements.

....

"2.The Insured shall not (a) make any hold harmless agreements or contract any expense nor voluntarily assume any liability in any situation nor (b) make or contract any settlement of a claim hereunder, except at his own cost and responsibility, without the written authorization of the Company.The Insured shall at all times fully cooperate with the Company in any claim hereunder and shall attend and assist in the preparation and trial of any such claim."

In district court, defendant argued that most insurance policies explicitly provide that the insurer has the right to settle without the insured's consent.This policy, however, does not have such a provision.According to defendant, Medpro was without authority to settle this action without defendant's consent and, consequently, the district court should not have approved the settlement.Importantly, Medpro did not intervene and offered no argument either in district court or on appeal.The only opposing argument in the district court came from plaintiff, whose position was that any dispute over the terms of the insurance policy were between defendant and Medpro and that she had no interest in such dispute because she had a valid settlement agreement with the insurer.Plaintiff further argued that the policy provides both express and apparent authority for Medpro to settle this suit and all that was left for the district court to do was to approve the attorney fees.

Under the terms of the policy before us, defendant could not make any hold harmless agreements or voluntarily assume liability.Defendant could not, except at his own expense, settle without the written consent of Medpro.Finally, defendant was required to fully cooperate with Medpro in any claim and attend and assist in the preparation of any trial.

Medpro, in consideration of payment of the premium paid by defendant, was required to assume the responsibility to defend any claim which was covered by the policy.Such defense was required to be maintained until a judgment favorable to defendant was obtained or until all appeals had been exhausted.However, Medpro was not obligated to defend any suit after the extent of the company's liability had been exhausted by payment of judgment or settlement.

Clearly, the policy before us does not give Medpro the express right to settle without defendant's consent.The policy does not specifically require that defendant give his consent to any settlement.This policy, however, specifically prohibits defendant from settling without Medpro's consent unless he assumes all responsibility for such a settlement.

There are several treatises that discuss the issue before us in general terms.

One treatise states:

"An insurance company is free to exercise its own judgment as to whether to enter into a settlement.It can, therefore, absent an express policy provision to the contrary, settle a case despite the insured's request that it not do so.The only limitation is that the insurer act in good faith."1 Windt, Insurance Claims & Disputes: Representation of Insurance Companies and Insureds§ 5.03, pp. 306-07 (3d ed.1995).

Interestingly, none of the cases this source relies upon states such a legal proposition.All the cited cases involved situations where the insurance policies expressly gave the insurer the right to settle within policy limits at the insurer's discretion.SeeIns. Co. of North America v. Medical Protective Co., 768 F.2d 315(10th Cir.1985);Puritan Ins. Co. v. Canadian Universal Ins. Co., 586 F.Supp. 84(E.D.Pa.1984), rev'd on other grounds775 F.2d 76(3d Cir.1985);Mitchum v. Hudgens, 533 So.2d 194(Ala.1988);Transit Casualty Co. v. Spink Corp., 94 Cal.App.3d 124, 156 Cal.Rptr. 360(1979);Sharpe v. Physicians Protective Trust, 578 So.2d 806(Fla.Dist.App.1991);Emp. Surplus Line Ins. v. City of Baton Rouge, 362 So.2d 561(La.1978);Olson v. Union Fire Ins. Co., 174 Neb. 375, 118 N.W.2d 318(1962)...