Shuler v. MICH. PHYSICIANS MUT. LIABILITY CO.
| Decision Date | 04 May 2004 |
| Docket Number | Docket No. 239472.,Docket No. 239291,Docket No. 239471 |
| Citation | 679 N.W.2d 106,260 Mich. App. 492 |
| Parties | Dorothy Denise SHULER, Brian Scott Shuler, Nina Jillane Shepherd, Margaret Mae Mayes, Frances Andre Mayes, Kallie J. Geiling, James M. Geiling, Plaintiffs-Counter-Defendants-Appellees, and Marion David Sutton, M.D., and Mid-Michigan Family Physicians, P.C., Intervening-Plaintiffs-Appellees' and Peggy S. Schneider and Ronald G. Schneider, Intervening-Plaintiffs-Appellees-Cross-Appellants, v. MICHIGAN PHYSICIANS MUTUAL LIABILITY COMPANY, a/k/a American Physicians Assurance Corporation, Defendant-Counter-Plaintiff-Appellant-Cross-Appellee, and Tig Insurance Company, Defendant-Not Participating. Lake States Insurance Company, Plaintiff-Counter-Defendant-Appellant, v. Dorothy Denise Shuler, Brian Scott Shuler, Nina Jillane Shepard, Margaret Mae Mayes, Francis Andre Mayes, Kallie J. Geiling, James M. Geiling, Marion David Sutton, M.D., P.C., and Mid-Michigan Family Physicians, Defendants-Counter-Plaintiffs-Appellees. Lake States Insurance Company, Plaintiff-Appellant, v. Peggy S. Schneider, Ronald G. Schneider, Marion David Sutton, M.D., Marion David Sutton, M.D., P.C., and Mid-Michigan Family Physicians, Defendants-Appellees. |
| Court | Court of Appeal of Michigan — District of US |
Mathieu & Lee (by James H. Mathieu), Midland, for Dorothy D. Shuler and others.
Sinas, Dramis, Brake, Boughton & McIntyre, P.C. (by Kenneth G. McIntyre), Lansing, for Marion D. Sutton, M.D., and Mid-Michigan Family Physicians, P.C.
Amos E. Williams, P.C. (by Thomas E. Kuhn and Amos E. Williams), Detroit, for Peggy S. and Ronald G. Schneider.
Fraser Trebilcock Davis & Dunlap, P.C. (by Mark A. Bush and Graham K. Crabtree), Lansing, for Michigan Physicians Mutual Liability Company.
Smith Haughey Rice & Roegge (by Jon D. Vander Ploeg), Grand Rapids, for Lake States Insurance Company.
Before: SMOLENSKI, P.J., and MURPHY and WILDER, JJ.
The suits in these consolidated cases arise out of allegations that in the late 1980s and early 1990s, Dr. Marion David Sutton committed criminal sexual conduct (CSC) against several of his patients, including Peggy Schneider (also Dr. Sutton's former employee), Nina Shepherd, Kallie Geiling, Margaret Mayes, and Dorothy Shuler, by inappropriately touching each patient's clitoris during pelvic examinations. Upon consideration of the various issues raised, we affirm in part, reverse in part, and remand to the trial court.
In February 1992, the Midland County Prosecuting Attorney charged Dr. Sutton with two counts of second-degree CSC based on the accusations made by Schneider and a patient who is not a party to these proceedings. In April 1992, the prosecuting attorney charged Dr. Sutton (in a separate complaint) with five counts of second-degree CSC and one count of fourth-degree CSC arising out of claims made by a number of other patients.
After severing the charges in the first complaint, the trial court conducted a jury trial on the complaint concerning the nonparty patient's accusations. The jury convicted Dr. Sutton of second-degree CSC as charged. In October 1992, immediately before sentencing Dr. Sutton, the trial court met with counsel for the parties and requested that Dr. Sutton plead guilty to the remaining charges in exchange for a delayed sentence without additional time in jail. Dr. Sutton accepted that offer and pleaded guilty of committing second-degree CSC against Schneider, Shepherd, Geiling, and Shuler, and pleaded guilty of committing fourth-degree CSC against an additional patient who is not a party to these proceedings. Before entering his pleas, Dr. Sutton stated that that he could not admit having a conscious awareness of touching his patients with a sexual intent, although he stated that he intentionally touched each patient's clitoris without a medical purpose. The trial court sentenced Dr. Sutton to five years' probation and one year in jail, subject to review in six months, for his jury trial conviction. Thereafter, the trial court imposed a delayed sentence for the charges to which Dr. Sutton pleaded guilty during the October 1992 sentencing hearing. On appeal, this Court vacated Dr. Sutton's sentence because it was disproportionately lenient. People v. Sutton, unpublished opinion per curiam of the Court of Appeals, issued October 26, 1994 (Docket No. 171214).
Following remand, the trial court granted Dr. Sutton's motion to withdraw the guilty pleas he entered in October 1992. Thereafter, in 1995, the trial court conducted a jury trial concerning the charge based on Schneider's allegation regarding a 1990 pelvic examination by Dr. Sutton. Although the jury acquitted Dr. Sutton of second-degree CSC, it convicted him of fourth-degree CSC. Subsequently, in March 1996, Dr. Sutton pleaded no contest to fourth-degree CSC in the cases concerning Geiling, Shuler, Shepherd, and another patient. In addition to the charges arising directly out of the sexual assaults, Dr. Sutton pleaded no contest to a charge of attempted perjury in exchange for dismissal of a perjury charge based on the inconsistency between his trial testimony and his statements at the October 1992 plea proceeding. Dr. Sutton served his sentence for these convictions and was released in August 1997.
In 1992, in separate yet nearly identical complaints, Shuler, Shepherd, Geiling, and Mayes (the plaintiff-patients) sued Dr. Sutton and his professional corporations, M. David Sutton, M.D., P.C., and Mid-Michigan Family Physicians, P.C., for assault and battery or criminal sexual conduct, medical malpractice, and breach of contract.1 The same year, Schneider filed an action alleging (1) gross negligence, sexual harassment, hostile work environment sexual harassment, assault and battery, and medical malpractice against Dr. Sutton, (2) negligent hiring and supervision against Mid-Michigan Family Physicians, P.C., and M. David Sutton, M.D., P.C., and (3) intentional and negligent infliction of emotional distress against Dr. Sutton, M. David Sutton, M.D., P.C., and Mid-Michigan Family Physicians, P.C.2
After becoming aware of the suits against its insureds in 1992, Michigan Physicians Mutual Liability Company (MPMLC), Dr. Sutton's malpractice insurer, refused to defend or indemnify Dr. Sutton and Mid-Michigan Family Physicians, P.C., because of the "criminal acts" exclusion in the insurance policy. The exclusion provides that coverage is not provided for "any liability as a consequence of the performance of a criminal or fraudulent act by the Insured, whether or not such an act was performed in conjunction with the rendering or failure to render professional services." On the basis of this exclusion, MPMLC filed a complaint seeking a declaratory judgment that it did not need to defend or indemnify Dr. Sutton or Mid-Michigan Family Physicians, P.C. MPMLC also named Shuler, the first patient to file suit, as a defendant in the declaratory action.
In 1993, the trial court granted MPMLC's motion for summary disposition pursuant to MCR 2.116(C)(10), concluding that none of Shuler's theories of liability was covered by the policy in light of Dr. Sutton's guilty pleas to charges involving Shuler. Thus, the trial court held that MPMLC had no duty to indemnify or defend Dr. Sutton or Mid-Michigan Family Physicians, P.C., in Shuler's suit.
In June 1998, after Dr. Sutton had completed his sentences in the criminal matters, the patients-plaintiffs entered into settlement agreements with Dr. Sutton and his professional corporations, settling their civil claims for $500,000 for each person or couple. Each agreement was subject to Dr. Sutton and his corporations (1) assigning the patients-plaintiffs their rights under insurance policies issued by four insurance companies; (2) requiring the plaintiff-patients to pursue declaratory relief against the insurance companies; and (3) permitting the plaintiff-patients to refile their suits if their efforts to collect from the insurers were unsuccessful.
In April 1998, three of the four insurers named in the settlement agreements, Lake States Insurance Company (Lake States), TIG, and Aetna (succeeded in interest by Travelers Property & Casualty Company), sought declaratory judgments stating that they did not have to provide coverage for the suits by Schneider and the patients-plaintiffs arising from Dr. Sutton's actions.
Lake States' suit against Schneider is the only one of these declaratory actions relevant on appeal (Docket Nos. 239471 and 239472).3 Lake States, which insured Dr. Sutton and Mid-Michigan Family Physicians, P.C., under a Special Business Owners Policy, asserted in its complaint that under the terms of the policy (1) Schneider did not suffer a "personal injury," (2) her injuries did not result from an "occurrence," and (3) coverage did not extend to the injuries because (a) they were expected or intended by the insureds, (b) they arose out of Schneider's employment with the insureds, (c) they arose out of rendering or a failure to render treatment or professional services, (d) they arose out of the willful violation of a penal statute, and (e) Dr. Sutton was not an "insured" under the policy.
In August 1998, the patients-plaintiffs filed a suit for declaratory relief against MPMLC and TIG, requesting a declaratory judgment that MPMLC and TIG, alternatively or together, were required to indemnify their insureds, and a money judgment in favor of each patient-plaintiff consistent with the settlement agreements, plus...
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