Smith v. St. Paul Fire & Marine Ins. Co.

• Decision Date: 24 August 1984
• Docket Number: No. C3-83-718,C3-83-718
• Citation: 353 N.W.2d 130
• Court: Minnesota Supreme Court
• Parties: David SMITH, a minor, etc., et al., Respondents, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Appellant.

Page 130

353 N.W.2d 130

David SMITH, a minor, etc., et al., Respondents, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Appellant.

No. C3-83-718.

Supreme Court of Minnesota.

Aug. 24, 1984.

Syllabus by the Court

Insured's professional liability insurance policy does not cover damages caused by sexual contact where the contact involved neither the providing nor withholding of professional services.

James W. Kenney, William H. Leary, St. Paul, for appellant.

John F. Eisberg, Barbara Ashley, St. Paul, for respondents.

Considered and decided by the court en banc without oral argument.

PETERSON, Justice.

This is a declaratory judgment action brought by plaintiffs David Smith, Bradley Smith, and Tom Wilson, ¹ individually and as assignees of M. Mark LeRud, against defendant, St. Paul Fire & Marine Insurance Company (insurer), claiming coverage under professional liability and personal catastrophe insurance policies issued by insurer to M. Mark LeRud.

At the time of the events giving rise to this action, M. Mark LeRud was a medical doctor practicing in Lake Park, Minnesota. Plaintiffs were minors being treated by LeRud for various medical problems. ² Each was sexually assaulted by LeRud on more than one occasion during the course of medical examination or treatment at LeRud's clinic or at the local hospital.

In April 1981, plaintiffs began medical malpractice actions against LeRud for damages suffered as a result of the sexual contacts. LeRud tendered defense of the actions to insurer, but insurer refused to defend, claiming that LeRud's conduct was not covered by the policies. LeRud then retained an attorney, who advised him to settle with plaintiffs. On January 29, 1982, LeRud entered into settlement agreements with plaintiffs, whereby he agreed to settlement amounts and assigned his rights under insurer's policies to plaintiffs. Rather than seeking to recover directly from LeRud, plaintiffs agreed to seek payment from insurer only.

As a result, plaintiffs began the instant declaratory judgment action against insurer. The issues tried were whether there was coverage under LeRud's professional liability policy or his personal catastrophe policy and whether the agreements entered into between plaintiffs and LeRud were reasonable and prudent. Counsel stipulated that if the trial judge found coverage but found the settlements unreasonable, he could, as fact finder, reduce the settlements to amounts he considered fair and reasonable.

The trial court, acting without a jury, concluded that the sexual assaults were "done under the guise of medical treatment" and that plaintiffs' damages were a "result of the doctor's withholding of professional services" and were, therefore, covered by the professional liability policy. ³ The court also concluded that the settlement amounts were unreasonable and entered judgment for reduced amounts that "would fairly and adequately compensate plaintiffs." We reverse.

Doctor M. Mark LeRud, a general practice physician, opened a clinic in Lake Park, Minnesota, in 1974. Between fall 1978 and May 1980, LeRud sexually assaulted plaintiffs on repeated occasions. Other than one incident that occurred in the emergency room of the local hospital, each incident occurred during a regularly scheduled visit to LeRud's clinic. There was no conversation between LeRud and plaintiffs about the sexual assaults before they took place, while they were taking place, or after they took place. The acts occurred during the middle or at the end of the examinations.

In May 1980, one of the plaintiffs informed his mother of the sexual assaults. The appropriate authorities were contacted, and LeRud was subsequently charged with criminal sexual conduct in the third degree. Ultimately, he entered a plea of guilty to criminal sexual conduct in the fourth degree.

The Minnesota Board of Medical Examiners subsequently undertook an investigation of LeRud's actions, resulting in restriction of LeRud's license to practice medicine. Rather than comply with the restrictions, LeRud chose not to continue the practice of medicine.

At the request of their attorneys, each plaintiff was seen by a psychiatrist and two psychologists for the purpose of evaluating psychological damage caused by LeRud's actions. One of the psychologists, Dr. Lorna Anderson, testified at trial. The reports of all three doctors were admitted into evidence. The doctors concluded that each plaintiff had suffered emotional and psychological harm as a result of LeRud's conduct, although the severity of the harm varied among plaintiffs.

Although we believe that LeRud's conduct was outrageous and damaging to plaintiffs, our limited role on appeal is to determine the insurance contract's meaning as intended by LeRud and insurer. The issue is whether LeRud's conduct, which resulted in damages to plaintiffs, is covered by the professional liability policy issued by insurer. The "plain english professional insurance" policy provides:

Your professional liability protection covers you for damages resulting from:

1. Your providing or withholding of professional services.

Specifically, the issue is whether damages to plaintiffs, caused by the sexual assaults, were damages resulting from "[LeRud's] providing or withholding of professional services." The policy does not define the terms used to describe coverage.

If the terms of an insurance policy are not specifically defined, they must be given their plain, ordinary, or popular meaning. Dairyland Insurance Co. v. Implement Dealers Insurance Co., 294 Minn. 236, 244, 199 N.W.2d 806, 811 (1972). In this case, the policy language is clear and unambiguous; ⁴ the policy covers damages caused by improperly provided or improperly withheld professional services. In a professional liability policy issued to a medical doctor, the term "professional services" plainly refers to medical treatment of physical ailments by the doctor. "[D]amages resulting from * * * providing * * * of professional services" contemplates improper or incorrect medical treatment of a...