Insurance (Liability) Coverage
639 F.3d 806 (8th Cir. 2011)
Also under Confidentiality
Outcome: Very favorable
The issue in this case was whether a notice of claim under a “claims made” medical liability insurance policy must comply strictly with the policy’s notice requirements or whether substantial compliance may be sufficient.
The AMA believes that, absent patient consent, information between a physician and a patient should be kept confidential.
Owatonna Clinic, a division of May Health System, owned a “claims made” medical malpractice insurance policy, issued by The Medical Protective Company of Fort Wayne, Indiana. The policy defined a “claim filed” as
"the receipt, by [the insurer] during the term of the policy, of written notice of a medical incident from which [the insured] reasonably believes allegations of liability may result. In order to be deemed a claim, notice of a medical incident shall include all reasonably obtainable information with respect to the time, place, and circumstances of the professional services from which liability may result and the nature and extent of the injury, including the names and addresses of the injured and of available witnesses."
The policy also covered physician employees at Owatonna Health Clinic.
Owatonna Clinic received a notice from the Minnesota Board of Medical Practice, which indicated that one of its employees may have provided substandard care to a woman immediately prior to and then during childbirth. Owatonna Clinic promptly forwarded the notice to the insurer and advised the insurer that a malpractice claim might arise. The insurer retained an attorney to represent the employee physician before the medical board.
Several years later, the infant child sued the employee physician and Owatonna Clinic in Minnesota state court, alleging medical malpractice claims arising from the incidents surrounding the child’s birth. Owatonna Clinic promptly notified the insurer, which accepted coverage for the employee physician but not for Owatonna Clinic. Following pretrial discovery, the employee physician and Owatonna Clinic settled the lawsuit for $4.25 million. Of this sum, Owatonna Clinic paid $3.25 million, and the insurer, on behalf of the physician employee, paid the remaining $1 million.
Owatonna Clinic then sued the insurer in the United States District Court for the District of Minnesota, claiming that the insurer had breached its policy by denying coverage to Owatonna Clinic in the lawsuit. The insurer asserted that the notice of claim given in connection with the medical board action, although timely, had been substantively inadequate. The notice identified the time, place and circumstances of the employee physician’s services. It also identified the likelihood that the employee physician had deviated from the standard of care and the infant’s having being born with persistent respiratory distress and a diaphragmatic hernia. However, the notice had not specifically identified the child or the mother, the potential witnesses, or the full nature and extent of the child’s injuries.
Following a jury trial, the lower court found that the notice of claim had been substantially adequate, although it had not strictly followed the policy requirements. The insurer could have asked for the additional information, but it had not. The court entered judgment in favor of Owatonna Clinic and ordered the insurer to pay the full amount of the policy, $2 million, plus interest and attorneys fees for both of the medical malpractice lawsuits and the breach of insurance policy lawsuit. The insurer appealed to the United States Court of Appeals for the Eighth Circuit.
On May 11, 2011, the Eighth Circuit affirmed the trial court, thus ruling in favor of Owatonna Clinic and against the insurer.
Litigation Center involvement
The Litigation Center, along with the Minnesota Medical Association, filed an amicus curiae brief in support of Owatonna Clinic.
The issue in this case was whether a liability insurance company was obligated to inform its insured (a physician) of whether the policy covered an underlying claim for medical malpractice.
The AMA believes that insurers should provide the appropriate degree of coverage on claims and communicate with their insureds regarding the extent of coverage.
This was an action for declaratory judgment arising from a claim made by a retired physician, Philip L. Rothbart, M.D., against the Delaware Insurance Guaranty Association (DIGA) for coverage of a medical malpractice/wrongful death lawsuit.
Dr. Rothbart asked DIGA to interpret and confirm the levels of his coverage rights under the DIGA Act. DIGA refused to provide the requested interpretation, presumably until the underlying malpractice/wrongful death suit against Dr. Rothbart reached a stage where DIGA would be required to make some payment to satisfy its statutory obligations. Because Dr. Rothbart believed that this delay prejudiced his ability to defend the malpractice/wrongful death suit effectively, he sued DIGA for a declaratory judgment.
Both the underlying medical malpractice/wrongful death lawsuit and the declaratory judgment lawsuit settled. Pursuant to the agreements, DIGA paid the settlement proceeds to the underlying litigants, and Dr. Rothbart was not required to contribute from his own pocket.
Litigation Center involvement
The Medical Society of Delaware and the Litigation Center each contributed modestly toward Dr. Rothbart’s litigation expenses.