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Medical Protective Company of Fort Wayne Indiana v. American International Specialty Lines Insurance Co.

United States District Court, N.D. Indiana, Fort Wayne Division

March 9, 2018

THE MEDICAL PROTECTIVE COMPANY OF FORT WAYNE INDIANA, Plaintiff,
v.
AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE COMPANY, Defendant.

          OPINION AND ORDER

          JAMES T. MOODY JUDGE

         This matter is before the court on the motion for partial summary judgment filed by plaintiff Medical Protective Company of Fort Wayne, Indiana (“MedPro”) (DE # 68), and the motion for summary judgment filed by defendant, American International Speciality Lines Insurance Company (“AISLIC”) (DE # 69). Because this court finds that MedPro knew, or should have known, as of June 30, 2005, that its prior failure to settle could lead to a claim or suit, MedPro's motion for partial summary judgment will be denied, and AISLIC's motion for summary judgment will be granted.

         I. BACKGROUND

         A. Terms of the Policy

         The following facts are not in dispute for purposes of the parties' motions for summary judgment. The plaintiff, MedPro, is a healthcare malpractice insurance company that purchased Insurance Company Professional Liability insurance from AISLIC. (DE # 76 at 3.) Insurance Company Professional Liability insurance is coverage for insurance companies and their agents for lawsuits alleging professional negligence and/or bad faith claims. (DE # 76 at 1.)

         MedPro's first insurance policy from AISLIC covered the period between June 30, 2005, and July 1, 2006 (“the 2005 policy”). (DE # 70-1 at 73.) MedPro subsequently renewed its policy and obtained coverage for the period between July 1, 2006, and July 1, 2007 (“the 2006 Policy”). (Id. at 104.) The polices stated, in relevant part:

NOTICE: THIS IS A CLAIMS MADE FORM. EXCEPT TO SUCH EXTENT AS MAY OTHERWISE BE PROVIDED HEREIN, THE COVERAGE OF THIS POLICY IS LIMITED GENERALLY TO LIABILITY FOR ONLY THOSE CLAIMS THAT ARE FIRST MADE AGAINST THE INSURED AND REPORTED IN WRITING TO THE COMPANY WHILE THE POLICY IS IN FORCE . . . .
* * * *
INSURING AGREEMENTS
1. PROFESSIONAL LIABILITY
To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages resulting from any claim or claims first made against the Insured and reported in writing to the Company during the Policy Period for any Wrongful Act of the Insured or of any other person for whose actions the Insured is legally responsible, but only if such Wrongful Act occurs prior to the end of the Policy Period . . . .
* * * *
DEFINITIONS
* * * * 1. “Insured” means:
A. the entity or entities named in Item 1 of the Declarations; B. any past, present, or future director, officer or employee of any entity named in Item 1 of the Declarations, while acting within the scope of their duties as such.
* * * *
7.Wrongful Act” means any breach of duty, neglect, error, misstatement, misleading statement, omission or other act done or wrongfully attempted.
EXCLUSIONS
This policy does not apply:
* * * *
m) to any claim arising out of any Wrongful Act occurring prior to the inception date of the first Insurance Company's Professional Liability Insurance Policy . . ., if on such first inception date any Insured knew or could have reasonably foreseen that such Wrongful Act could lead to a claim or suit;
* * * * ENDORSEMENT
* * * *
AMEND SPECIAL REPORTING CLAUSE ENDORSEMENT
In consideration of the premium charged, it is hereby understood and agreed that SPECIAL PROVISIONS, 4. SPECIAL REPORTING CLAUSE is deleted in its entirety and replaced with the following;
4. SPECIAL REPORTING CLAUSE
If during the Policy Period . . . ., the General Counsel, CEO or CFO shall become aware of any occurrence which may reasonably be expected to give rise to a claim against the Insured for a Wrongful Act which occurred during or prior to the Policy Period, and provided the Insured gives written notice to the Company during the Policy Period . . . of the nature of the occurrence and specifics of the possible Wrongful Act, any claim which is subsequently made against the Insured arising out of such Wrongful Act shall be treated as a claim made during the Policy Period.
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.

(Id. at 73-97, 106-113 (emphasis in original).)

         The parties did not define the term “claim” in either of their agreements, giving rise, in large part, to their present dispute.

         B. Factual Background for Wrongful Death Lawsuit

         The parties' dispute involves three lawsuits: (1) a 2003 wrongful death lawsuit by the Bramletts - the family of a deceased patient - against MedPro's insured, Dr. Benny Phillips, (the “wrongful death lawsuit”); (2) the Bramletts' subsequent lawsuit against MedPro arising from MedPro's alleged wrongful failure to settle the wrongful death lawsuit; and (3) the present lawsuit, in which ...


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