Summary
In Swicegood v. The Medical Protective Co., Civ. No. 95-0335-D, 2003 WL 22234928, *14 (N.D. Tex. Sept. 19, 2003), the Northern District of Texas has observed that "[i]n Hartrick the court was able to grant summary judgment in favor of the insurer in a coverage case because it was clear from the verdict and judgment in the underlying case that the judgment did not award damages caused by a covered `occurrence,' within the meaning of a general liability policy."
Summary of this case from National Union Fire Ins. v. Puget PlasticsOpinion
Civil Action No. 3:95-CV-0335-D.
September 19, 2003
MEMORANDUM OPINION AND ORDER
A former patient brought suit in state court to recover from a physician and his professional association for medical malpractice that arose in the context of an illicit romantic/sexual relationship between the physician and patient. The medical malpractice insurer for the physician and professional association filed suit in this court to obtain a declaratory judgment regarding its obligations to defend and indemnify them, relying on sexual act and punitive damages exclusions in their respective policies. The court issued an initial summary judgment ruling in 1996, holding that the insurer had no duty to defend or indemnify with respect to claims based on the physician's romantic/sexual relationship with the patient and no duty to indemnify against punitive damages. It abated the case until the state court case was tried and all appeals were exhausted. Following a final judgment that has been affirmed on appeal, the court must now address questions concerning the insurer's coverage obligations and its liability on certain extracontractual claims. The court must also decide the scope of the evidence that will be admissible at the coverage trial.
I A
Some of the background facts and procedural history of this case are set out in the court's prior opinion. See Med. Protective Co. v. Swicegood, No. 3:95-CV-0335-D (N.D. Tex. July 22, 1996) (Fitzwater, J.) (" Swicegood I"). Other pertinent background facts and procedural history are contained in the opinion of the Dallas Court of Appeals in the underlying state court lawsuit. See Hull-Swicegood Clinic, P.A. v. Dean, 2001 WL 1464934, at *1-*6 (Tex.App.-Dallas Nov. 20, 2001, pet. denied) (not designated for publication) (" Swicegood II"). The court will repeat and add to some of the background facts and procedural history described in Swicegood I and II to assist in an understanding of the court's decision today.
Defendant-counterplaintiff The Medical Protective Company ("Medical Protective") filed this suit on February 22, 1995 against William R. Swicegood, Jr., M.D. ("Dr. Swicegood"), now deceased, seeking a declaratory judgment that it had no duty to defend and/or indemnify him in a state court lawsuit brought by Marti T. Dean ("Dean"), whom he had formerly treated as a patient but with whom he had also engaged in an illicit romantic/sexual relationship. See Dean v. Swicegood, No. 94-6195 (191st Dist. Ct., Dallas County, Tex.) ("Underlying Lawsuit"), aff'd, 2001 WL 1464934 (Tex.App.-Dallas Nov. 20, 2001, pet. denied) (not designated for publication). Medical Protective insured Dr. Swicegood for medical malpractice under Policy No. 555185 (the "Swicegood Policy") in the amount of $500,000, and it insured Dr. Swicegood's professional association, Hull-Swicegood, P.A. (the "Clinic"), under Policy No. C33006 (the "Clinic Policy") in the amount of $100,000. In Swicegood I the court held that Medical Protective was required to defend and indemnify Dr. Swicegood concerning claims based on medical services that he had rendered as a physician to Dean but that it had no duty to defend or indemnify him with respect to Dean's claims to the extent based on her romantic/sexual relationship with him, and it had no duty to indemnify Dr. Swicegood against punitive damages. See Swicegood I, slip op. at 9.
Medical Protective also sued Dean. On January 11, 1996 the court dismissed the action against Dean in response to a stipulation of dismissal.
In December 1996 Dr. Swicegood committed suicide. In 1997 the court granted Medical Protective's motions to extend various pretrial deadlines and the trial setting, and it granted Medical Protective's motion to substitute Virginia E. Swicegood ("Mrs. Swicegood"), as executrix of Dr. Swicegood's estate (the "Estate"), as the defendant. Mrs. Swicegood answered Medical Protective's suit and filed a counterclaim. Dean later substituted the Estate in place of Mrs. Swicegood. On January 12, 1998 the court again extended the pretrial deadlines, it granted Medical Protective's motion for continuance and plea in abatement, and it statistically closed the case until the proceedings in the Underlying Lawsuit were completed. The court statistically reopened the case on December 13, 1999. The trial of the Underlying Lawsuit had been completed, and the state court had entered a final judgment on November 12, 1999. On May 11, 2000, however, the court statistically closed the case again so that Medical Protective could exhaust its appeal. After the Dallas Court of Appeals affirmed and the Supreme Court of Texas denied Medical Protective's petition for review, the court reopened the case statistically for the final time on October 2, 2002. At that point, Medical Protective was still aligned as plaintiff-counterdefendant and the Estate was aligned as defendant-counterplaintiff.
The court later granted the Estate's unopposed motion for leave to amend and realign parties and Dean's unopposed motion for leave to intervene. The Estate and Dean filed a combined first amended complaint. David Greenstone ("Greenstone"), as Dean's receiver, later obtained leave to intervene as a plaintiff.
The state district court in the Underlying Lawsuit appointed Greenstone as Dean's receiver under a turnover order, transferring to him as receiver all rights of the Clinic to bring an action against Medical Protective arising out of or related to the Clinic Policy.
Dean filed the Underlying Lawsuit on June 21, 1994 against Dr. Swicegood, his associate, Paul G. Hull, M.D. ("Dr. Hull"), the Clinic, and HSP of Texas, Inc., d/b/a HCA Medical Center-Plano ("HSP"). She alleged that Dr. Swicegood had committed medical malpractice and that the Clinic was vicariously liable. By the time of the state court trial, the defendants were Mrs. Swicegood, as independent executrix of the Estate, and the Clinic. The Underlying Lawsuit was tried to a jury, which found that Dean was Dr. Swicegood's patient and that his negligence and the negligence of the Clinic, but not of HSP, caused her injuries. The jury also found that Dr. Swicegood was acting at the time in the scope of his employment with the Clinic. The jury apportioned responsibility 80% to Dr. Swicegood and 20% to the Clinic. It found that Dean had incurred actual damages in the total sum of $725,529.80. The jury also found that Dr. Swicegood was grossly negligent, and it awarded Dean $1 million against the Estate as exemplary damages.
Dean voluntarily dismissed her action against HSP in 1995 and dismissed her action against Dr. Hull in 1998.
The jury awarded $35,004.80 for medical care in the past, $20,525.00 for psychological counseling in the past, $20,000 for psychological counseling that, in reasonable probability, she will require in the future, $500,000 for physical pain and mental anguish sustained in the past, and $150,000 for mental anguish that, in reasonable probability, she will sustain in the future.
The state district court set aside the jury's finding that the Clinic was negligent. It held, however, that the Clinic was vicariously liable for Dr. Swicegood's negligence. Based on the remainder of the verdict, the court awarded Dean judgment in the sum of $725,529.80 against the Estate and the Clinic, jointly and severally, and $391,189.77 in prejudgment interest, and it awarded Dean judgment in the sum of $1 million against the Estate. The court also awarded Dean her costs of court and post-judgment interest. As noted, the Dallas Court of Appeals affirmed in Swicegood II, and the Supreme Court of Texas denied a petition for review. The Underlying Lawsuit judgment is now final and unappealable.
As the present case is now structured, the Estate sues Medical Protective seeking a declaratory judgment that Medical Protective is obligated to indemnify the Estate and pay Dean the damages awarded by the judgment in the Underlying Lawsuit. It also brings claims against Medical Protective under the Stowers doctrine for negligently mishandling the Estate's insurance claim and for unfair claim settlement practices, in violation of Tex. Ins. Code Ann. art. 21.21, § 4(10)(a)(ii) (Vernon Supp. 2003). Dean sues Medical Protective for breach of contract as third-party beneficiary of the Swicegood and Clinic Policies and as judgment creditor of the Estate and Clinic. Greenstone brings claims for negligently mishandling the Estate's insurance claim and violating the Texas Insurance Code. Medical Protective denies that it is liable to the Estate, Dean, and Greenstone, and its seeks declaratory judgment that it has no liability under the Swicegood Policy and Clinic Policy.
G.A. Stowers Furniture Co. v. Am. Indem. Co., 15 S.W.2d 544 (Tex. Comm'n App. 1929, holding approved).
B
Dean moves for partial summary judgment against Medical Protective. She contends that Medical Protective is liable under the Swicegood and Clinic Policies to pay her the full amount of compensatory damages awarded in the judgment against the Estate and the Clinic. Dean maintains that she is entitled to summary judgment that the Clinic Policy covers the compensatory damages because Medical Protective waived or is estopped from raising any coverage defenses as to the Clinic since it defended the Clinic without a reservation of rights. She posits that the Swicegood Policy clearly covers the compensatory damages awarded in the Underlying Lawsuit judgment and that the Swicegood Policy's sexual act exclusion does not apply because her damages arise from covered professional services and not from the non-covered personal relationship with Dr. Swicegood and/or from sexual acts of Dr. Swicegood.
Dean's motion for summary judgment is filed in her name alone, see P. Mar. 31, 2003 Mot. at 1; P. Mar. 31, 2003 Br. at 1, but her contentions are now aligned with those advanced by the Estate and/or Greenstone.
Medical Protective moves for partial summary judgment. It argues that (1) it has no duty to indemnify the Estate under its request for declaratory judgment because there was no adjudication in the Underlying Lawsuit of legal responsibility of Dr. Swicegood for damages caused by covered claims as opposed to non-covered claims; (2) the Estate cannot recover for negligent mishandling of an insurance claim because neither the judgment nor the verdict in the Underlying Lawsuit allocated or segregated damages caused by covered claims from damages caused by non-covered claims and thus no right to indemnity arises under the Swicegood and Clinic Policies, Texas does not recognize a cause of action for negligent mishandling other than under the Stowers doctrine (the elements of which the Estate cannot establish), and the Estate cannot present evidence of an excess judgment for covered claims; (3) the Estate cannot establish the elements of a claim under Article 21.21 and cannot present evidence of an excess judgment for covered claims or of a knowing violation of Article 21.21; and (4) Medical Protective has no duty to indemnify the Clinic or the Estate under the court's interpretation in Swicegood I of the sexual act and punitive damages exclusions of the Swicegood Policy and the jury verdict, and Dean can present no evidence that Medical Protective breached its duty to indemnify the Estate under the Swicegood Policy or that it failed to pay damages caused by a covered claim, as this court has interpreted the Swicegood and Clinic Policies in Swicegood I.
Although the following defect in Medical Protective's briefing does not affect the court's decision on these motions, the court notes that in its motion and brief, Medical Protective purports to incorporate by reference and through judicial notice evidence submitted in support of its earlier motion for summary judgment and other pleadings on file. See, e.g., D. Mar. 31, 2003 Br. at 3-5 4 n. 1. Consequently, it has not included this evidence in the appendix that supports its present motion and has not cited the evidence by its specific appendix page number. This is improper. N.D. Tex. Civ. R. 56.6(a) provides that "[a] party who relies on affidavits, depositions, answers to interrogatories, or admissions on file to support or oppose a motion for summary judgment must include such evidence in an appendix." Rule 56.5(c) requires that "[a] party whose motion or response is accompanied by an appendix must include in its brief citations to each page of the appendix that supports each assertion that the party makes concerning the summary judgment evidence." The court's local civil rules supplement the Federal Rules of Civil Procedure. The summary judgment rules are intended to require a party to place before the court, in a convenient form, the evidence on which the party relies to support or oppose a summary judgment motion and to assist the court in readily locating the evidence by requiring that the evidence be cited accurately. Allowing, as here, extensive evidence to be incorporated by reference, without citing the evidence in the manner prescribed by Rule 56.5(c), would deprive the court of valuable tools in deciding summary judgment motions justly and efficiently.
The parties have also submitted briefs that address the question whether evidence beyond that introduced in the Underlying Lawsuit will be admissible at the trial of this case if the court concludes that the coverage issues cannot be resolved by summary judgment.
II
The court turns first to the coverage questions involving the Estate. Medical Protective seeks summary judgment dismissing the Estate's declaratory judgment action and establishing as a matter of law that it is entitled to a declaratory judgment that it has no duty to indemnify the Estate for the judgment in the Underlying Lawsuit. It also requests summary judgment dismissing Dean's breach of contract action in which she alleges that Medical Protective has breached the Swicegood and Clinic Policies by not paying the actual and punitive damages awarded in the Underlying Lawsuit. Dean moves for summary judgment establishing that Medical Protective is liable up to policy limits under the Swicegood and Clinic Policies. Because the parties' cross-motions present related arguments, the court will consider them together.A 1
The threshold question the court must decide is whether Medical Protective is obligated to indemnify the Estate in the absence of a judgment or verdict that apportioned or allocated the damages between covered and non-covered claims. In Swicegood I the court held based on an exclusion for "damages [that] are in consequence of the performance of a criminal act or willful tort or sexual act" that "unless the factual allegations in Dean's complaint include a claim that she was receiving [psychotherapeutic treatment involving the transference phenomenon] from Dr. Swicegood, Medical Protective is not obligated to defend or indemnify Dr. Swicegood for the claims in this suit related to his sexual conduct." Swicegood I, slip op. at 7. The court concluded:
The exclusion provides:
A. IN ANY CLAIM FOR DAMAGES, AT ANY TIME FILED, BASED ON PROFESSIONAL SERVICES RENDERED OR WHICH SHOULD HAVE BEEN RENDERED, BY THE INSURED OR ANY OTHER PERSON FOR WHOSE ACTS OR OMISSIONS THE INSURED IS LEGALLY RESPONSIBLE, IN THE PRACTICE OF THE INSURED'S PROFESSION DURING THE TERM OF THIS POLICY; EXCEPT this policy does not cover
* * *
2. payment of damages (BUT WILL DEFEND) in any claim for damages if said damages are in consequence of the performance of a criminal act or willful tort or sexual act[.]Swicegood I, slip op. at 2-3 (reprinting exclusion).
A review of Dean's second amended petition reveals no allegations that Dr. Swicegood provided psychotherapeutic services involving the transference phenomenon. Dean's petition states that "Swicegood failed to appropriately recognize and handle the transference and counter-transference phenomena that arose between him and Ms. Dean." Nowhere in the complaint, however, does Dean allege facts indicating that she and Dr. Swicegood had entered into a therapeutic program whereby Dean displaced onto Dr. Swicegood feelings, attitudes, and attributes that properly belong to a significant attachment figure from her past, or that he came to serve as a substitute for any person with whom Dean was having difficulty expressing herself. Even if some form of transference took place between Dean and Dr. Swicegood, where such transference is not an element of the patient's psychotherapeutic treatment, it does not render subsequent sexual relations part of the "professional services" rendered. Under the terms of the Policy, Medical Protective is therefore not obligated to defend and/or indemnify Dr. Swicegood for Dean's claims arising out of her romantic/sexual relationship with Dr. Swicegood.Id. at 7-8 (citation omitted). The court distinguished, however, other claims that were not predicated on her sexual relationship with Dr. Swicegood, such as her allegations that he had provided her with samples of prescription drugs without explaining their proper use and that the amount of drugs he supplied her was excessive; that among the drugs provided were oral contraceptives that he supplied without examining her and without adequately explaining the potential side-effects; that he did not properly treat her for the side effects she had experienced; that he instructed her not to inform any of her other health care providers about the drugs he had given her; that his failure to render services caused her injury; that, in his capacity as her physician and mental health care provider, he failed to diagnose or treat her depression and to refer her to another doctor for treatment; and that he informed her that she would be confined to a state psychiatric hospital as a consequence of her suicide attempt unless she admitted herself to a private institution. Id. at 8-9. The court held:
These allegations of non-sexual-type acts and omissions form the basis for portions of Dean's medical malpractice and gross negligence claims. The prescribing of medications, diagnosing of disorders, referring to specialized practitioners, and recommending to a patient that she admit herself to a psychiatric facility, are professional services within the meaning of the Policy. Consequently, unless they are excepted by other Policy provisions, Dean's claims that are based on such conduct are covered by the Policy.Id. at 9.
Medical Protective maintains that it is entitled to summary judgment because the Estate was obligated, but failed, to obtain findings in the Underlying Lawsuit that apportioned or allocated Dean's damages between covered and non-covered conduct. It seeks summary judgment declaring that it has no duty to indemnify the Estate and dismissing Dean's breach of contract action.
Medical Protective has failed to establish that Texas requires that an apportionment or allocation be made in the underlying third-party suit rather than in a first-party coverage case. The cases it cites do not stand for this principle. They support only the propositions that the apportionment or allocation must be made at some point and that the judgment or verdict in the underlying suit may in some instances completely resolve the coverage question.
Allison v. Fire Insurance Exchange, 98 S.W.3d 227 (Tex.App. 2002, pet. filed), and Wallis v. United Services Automobile Ass'n, 2 S.W.3d 300 (Tex.App. 1999, pet. denied), are first-party coverage cases. Although Employers Casualty Co. v. Block, 744 S.W.2d 940 (Tex. 1988) (on rehearing), overruled on other grounds by State Farm Fire and Casualty Co. v. Gandy, 925 S.W.2d 696 (Tex. 1996), and Enserch Corp. v. Shand Morahan Co., 952 F.2d 1485 (5th Cir. 1992) (Texas law), are coverage actions that address liability in relation to underlying third-party cases, for reasons that will be made clear in the court's discussion of these cases below, see infra at § IV(B)(1), neither supports the principle that damages between covered and non-covered claims must be apportioned or allocated in the underlying case. In Hartrick v. Great American Lloyds Insurance Co., 62 S.W.3d 270 (Tex.App. 2001, pet. filed) (on rehearing), the court of appeals affirmed a summary judgment in favor of the insurer in a coverage suit because it was clear from the verdict and judgment in the underlying case that the judgment did not award damages caused by a covered "occurrence" within the meaning of a commercial general liability policy. Id. at 278. Hartrick neither holds nor suggests that an allocation or apportionment between covered and non-covered claims must be made in the underlying case.
One of the decisions Medical Protective cites, Farmers Texas County Mutual Insurance Co. v. Griffin, 955 S.W.2d 81 (Tex. 1997) (per curiam), may even contradict its position. In Farmers the Texas Supreme Court observed that "[i]t may sometimes be necessary to defer resolution of indemnity issues until the liability litigation is resolved. In some cases, coverage may turn on facts actually proven in the underlying lawsuit." Id. at 84. The contrast between these two statements suggests that coverage issues that cannot be resolved in the third-party liability action may be the subject of additional factual development in the first-party coverage case.
Accordingly, because the authorities on which Medical Protective relies do not establish that the apportionment or allocation must be made in the underlying third-party suit, the court denies Medical Protective's motion for summary judgment seeking a declaration that it has no duty to indemnify the Estate.
In opposing Medical Protective's motion in this respect, Dean asserts that its "citation of the case law [was] either deliberately misleading or (charitably) grossly incompetent." See P. May 21, 2003 Br. at 10. While the court agrees that Medical Protective's reliance on the cases it cites is misplaced, this type ad hominem assertion has no place in a brief. Assertions of this type are not persuasive, and they detract from the professionalism of a brief.
2
Medical Protective moves for summary judgment dismissing Dean's breach of contract claim. Its first argument directed to liability under the Swicegood and Clinic Policies incorporates the contentions made in support of its declaratory judgment action, i.e., that Dean cannot demonstrate breach of contract because the final judgment in the Underlying Lawsuit did not apportion or allocate covered from non-covered damages. Because the court has held above that Dean was not obligated to obtain this apportionment or allocation in the Underlying Lawsuit, Medical Protective is not entitled to summary judgment dismissing Dean's breach of contract claim on this basis.Medical Protective's second argument concerning the Swicegood Policy relates to punitive damages. It maintains that because the court held in Swicegood I that Dean cannot recover such damages, it is entitled to judgment dismissing this component of her breach of contract claim. Dean essentially concedes in her response, and acknowledged at oral argument, that Swicegood I forecloses a recovery of punitive damages under a breach of contract theory. She maintains, however, that such damages are recoverable under her extracontractual claims, and she asks the court to make clear that dismissal of this aspect of her contract action will not affect her right to recover under these claims. See P. May 21, 2003 Br. at 34-36. The court follows its conclusion in Swicegood I and holds that Dean may not recover from Medical Protective on a breach of contract theory the punitive damages awarded in the Underlying Lawsuit. Medical Protective's motion for summary judgment is granted in this respect.
C
The court now turns to Dean's pertinent coverage arguments and to Medical Protective's arguments in opposition. In her response to Medical Protective's motion and in her own motion, Dean maintains that she is entitled to summary judgment declaring that Medical Protective is obligated under the Swicegood Policy to indemnify the Estate. She posits, inter alia, that Medical Protective is collaterally estopped from contesting coverage because the jury in the Underlying Lawsuit allocated or apportioned 100% of the damages to covered malpractice claims and no further allocation or apportionment is necessary, and she argues that Medical Protective waived its right to assert, or is estopped from asserting, its coverage defenses because it did not expeditiously pursue its declaratory judgment action against the Estate.
1
The court will assume arguendo that collateral estoppel otherwise applies and will also assume that Medical Protective will have the burden at trial of proving that the sexual act exclusion of the Swicegood Policy excludes coverage for the compensatory damages that Dean recovered. Even on these assumptions, the court holds that there is a genuine issue of material fact whether these damages are based solely on covered conduct.
In view of this disposition, the court need not address Medical Protective's objections to Dean's evidence. See D. May 19, 2003 Br. at 4-11. Nor need it consider Medical Protective's contention that Dean is precluded by an agreement reached on the trial record in the Underlying Lawsuit from arguing that the judgment establishes Medical Protective's liability as a matter of law, see id. at 14-18, or its assertions that Dean cannot raise collateral estoppel or waiver because she failed to plead these arguments, see D. June 5, 2003 Rep. Br. at 2-3.
If the court were to hold that Dean will have the burden at trial of proving that the judgment awards damages for a loss covered under the Swicegood Policy, it would hold that she is not entitled to summary judgment because she has not established beyond peradventure that the judgment awards only covered damages.
Evidence concerning the romantic/sexual relationship between Dean and Dr. Swicegood permeated the trial of the Underlying Lawsuit. As the state district court observed in ruling on the Clinic's motion for directed verdict, "had there not been the sexual relationship, there would be no lawsuit." See D. May 19, 2003 App. 1660. The opinion of the court of appeals, in reciting the background facts, corroborates the foundational role that the relationship played. See Swicegood II, 2001 WL 1464934, at *1-*6. Dean's expert witness opined, based on his review of her medical records, that her relationship with Dr. Swicegood was "the major factor" in her emotional distress and attempted suicide, see D. May 19, 2003 App. 985, and that although other stressors may have played some role, they "were minor factors compared to the relationship with Dr. Swicegood and its course, id. at 1080. The jury awarded Dean substantial damages for past and future psychological counseling and past and future mental anguish. The Estate argued on appeal "that Swicegood's sexual relationship with Dean was not medical malpractice because the sexual relationship was not initiated under the pretext of treating Dean." Swicegood II, 2001 WL 1464934, at *7 n. 11 (emphasis added).
Dean's best argument that the jury awarded damages only for covered medical malpractice is based on the jury charge. The charge defined "negligence" in terms of what a family practice physician of ordinary prudence would or would not do, defined "ordinary care" in terms of the degree of care that a family practice physician of ordinary prudence would use, and defined the foreseeability element of "proximate cause" in terms of what was foreseeable to a family practice physician using ordinary care. See P. Mar. 31, 2003 Br. at 28 (reprinting definitions from jury charge). Dean posits that, given instructions framed in terms of a physician's conduct and foreseeability, the jury could only have awarded damages for medical malpractice covered by the Swicegood Policy. Although this argument has superficial appeal, it falters on close scrutiny.
First, the charge defined negligence as "failure to use ordinary care, that is, failing to do that which a family practice physician of ordinary prudence would have done under the same or similar circumstances or doing that which a family practice physician of ordinary prudence would not have done under the same or similar circumstances." Id. "Ordinary care" was defined as "that degree of care that a family practice physician of ordinary prudence would use under the same or similar circumstances." Id. The jury could have found, at least in part, that a family practice physician exercising ordinary care would not have engaged in a romantic/sexual relationship with a patient. Nothing in the court's charge instructed the jury to limit its consideration of the evidence to the performance of medical care by a physician to a patient.
Question No. 1 did ask if Dean was a patient of Dr. Swicegood, and the charge instructed the jury that "[a] physician-patient relationship exists only if the physician has agreed, expressly or impliedly, to render medical services of a specified or general nature to the person claiming the relationship." P. Mar. 31, 2003 Br. at 28. The charge did not, however, instruct the jury that Dean's romantic/sexual relationship with Dr. Swicegood did not occur within the physician-patient relationship.
Second, to establish proximate cause, Dean was only required to show that Dr. Swicegood's negligence was a proximate cause of her injuries, because the court instructed the jury, in accordance with Texas law, that there may be more than one proximate cause of an event. Accordingly, while Dr. Swicegood's medical malpractice was at least a proximate cause of Dean's injuries, other conduct could have been as well.
Third, the question that asked the jury to determine Dean's damages directed it to find the amounts that would compensate her for her injuries "resulting from the occurrence in question," but did not define the term "occurrence in question." See id. at 30. When this term is not defined, the court examines the legal basis of the lawsuit. See Upjohn Co. v. Freeman, 885 S.W.2d 538, 546 (Tex.App. 1994, writ denied) ("[T]he trial court did not instruct the jury on the meaning of occurrence in question. The occurrence in question is defined as the legal basis of the lawsuit."). It is "the event that enables a plaintiff to bring suit against a defendant[.]" Id. at 546 n. 7. This task is relatively easy when the case involves, for example, an accident from which an injury occurs. In a medical negligence case, the occurrence could be easily ascertained when malpractice is committed during a single procedure. Here, however, Dean relied on several events as the legal basis of her lawsuit, some of which were arguably inextricably intertwined with her romantic/sexual relationship with Dr. Swicegood. As the court of appeals noted, "Dean alleged and presented evidence that Swicegood breached his duty as a physician by engaging in a `romantic' or sexual relationship and not warning Dean of the dangers of such a relationship." Swicegood II, 2001 WL 1464934, at *6.
The court intends no criticism of the state district court. The Texas Pattern Jury Charge that the court probably used to frame the damages question does not define the term. See COMM. ON PATTERN JURY CHARGES, STATE BAR OF TEX., TEXAS PATTERN JURY CHARGES — MALPRACTICE, PREMISES PRODUCTS PJC 80.2 (2002).
Accordingly, the court is unable to say that the jury charge indubitably excluded the possibility of an award of any compensatory damages for non-covered claims. Dean is not entitled to summary judgment establishing that Medical Protective is collaterally estopped from contesting coverage under the Swicegood Policy.
2
Dean also asserts that Medical Protective waived its coverage defenses because it did not expeditiously pursue its declaratory judgment action against the Estate.
Dean relies on the fact that approximately eight years after Medical Protective initially contested coverage, the coverage defense has not been resolved. This argument lacks merit. Dean sued Swicegood in the Underlying Lawsuit on June 21, 1994. Medical Protective filed this declaratory judgment action on February 22, 1995. On July 22, 1996 the court decided Swicegood I, holding that Medical Protective was required to defend and indemnify Dr. Swicegood against claims based on medical services rendered as a physician to Dean, but that it had no duty to defend or indemnify him with respect to Dean's claims to the extent based on her romantic/sexual relationship with him. The court also concluded that Medical Protective had no duty to indemnify Dr. Swicegood against punitive damages. See Swicegood I, slip op. at 9. In December 1996 Dr. Swicegood committed suicide. In 1997 the court extended various pretrial deadlines and the trial setting, and it substituted Mrs. Swicegood, as executrix of Dr. Swicegood's estate, as the defendant. In 1998 the court statistically closed the case due to the proceedings in the Underlying Lawsuit. Except for a period of six months in late 1999 and early 2000, the case remained statistically closed until October 2, 2002, after the appeals in the Underlying Lawsuit were completed. The delay in adjudicating the policy defenses was due to the necessity of completing the proceedings in the Underlying Lawsuit.
In view of this conclusion, the court need not reach Medical Protective's contention that Dean is estopped from raising this argument because she failed to plead waiver. But see infra note 16.
Accordingly, the court denies Dean's motion for summary judgment against Medical Protective in which she seeks to recover the limits of the Swicegood Policy.
III
The court considers next the coverage questions involving the Clinic Policy. Medical Protective moves for summary judgment on the ground that Dean cannot recover for breach of contract under the Clinic Policy because she did not obtain in the Underlying Lawsuit an allocation or apportionment of covered and non-covered damages. Dean argues that she is entitled to recover the limits of the Clinic Policy because Medical Protective waived its right to contest coverage by assuming the defense of the Clinic in the Underlying Lawsuit without obtaining a non-waiver agreement or a reservation of rights.
Dean does not move for summary judgment under the Clinic Policy — as she does concerning the Estate and the Swicegood Policy — on the ground that Medical Protective is collaterally estopped from relitigating its coverage defenses. The court thus has no occasion to consider whether she is entitled to relief on this basis.
A
The court rejects Medical Protective's contention that Dean cannot recover for breach of the Clinic Policy because she did not obtain in the Underlying Lawsuit an allocation or apportionment of covered and non-covered damages. The court has already explained above why Medical Protective is not entitled to summary judgment on this basis. See supra § II(A)(1). Accordingly, the court denies Medical Protective's motion in this respect, and it declines to deny Dean's summary judgment motion on this basis.B
The court now considers whether, as third-party beneficiary of the Clinic Policy and as judgment creditor of the Clinic, Dean is entitled to summary judgment on her breach of contract claim. Because she will have the burden of proof on this cause of action at trial, to obtain summary judgment she "must establish `beyond peradventure all of the essential elements of the claim[.]'" Bank One, Tex., N.A. v. Prudential Ins. Co. of Am., 878 F. Supp. 943, 962 (N.D. Tex. 1995) (Fitzwater, J.) (quoting Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986)). Medical Protective opposes Dean's motion on several grounds, but the dispositive question is whether she has failed to meet her burden of conclusively proving how the Clinic was harmed.
Because Medical Protective may attempt to reassert one of its estoppel arguments at trial, the court will address it now. Medical Protective posits that Dean is estopped from raising waiver because she did not plead it. Assuming arguendo that her breach of contract claim invokes the affirmative defense of waiver and that Dean was obligated to plead waiver affirmatively, the defense is not waived if raised at a pragmatically sufficient time and the opposing party is not prejudiced in its ability to respond. See Allied Chem. Corp. v. Mackay, 695 F.2d 854, 856 (5th Cir. 1983) (per curiam). Dean raised this assertion at least as of the filing of her motion for partial summary judgment (if not in the breach of contract claim), and Medical Protective had a fair opportunity to respond on the merits. Because Dean raised the defense at a pragmatically sufficient time and Medical Protective cannot demonstrate prejudice, the court even now could grant Dean leave to amend to plead waiver.
Under Texas law, "[i]f an insurer assumes an insured's defense without declaring a reservation of rights or obtaining a non-waiver agreement, and with knowledge of facts indicating non-coverage, all policy defenses, including those of non-coverage, are waived, or the insurer may be estopped from raising them." Pa. Nat'l Mut. Cas. Ins. Co. v. Kitty Hawk Airways, Inc., 964 F.2d 478, 481 (5th Cir. 1992) (per curiam) (quoting State Farm Lloyds, Inc. v. Williams, 791 S.W.2d 542, 550 (Tex.App. 1990, writ denied)). To come within this exception to the Texas rule that the doctrines of waiver and estoppel cannot be used to create insurance coverage where none exists under the terms of the policy, the insured must show "(1) that the insurer had sufficient knowledge of the facts or circumstances indicating non-coverage but (2) assumed or continued to defend its insured without obtaining an effective reservation of rights or non-waiver agreement and, as a result, (3) the insured suffered some type of harm." Id. The court will assume arguendo that Dean can meet the first two elements of this test for waiver.
Dean has introduced evidence that, in an August 2, 1994 letter, Medical Protective assumed the Clinic's defense without obtaining either a non-waiver agreement or a reservation of rights. See P. Mar. 31, 2003 App. 123-24. Medical Protective asserts that there is a fact issue whether it waived its coverage defenses because it stated in the letter that punitive damages were not covered under the Clinic Policy and advised the Clinic of its right to secure independent counsel. The court disagrees with Medical Protective that the letter can reasonably be read as a reservation of rights concerning the Clinic's liability for compensatory damages. Even Medical Protective's adjuster testified that the purpose of the letter was to accept coverage of compensatory damages to the limits of the Clinic Policy, excluding punitive damages. See P. May 21, 2003 App. 8.
Under the third element, "unless a conflict of interests or other harm is clear and unmistakable . . . the insured must show how he was harmed." Williams, 791 S.W.2d at 553. Because Dean has the burden of proving this element at trial, to obtain summary judgment she must establish the third element beyond peradventure. The court holds that she has not.
Dean posits that she meets this element because Medical Protective and the Clinic had a conflict of interest that establishes clear and unmistakable harm. She also contends that in this case there is ample evidence that Medical Protective in fact prejudiced the Clinic. Dean cites as evidence the fact that the lawyer whom Medical Protective furnished the Clinic defended it on the ground that Dr. Swicegood had not acted in the course and scope of his employment because Dean's damages were allegedly caused by a personal relationship with Dr. Swicegood that was not in furtherance of the Clinic's business. Dean maintains that this defense deprived the Clinic of policy coverage and that the lawyer could have made the same argument — i.e., the conduct was not within the course and scope of employment — on another basis that was consistent with coverage, such as on the ground that Dr. Swicegood provided medical treatment to Dean off the Clinic's premises and without compensation.
The court declines to grant summary judgment because it cannot say beyond peradventure that the defense the Medical Protective attorney pursued on the Clinic's behalf clearly and unmistakably shows a conflict of interest or that Dean has demonstrated harm. As noted, the state district court concluded the Clinic was only vicariously liable to Dean for Dr. Swicegood's negligence. A reasonable trier of fact in the instant coverage suit could find that a reasonable — if not the most logical — approach for the Clinic to take in defending itself in the Underlying Lawsuit was to attempt to persuade the jury that Dean's injuries all arose from a romantic/sexual relationship with Dr. Swicegood that occurred outside the course and scope of his employment with the Clinic. The fact that this defense, if successful, coincided with non-coverage under the Clinic Policy was perhaps fortuitous for Medical Protective, but it does not of itself render the strategy clearly and unmistakably harmful. Texas rejected a per se conflict of interest rule in Williams. See Williams, 791 S.W.2d at 553 (noting that in some jurisdictions "[a]pparently, the mere existence of a conflict of interests may be enough to demonstrate harm[,]" but holding that "unless a conflict of interests or other harm is clear and unmistakable, we are inclined to the view that the insured must show how he was harmed."). And Dean has not otherwise established beyond peradventure that the Clinic was harmed by the use of this defensive strategy. Accordingly, because the trier of fact could reasonably find in the coverage suit that the litigation strategy that Medical Protective followed was the most beneficial for the Clinic, Dean's motion for summary judgment is denied in this respect.
Dean also contends that Medical Protective waived its right to assert, or is estopped from asserting, its coverage defenses because it did not pursue a declaratory judgment action against the Clinic. Medical Protective had no reason to seek a declaratory judgment, however, where this court had already held in Swicegood I that it could not be liable for punitive damages and the only basis on which it purported to reserve its rights was non-liability for such damages.
IV
Having decided that neither Dean nor Medical Protective is entitled to summary judgment on the coverage issues, the court must determine the scope of the evidence that will be admissible at the coverage trial. Dean maintains that the trial is not limited to the evidence adduced by the parties during the trial of the Underlying Lawsuit. She argues that because the admission of evidence is procedural, federal rather than state law controls and allows the introduction of new testimony and exhibits. She also posits that Texas law requires the admission of new evidence in the coverage trial where the underlying suit does not resolve the issue. Medical Protective contends for various reasons that the evidence in the coverage trial is limited to that which was introduced in the Underlying Lawsuit.A
Dean maintains that because in a diversity case the question whether the court should admit or limit new evidence is one of evidentiary law and trial management, federal procedure, including Fed.R.Evid. 402, controls. She contends that because this court is vested with discretion under Rule 402 to decide what evidence is relevant, it is not bound by Texas law in making this decision. Dean then reasons that the new proof she intends to offer at trial is relevant and may be admitted. Her argument is only partially correct and is ultimately misplaced. Dean correctly contends that the Federal Rules of Evidence control. But she overlooks that this court's discretion under Rule 402 to decide what evidence is relevant is governed by state law, i.e., state substantive law dictates what proof is relevant. This court is not vested with discretion under Rule 402 to admit evidence that Texas would deem substantively irrelevant. Accordingly, while Rule 402 unquestionably controls, it does not excuse the court from its obligation to follow state law.
B
The court now examines Texas law to decide what evidence will be admissible. Dean at one point in her briefing thoughtfully analyzes how different factual scenarios in a third-party liability lawsuit affect (and vary) the evidence that is admissible in a subsequent first-party coverage suit, see P. July 21, 2003 Br. at 6-7, and she appeared to take a somewhat narrower approach at oral argument concerning what additional evidence is admissible. Nevertheless, she insists in her brief that she is entitled to call anew witnesses who testified in the Underlying Lawsuit (including herself), as if this coverage suit were in some sense a trial de novo. Medical Protective, on the other hand, appears to argue for an unduly restrictive per se ban on all additional evidence. The court has been unable to locate, and the parties have not cited, a decision by the Texas Supreme Court that squarely decides this issue. "The court must therefore make an Erie-guess as to how the Texas Supreme Court would decide the question." Nutmeg Ins. Co. v. Pro-Line Corp., 836 F. Supp. 385, 388 (N.D. Tex. 1993) (Fitzwater, J.).
1
The court rejects Medical Protective's contention that new evidence cannot be introduced at trial. There are decisions of the Texas Supreme Court and of the Fifth Circuit interpreting Texas law that indicate that new evidence is admissible when the coverage question turns on a matter that was not adjudicated in the liability suit. See Block, 744 S.W.2d 940; Utica Nat'l Ins. Co. v. Am. Indem. Co., ___ S.W.3d ___, 2003 WL 21468776 (Tex. June 26, 2003); Enserch, 952 F.2d 1485 (Texas law).In Block the Texas Supreme Court concluded that the insurer could not be held liable for damage from a leaking roof based on an agreed judgment between the plaintiffs and its insured because their agreement concerning the date of the occurrence of the property damage was not essential in determining the insured's liability. Block, 744 S.W.2d at 943. Accordingly, the insurer was not collaterally estopped from litigating the issue of coverage, i.e., whether the roof was damaged during the policy period. Id. The court held, however, that the plaintiffs had met their burden in the trial of the coverage suit by establishing through uncontroverted testimony that the property damage occurred during the policy period. Id. at 944. Had there been a per se ban on introducing evidence during the coverage trial to address a coverage issue not resolved by the agreed judgment in the indemnity suit, the Texas Supreme Court could not have concluded that this evidence was sufficient to establish coverage.
The court recognizes that Block focuses principally upon collateral estoppel. This does not, however, affect the court's reasoning concerning whether Block can be interpreted to permit the introduction of additional evidence.
In Utica National the Texas Supreme Court addressed the question whether an insurer had a duty to indemnify a doctors' association against a claim filed by patients injured by the administration of contaminated anesthetics. Utica National, 2003 WL 21468776, at *1. The patients sued the doctors' association, and they settled for approximately $1 million. Id. at *2. The insurer relied on a policy provision that excluded coverage for bodily injury due to rendering or failure to render any professional service. Id. at *1. Although the parties argued at the subsequent trial of the coverage suit that the indemnity question could be decided as a matter of law, the court held that the coverage determination depended on resolution of the factual question whether the patients' infection was caused by the doctors' breach of a professional standard of care. Id. at *6. It pointed out that it had previously noted that the question of coverage often turned on the resolution of factual questions. Id. It quoted from its earlier decision in Farmers, in which it held, inter alia, that "[i]t may sometimes be necessary to defer resolution of indemnity issues until the liability litigation is resolved. In some cases, coverage may turn on facts actually proven in the underlying lawsuit." Utica National, 2003 WL 21468776, at *6 (quoting Farmers, 955 S.W.2d at 84). The court then applied its reasoning to the facts, holding that because the policy treated the professional services exclusion as an exception to coverage, the insurer bore the burden of proving that the exclusion applied. Id. It concluded that "[a] determination by the finder of fact that the infection was caused by the breach of a professional standard of care . . . would negate [the insurer's] duty to indemnify. If, however, the professional services were rendered with due care, then the exclusion would not apply." Id. Because it disagreed with the court of appeals that the record established the insurer's indemnity obligation as a matter of law, the court reversed in part and remanded the case to the trial court to determine this issue. Id. In rejecting the parties' contention that the question could be decided as a matter of law, and in addressing the factual question to be resolved on remand, it necessarily suggested that additional evidence could be admitted in the coverage suit that was not introduced in the indemnity suit.
In Enserch the Fifth Circuit addressed whether two insurers had breached the duty to defend their insured in underlying multidistrict ("MDL") litigation. Because the panel held that they had, the question became whether the insurers were liable for the entire settlement that the insured had arranged on its own. See Enserch, 952 F.2d at 1493. The Fifth Circuit held that the apportionment had not properly been made in the coverage trial. Id. at 1494. In remanding the case, the panel held:
There are several possible sources for help in allocating the claimant's damages. There are the allegations contained in the bondholders' complaint; there is the settlement between Ebasco and the bondholders; and there are the facts that would have been the subject of the MDL lawsuit, had it been tried. We can imagine cases where the allegations alone could sufficiently justify an allocation of damages. In such a case the judge could compare the insurance contract with the complaint and determine as a matter of law what portion of the damages were covered. This is not such a case. The MDL allegations are so insufficient to decide the allocation issue, in fact, that both parties before us have argued that the bondholders' complaint justifies an allocation entirely to their benefit as a matter of law. Neither is right. On remand the trial court will have to look further.Id. Accordingly, although Enserch involved an underlying case that was settled, it supports the principle that new evidence may be admitted in coverage trials that follow liability trials.
2
The court also rejects Dean's contention that she is allowed to offer in the instant trial some or perhaps all the evidence introduced in the trial of the Underlying Lawsuit. The court has located no case that suggests that a coverage suit should consist of a retrial of all or even substantial parts of an indemnity suit that has been fully tried. Moreover, under Texas law, "[t]he duty to indemnify is triggered by the actual facts establishing liability in the underlying suit." Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 821 (Tex. 1997) (emphasis added). This well-settled principle would have little meaning if the trial of an indemnity suit served as nothing more than a warm-up match for the coverage trial. Under Dean's expansive view, "actual facts establishing liability" that were not proved in the indemnity trial could be demonstrated during the coverage trial. Having obtained substantial damages in the Underlying Lawsuit by relying heavily on her romantic/sexual relationship with Dr. Swicegood, she could retain the jury award and then shift gears in the coverage suit, focusing instead on the doctor-patient relationship in hopes of persuading the jury that all the damages awarded were for covered medical malpractice. Texas law discourages such an approach. See, e.g., Gandy, 925 S.W.2d at 712, 714 (holding in a case where the "parties took positions that appeared contrary to their natural interests for no other reason than to obtain a judgment against [the insurer]" that certain assignments by defendants of their claims against their insurer are invalid).
This is not to say that more extensive evidence might not be admissible, for example, when the underlying suit was settled before trial. See, e.g., Enserch, 952 F.2d at 1494. In that circumstance, a more complete evidentiary record might be necessary to allocate the recovery in the third-party action between covered and non-covered claims.
3
The court predicts that the Texas Supreme Court will hold that new evidence can be introduced at a coverage trial when the proof is necessary to resolve a controlling coverage question that was not conclusively decided in the indemnity suit. By "not conclusively decided" the court means the issue was not determined in a way that binds all affected parties in the coverage case (e.g., via collateral estoppel). An undecided issue could include one that the parties in the indemnity case had no reason to litigate, e.g., an exclusion from coverage, where the burden of proof would be on a non-party insurer.
The court also holds that if the coverage question is one of law that can be decided on the record of the underlying suit, no new evidence is admissible. See, e.g., Farmers, 955 S.W.2d at 84 ("In some cases, coverage may turn on facts actually proven in the underlying lawsuit."). This principle is illustrated by Hartrick. In Hartrick the court was able to grant summary judgment in favor of the insurer in a coverage case because it was clear from the verdict and judgment in the underlying case that the judgment did not award damages caused by a covered "occurrence," within the meaning of a commercial general liability policy. See Hartrick, 62 S.W.3d at 278. The premise is also supported by Great American Lloyds Insurance Co. v. Mittlestadt, 109 S.W.3d 784 (Tex.App. 2003, not pet. h.), a decision on which Medical Protective heavily relies to support its contention that no new evidence may be admitted during the coverage trial.
In Great American the Fort Worth Court of Appeals held that "because a duty to indemnify arises only if the underlying litigation establishes liability, we only look to the facts established in the underlying litigation to determine if a duty to indemnify exists." Id. at 787 (emphasis added). The record that it examined consisted of the pleadings, the trial transcript, the insurance policy, and the judgment. Id. at 787 n. 1 ("In doing so, we review the record from the underlying suit, which includes the pleadings, the trial transcript, the insurance policy, and the judgment, all of which were before the trial court in the indemnity suit."). In Great American no new evidence was necessary because the coverage questions were purely issues of law. See Great Am., 109 S.W.3d at 786 ("We agree that the issue of whether Great American has a duty to indemnify is a legal issue to be reviewed de novo, and that the determination of whether `property damage' occurred is also an issue of law." (citations omitted)).
Medical Protective reads Great American to establish a complete ban on new evidence. Because the Texas Supreme Court has not decided the question now before the court, and since Great American is a decision of a Texas court of appeals, the court must address this contention.
[W]here, as here, there is no definite decision of the state's highest civil tribunal, the court will look to decisions of the state's intermediate appellate courts. A decision of the Texas court of appeals is controlling on questions of state law absent a strong indication that the Texas supreme court would decide the question differently.Swicegood I, slip op. at 6 (quoting Allstate Ins. Co. v. Shelby, 672 F. Supp. 956, 958 (N.D. Tex. 1987) (Fitzwater, J.)). "A federal district court will not lightly reexamine a state intermediate court's decision unless there are persuasive indications that the highest court of the state would decide otherwise." Id. at 7 (quoting Allstate, 672 F. Supp. at 958-59).
The court concludes that Great American can be harmonized with this court's prediction of how the Texas Supreme Court will resolve the evidence issue. The plaintiffs in Great American contended that the insurer of the seller who had sold them a house was liable under a general liability policy. They had purchased from the seller-insured a house that encroached on a pipeline easement. The plaintiffs alleged that the seller-insured had induced them to close on the contract by misrepresenting that the house could remain on the easement permanently. Great Am., 109 S.W.3d at 785. The plaintiffs established in an underlying suit that the seller-insured was liable. Id. at 786. In the subsequent coverage case, the plaintiffs sued the insurer to recover under the policy. The court of appeals was required to decide in the coverage case whether the plaintiffs had sustained "property damage." Id. at 786-87. "Property damage" consisted either of physical injury to tangible property or loss of use of tangible property. Id. at 787. The evidence was undisputed that the plaintiffs only relied on the seller-insured's representation in closing on the house, and the house was not physically damaged. Id. It was also uncontested that there was no loss of use of tangible property. The plaintiffs showed only an economic loss, which as a matter of law did not constitute "property damage" within the meaning of the insurance policy. Id. at 787-88. Therefore, as a matter of law no loss of use occurred and there was no property damage. Id. at 788. Because the coverage questions in Great American were ones of law, there was no need for the court of appeals to consider new evidence introduced in the coverage trial. The court of appeals' conclusion that its review was limited to the pleadings, the trial transcript, the insurance policy, and the judgment in the underlying suit was correct considering that the issues before it were solely ones of law.
C
Applying the court's Erie-guess to the present case, it holds that the proof to be admitted at trial will consist of historical evidence from the Underlying Lawsuit and expert testimony to assist the jury in allocating or apportioning covered and non-covered damages. In other words, the evidence to be admitted will be limited to historical documents such as the Swicegood and Clinic Policies, the court's opinion in Swicegood I, the pleadings, trial transcript, jury charge, verdict, and judgment in the Underlying Lawsuit, the briefs and opinion in Swicegood II, and expert testimony to help the jury understand this evidence and decide whether the damages in the Underlying Lawsuit should be allocated between covered and non-covered conduct and, if so, how. For example, Dean may call expert witnesses to opine that no allocation is necessary because, based on their review of the proceedings in the Underlying Lawsuit, the damages awarded were necessarily limited to covered acts of medical malpractice. Medical Protective's experts may testify, for example, that some or all of the damages were necessarily awarded based on the romantic/sexual relationship between Dean and Dr. Swicegood and not covered.
The court is addressing evidence admissible concerning the coverage-related claims, not the extracontractual causes of action. Nor is the court suggesting a view concerning Medical Protective's pending motion to bifurcate/sever, which will be decided after the briefing on the motion is completed.
Because the court has reached this conclusion, it need not consider the other arguments the parties have presented.
V A
Medical Protective moves for summary judgment as to the Estate's claim for negligent mishandling of Dean's claim. It maintains that under Texas law it had no duty apart from the one imposed by the Stowers doctrine and that the Estate cannot meet its burden of establishing a Stowers claim. Dean acknowledges in her opposition brief that her negligent mishandling action is not broader in scope than one that arises under the Stowers doctrine. See P. May 21, 2003 Br. at 23 n. 12. Accordingly, the court will not address Medical Protective's argument that there is no recognized cause of action under Texas law for negligent mishandling and will instead address whether Dean can recover under Stowers.
Medical Protective contends it is entitled to summary judgment dismissing Dean's Stowers claim because she cannot show that she or the Estate made a settlement offer specifically on the claims covered by the Swicegood Policy, as defined by this court in Swicegood I, and that the demand was within policy limits. It also argues that she cannot establish that the judgment in the Underlying Lawsuit includes covered claims in excess of the Swicegood Policy limits and that the terms of any settlement were such that an ordinarily prudent insurer would accept them.
Dean opposes Medical Protective's motion in this respect. She asserts that the Stowers doctrine does not require that an insured make a specific settlement demand only as to claims that the insurer contends fall within coverage, and that (assuming the court does not grant summary judgment in her favor as to liability) there are genuine issues of material fact as to all three elements of her Stowers cause of action.
She requests in the alternative that the court permit her to conduct additional discovery to oppose this component of Medical Protective's motion. See P. May 21, 2003 Br. at 32-33. The court need not address this request.
B
The court turns initially to the question whether under Stowers the Estate and Dean were obligated to make a settlement offer specifically on the claims covered by the policy. Medical Protective appears in its reply brief to shift from its initial argument. In its initial brief Medical Protective contends it is entitled to summary judgment because Dean cannot show that she or the Estate made a settlement offer specifically on the claims covered by the Swicegood Policy, as defined by this court in Swicegood I, and that the demand was within policy limits. See D. Mar. 31, 2003 Br. at 22-23. In its reply brief Medical Protective recharacterizes this argument as one asserting that Dean's and the Estate's settlement demands were global and thus did not show a claim within the scope of coverage that a reasonably prudent insurer would accept. See D. June 5, 2003 Rep. Br. at 17. Because this refined argument blends with the second contention — that Dean cannot meet any of the elements required to prove a Stowers cause of action — the court will not address it separately.C
Medical Protective argues that Dean cannot prove any of the three required elements of a Stowers claim. Under Stowers a plaintiff must prove "(1) the claim against the insured is within the scope of coverage, (2) the demand is within the policy limits, and (3) the terms of the demand are such that an ordinarily prudent insurer would accept it, considering the likelihood and degree of the insured's potential exposure to an excess judgment." St. Paul Fire and Marine Ins. Co. v. Convalescent Servs., Inc., 193 F.3d 340, 342 (5th Cir. 1999) (quoting Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 849 (Tex. 1994)). Because it will not have the burden of proof on this claim at trial, Medical Protective can meet its summary judgment obligation by pointing the court to the absence of evidence to support it. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once Medical Protective does so, Dean must go beyond her pleadings and designate specific facts showing there is a genuine issue for trial. See id. at 324; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam). Summary judgment is mandatory when the nonmoving party fails to meet this burden. Little, 37 F.3d at 1076.
Dean has cited in her opposition brief evidence that raises genuine issues of material fact as to each element, that is, that Dean made a demand for medical malpractice conduct that was within policy limits and did not include punitive damages, and the terms were such that an ordinarily prudent insurer would have accepted it. See P. May 21, 2003 Br. at 24-31. Accordingly, Medical Protective's motion for summary judgment on this ground is denied.
Because the court is denying rather than granting summary judgment, it will not set out in detail the evidence that creates a genuine issue of material fact.
At oral argument, Medical Protective's counsel asserted that St. Paul Fire precludes Dean's Stowers claim because her settlement demand included punitive damages, which this court held in Swicegood I are not recoverable. Dean has adduced evidence that would permit a reasonable trier of fact to find that she made several settlement demands that were within the compensatory damages limit.
VI
Medical Protective moves for summary judgment dismissing Dean's unfair settlement practices claim under Tex. Ins. Code Ann. art. 21.21, § 4(10)(a)(ii) (Vernon Supp. 2003). It maintains that the Estate cannot prove that a settlement demand was specifically made on a medical negligence claim covered by the Swicegood Policy or that the settlement amount requested was linked to the medical negligence claim covered by the Policy, and it assumes that there is no evidence of a specific amount of damages caused by claims covered under the Swicegood Policy as contained in the judgment in the Underlying Lawsuit. Medical Protective posits that the Estate cannot present evidence of an excess judgment for covered claims or that the terms of any demand were for covered claims, that Dr. Swicegood's liability for covered claims was reasonably clear, that the amount of the demand was within policy limits, and/or that the terms of the demand were such that an ordinarily prudent insurer would accept it. Medical Protective also asserts that the Estate can present no evidence that is necessary to prove a knowing violation of the statute and thus to recover additional statutory damages.As the court has noted above in the context of Stowers, Medical Protective can meet its summary judgment obligation by pointing the court to the absence of evidence to support Dean's unfair settlement practices cause of action. Dean must then go beyond her pleadings and designate specific facts showing there is a genuine issue for trial.
The elements of Dean's unfair settlement practices claim are set out in Rocor International Inc. v. National Union Fire Insurance Co., 77 S.W.3d 253 (Tex. 2002). To prove this cause of action, Dean must establish that "(1) the policy covers the claim, (2) the insured's liability is reasonably clear, (3) the claimant has made a proper settlement demand within policy limits, and (4) the demand's terms are such that an ordinarily prudent insurer would accept it." Id. at 262.
The evidence that the court has relied on above concerning Dean's Stowers claim, see supra § V(C), is sufficient to avoid summary judgment as to her unfair settlement practices cause of action, including summary judgment as to a "knowing" violation. Accordingly, Medical Protective's motion for summary judgment on this ground is denied.
* * *
For the reasons set out above, the court grants Medical Protective's March 31, 2003 second motion for partial summary judgment to the extent that it holds that Dean cannot recover, under her breach of contract claim, the award of punitive damages made in the Underlying Lawsuit, and it otherwise denies the motion. The court denies Dean's March 31, 2003 motion for partial summary judgment.