St. Paul Fire & Marine Insurance Company v. The Medical Protective Company, 691 F.2d 468, 10th Cir. (1982)
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Scribd Government DocsSt. Paul Fire & Marine Insurance Company v. The Medical Protective Company, 691 F.2d 468, 10th Cir. (1982)
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Scribd Government Docs691 F.
2d 468
ST. PAUL FIRE & MARINE INSURANCE COMPANY,
Plaintiff-Appellee,
v.
The MEDICAL PROTECTIVE COMPANY, DefendantAppellant.
No. 80-2340.
United States Court of Appeals,
Tenth Circuit.
Oct. 18, 1982.
Richard T. Foster, Wichita, Kan. (William Tinker, Wichita, Kan., on the
brief), of McDonald, Tinker, Skaer, Quinn & Herrington, Wichita, Kan.,
for defendant-appellant.
H. W. Fanning, Wichita, Kan. (Harker E. Russell, Wichita, Kan., with
him on the brief), of Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita,
Kan., for plaintiff-appellee.
Before DOYLE, McKAY and LOGAN, Circuit Judges.
LOGAN, Circuit Judge.
The appeal in this diversity case arises out of a dispute between two insurance
companies over which has to pay portions of a medical malpractice settlement
against a professional corporation and a doctor it employed. St. Paul Fire &
Marine Insurance Company (St. Paul), which had written excess liability
policies, paid $300,000 of the $400,000 settlement, and brought suit against
The Medical Protective Company (Medical Protective) to recover $200,000 of
the amount paid. The trial court ruled in favor of St. Paul, construing the
insurance contracts to require $300,000 to be paid by Medical Protective before
any amount was payable from the excess policies.
During the time period at issue, Women's Clinic, P.A., a professional
corporation, employed three doctors: Ronald D. Linhardt, J. Gilleran Kendrick,
and Charles P. McCoy. Although the corporation and all three doctors were
sued in the malpractice action, the claim was based upon services rendered by
Dr. Linhardt, and the settlement judgment was entered only against Dr.
Linhardt and the professional corporation. Five insurance policies were
potentially applicable to satisfy the malpractice claim. Medical Protective wrote
three base policies with limits of $100,000-one each on Dr. Linhardt, Dr.
Kendrick and Dr. McCoy. Although none of the base policies listed any of the
other doctors, each declared by endorsement that "(t)his policy extends to and
covers Kendrick, Nyberg, and McCoy, P.A. (now, by change of name,
Women's Clinic, P.A.) in any claim hereunder." St. Paul wrote two excess
policies-one each on Dr. Kendrick and Dr. McCoy. Each excess policy listed
the professional corporation as an additional insured.
3
Medical Protective argues that its liability for the $400,000 settlement is
limited to the $100,000 payable under the Linhardt policy. St. Paul contends
that the Kendrick and McCoy policies must be exhausted before resort to the
excess policies, and therefore, that Medical Protective is liable for $300,000 of
the settlement. St. Paul relies on a section contained in its policies which
declares that St. Paul's liability
4
"shall
be only for the ultimate net loss in excess of the 'underlying limits' defined as
the greater of:
5 an amount equal to the limit(s) of liability indicated beside underlying policy(ies)
(1)
listed or insurance described in Schedule A hereof, plus the applicable limits of any
other underlying insurance collectible by the Insured."
6
St. Paul prevailed below because the trial court determined that Medical
Protective's policies on Kendrick and McCoy constituted "other underlying
insurance collectible by the Insured." Because we agree with that
determination, we affirm.
Medical Protective's policies state, "This policy extends to and covers (the
professional corporation) in any claim hereunder." The district court construed
this language to mean that the professional corporation was insured under the
Medical Protective policies on Drs. Kendrick and McCoy, and therefore that
each policy constituted "other underlying insurance collectible by the Insured."
Medical Protective asserts that the policies were only intended to cover the
professional corporation in the event of claims arising against the named
doctor. It argues that the policies' prohibition against partnership liability
supports its reading.1 We do not find Medical Protective's argument persuasive.
First, the corporation is not in a partnership relation with the doctors. Second,
the policies expressly state that they cover damages based on professional
services rendered "by the insured or any other person, in the practice of the
insured's profession." We believe this language contemplates liability for the
negligence of employees of the corporation and is, therefore, inconsistent with
Medical Protective's assertion that the corporation's liability derives solely from
the conduct of the named physician. Exception 4 is also inconsistent with
Medical Protective's interpretation. That exception addresses the corporateemployer/physician-employee relation directly, declaring, "this policy does not
cover ... any liability growing out of services rendered by any physician or
dentist regularly employed by the Insured, unless such employee is covered as
an Insured of this Company." As the trial court noted, Dr. Linhardt is an
"Insured of this Company" under the separate policy issued in his name. Had
the policy excluded liability for services of a regularly employed physician
unless the employee were listed as an "Insured under this policy," the result
would likely be different, cf. McNemee v. Farmers Insurance Group, 228 Kan.
211, 612 P.2d 645 (1980) (giving effect to specific language designed to
prevent stacking of personal injury protection benefits in an automobile
insurance policy); but that language was not used. Finally, although Medical
Protective argues that coverage in the situation before us was not intended, the
subjective intent of the insurer does not control the interpretation of the
contract. While the instant dispute is between two insurance companies, the
result should be the same as if the professional corporation had no excess
coverage policy and was suing Medical Protective under its base policies. We
interpret the policy under the following standard:
9 determining the intention of the parties as to an insurance contract, the test is not
"In
what the insurer intends the printed language to mean, but what a reasonable person
placed in the position of the insured would have understood the words to mean.
Where an insurance company desires to limit its liability under a policy, it should
employ language which will distinctly reveal its purpose."Clayton v. Alliance
Mutual Casualty Co., 212 Kan. 640, 646, 512 P.2d 507, 512 (1973) (citation
omitted). We think the district court's construction of the Medical Protective policies
is correct.
10
Apparently neither Medical Protective nor St. Paul anticipated the problem
facing us. However, St. Paul had no policy on Dr. Linhardt for which it
received a separate premium. Medical Protective received premiums for base
policies on all three physician employees. The language in the Medical
Protective policy excluding employer liability unless a physician employee is
an "Insured of this Company" seems to encourage a corporation to acquire
Medical Protective policies on all physician employees of the corporation.
Medical Protective presumably has received the benefit of such language; it
cannot now be heard to disown the burdens associated with it.
11
The judgment of the district court, 504 F.Supp. 877, is AFFIRMED.
The relevant provisions of the Medical Protective policies state as follows:
"(T)he Company hereby agrees to DEFEND and PAY DAMAGES, in the
name and on behalf of the Insured or his estate,
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, IN
THE PRACTICE OF THE INSURED'S PROFESSION (INCLUDING
INJURY SUSTAINED BY ANY PATIENT OR ANYONE
ACCOMPANYING A PATIENT WHILE IN THE INSURED'S OFFICE),
DURING THE TERM OF THIS POLICY; EXCEPT this policy does not cover
any partnership liability of the Insured;
any liability growing out of services rendered by any physician or dentist
regularly employed by the Insured, unless such employee is covered as an
Insured of this Company."
