Medical Protective Company of Fort Wayne v. American International Specialty Lines Insurance Co, No. 20-1831 (7th Cir. 2021)Annotate this Case
In 2002, Dr. Phillips performed a hysterectomy on Bramlett; she died from complications days later. Bramlett’s family sued Phillips, his clinic, and the hospital. Phillips and his clinic held a $200,000 MedPro professional liability insurance policy. The hospital settled for about $2.3 million. Under Texas law, an insurer who rejects a settlement demand (Stowers demand) within policy limits that a reasonably prudent insurer would accept will later be liable for any amount awarded in excess of the policy limit. MedPro refused two $200,000 Stowers demands. A jury returned a $14 million verdict. In 2009, the Supreme Court of Texas capped Phillips’s liability at $1.6 million. The Bramletts sued MedPro. The parties settled for a confidential amount.
MedPro asked its insurer, AISLIC, to cover the settlement. AISLIC refused. The district court rejected MedPro's claims under an exclusion, finding that MedPro’s rejections of the two Stowers demands were Wrongful Acts that MedPro could have reasonably foreseen would lead to a claim.
On remand, the district court held that MedPro could invoke coverage without having to prove that it actually committed a “Wrongful Act,” and found that a claim was not first asserted against MedPro for its failure to settle for policy limits before the 2006 AISLIC Policy incepted. A jury found that MedPro did not commit a “Wrongful Act.” The Seventh Circuit affirmed. The district court properly held that MedPro was covered by the 2006 Policy before the jury decided the issue of exclusion. The earlier interpretation of the policy did not require a holding that MedPro never committed a “Wrongful Act” necessary to invoke coverage. MedPro can invoke coverage because the claim that it settled was not brought before the policy period began.