Insurer must pay malpractice settlement, 7th Circuit affirms

Judgment against an insurer in the most recent decision involving a nearly 20-year-old medical malpractice case was affirmed Tuesday by the 7th Circuit Court of Appeals.

The case arose from a laparoscopic hysterectomy performed on Vicki Bramlett in 2002, after which she died from complications a few days later. Her husband and children filed a medical malpractice suit, and after settling with the Texas hospital where the procedure was performed for $2.3 million, their remaining claim against surgeon Dr. Benny Phillips proceeded to a jury trial in 2005.

Phillips and his clinic declined the Bramletts’ offer to settle remaining claims for the policy limit of $200,000 through Medical Protective Co. of Fort Wayne. But as discovery continued and evidence mounted against Phillips, the Bramletts’ mediation demand rose to $2.3 million. A Texas jury awarded the family $14 million in damages, which the Texas Supreme Court on appeal reduced to the statutory cap of $1.6 million. But the Texas high court also permitted the family to sue MedPro directly for the difference over its failure to settle. The parties settled for a confidential amount.

MedPro in turn sued its insurer, American International Specialty Lines Insurance Co., now known as AIG Specialty Insurance Co., claiming breach of contract for failing to cover the settlement. After an initial appeal and remand by the 7th Circuit in 2018,  a jury in the Northern District of Indiana found for MedPro, and the 7th Circuit affirmed in Medical Protective Co. of Fort Wayne v. American International Specialty Lines Insurance Co., now known as AIG Specialty Insurance Co., 20-1831.

“The district court did not err in concluding that MedPro was covered by the 2006 Policy before the jury decided the issue of exclusion,” Judge Michael Kanne concluded for the panel, affirming the Northern District jury.

“In AISLIC’s view, our earlier interpretation of the policy at issue requires us to hold that MedPro never committed a ‘Wrongful Act’ necessary to invoke coverage. Further, AISLIC contends that MedPro cannot invoke coverage because the claim that it settled was brought before the policy period began. We disagree. The district court properly interpreted the policy in MedPro’s favor, and it did not err when it concluded that MedPro’s claim was timely brought. Thus, the verdict in MedPro’s favor stands.”

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