The Medical Protective Co. of Ft. Wayne, Ind. v. American International Specialty Lines Ins. Co.

Federal 7th Circuit Court
Civil Court
Case Number: 
No. 18-1737
Decision Date: 
December 18, 2018
Federal District: 
N.D. Ind., Ft. Wayne Div.
Affirmed and reversed in part and remanded

Dist. Ct. erred in granting defendant-insurance company’s motion for summary judgment in plaintiff-malpractice insurance company’s action alleging that defendant breached insurance policy issued to plaintiff, where defendant had refused to indemnify plaintiff for excess payment it made in underlying medical malpractice action that resulted in judgment that exceeded limits of policy issued by plaintiff to physician under circumstances, where: (1) plaintiff had rejected two offers to settle malpractice action with proceeds of policy it issued to physician; (2) malpractice action went to trial during which jury awarded damages in excess of policy limits, and (3) plaintiff paid excess judgment to plaintiffs in underlying malpractice action under physician's claim that plaintiff had wrongfully refused to settle malpractice action. Defendant’s policy to plaintiff had exclusion for any claim arising out of plaintiff’s wrongful act occurring prior to inception of policy if plaintiff knew or could have reasonable foreseen that such wrongful act could lead to lawsuit, and Dist. Ct. found that said exclusion applied, since as of date that plaintiff obtained policy, plaintiff knew or should have foreseen that its failure to settle malpractice action within policy limits could lead to lawsuit seeking recovery for excess judgment in malpractice action. Ct. of Appeals, though, found that there was triable issue as to whether plaintiff had committed any wrongful act in failing to settle malpractice action, where, at time plaintiff had rejected settlement offers, more discovery was contemplated, and where plaintiff had reason to believe that any jury verdict would not lead to extra-contractual liability, since any judgment would have been offset by $2.3 million settlement that plaintiffs in malpractice action had received from other defendants.