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Sherman v. Missouri Professionals Mutual-Physicians Professional Indemnity Association

Court of Appeals of Missouri, Western District, Special Division

January 14, 2020

TRACY LYNN SHERMAN, Appellant,
v.
MISSOURI PROFESSIONALS MUTUAL-PHYSICIANS PROFESSIONAL INDEMNITY ASSOCIATION (MPM), Respondent.

          Appeal from the Circuit Court of Boone County, Missouri The Honorable Jon Edward Beetem, Judge

          Before Mark D. Pfeiffer, P.J., Edward R. Ardini, and Thomas N. Chapman, JJ.

          Thomas N. Chapman, Judge

         Tracy Sherman appeals the judgment of the Boone County Circuit Court in favor of Missouri Professionals Mutual-Physicians Professional Indemnity Association ("MPM"). Ms. Sherman filed this equitable garnishment action against MPM seeking to satisfy a $500, 000 judgment against MPM's insured, Michael Kaplan, M.D., in a medical malpractice action. The trial court determined that MPM did not violate its duty to defend and that MPM was not responsible for a judgment entered in accordance with a section 537.065 agreement between Ms. Sherman and Dr. Kaplan. The judgment is affirmed.

         Factual and Procedural Background[1]

         MPM issued a medical professional liability policy to insureds, Dr. Kaplan and Dr. Kaplan's corporate entity, Plastic & Reconstructive Surgery of Mid-Missouri, Inc., for the policy period of August 1, 2013, to August 1, 2014, with a policy limit of $500, 000 per each medical incident.

         On April 18, 2014, Dr. Kaplan performed an abdominoplasty ("tummy tuck") surgery on Ms. Sherman. Following the surgery, Ms. Sherman developed an infection near the surgical site.

         On July 15, 2014, Ms. Sherman filed a petition for damages related to the tummy tuck surgery against Dr. Kaplan, his wife Christine Bell-Kaplan, Plastic & Reconstructive Surgery, and CH Allied Services Inc. d/b/a Boone Hospital Center. The case was filed in the Boone County Circuit Court, case number 14BA-CV02328. The petition set forth three counts: Count I for general negligence against Mrs. Kaplan and Plastic & Reconstructive Surgery; Count II for medical malpractice against Dr. Kaplan and Plastic & Reconstructive Surgery; and Count III for medical malpractice against Boone Hospital Center. MPM provided a defense to Dr. Kaplan and Plastic & Reconstructive Surgery. It also provided a courtesy defense to Mrs. Kaplan while the case was pending against Dr. Kaplan and Plastic & Reconstructive Surgery, although she was not insured under the policy and not a licensed healthcare provider. Dr. Kaplan, at all times, has denied liability for any damages suffered by Ms. Sherman.

         Through the defense provided by MPM, Dr. Kaplan, Mrs. Kaplan, and Plastic & Reconstructive Surgery filed a motion to dismiss based on Ms. Sherman's failure to file an affidavit of merit required by section 538.225, RSMo 2016. On April 6, 2015, the trial court dismissed Ms. Sherman's claims against Dr. Kaplan and Plastic & Reconstructive Surgery without prejudice, based on the failure to file a section 538.225 affidavit of merit. The general negligence claim against Mrs. Kaplan was not dismissed. No appeal was taken by Ms. Sherman from the dismissal of her medical negligence claims against Dr. Kaplan. After April 6, 2015, there was no action pending against Dr. Kaplan in case number 14BA-CV02328. On April 21, 2015, Boone Hospital Center was (by stipulation) dismissed with prejudice. The only action remaining in case number 14BA-CV02328 as of April 22, 2015, was Ms. Sherman's general negligence claim against Mrs. Kaplan.

         On July 7, 2015, Jonathan Downard, the Executive V.P. and General Counsel for MPM, notified Dr. Kaplan by letter that, because the action against him and Plastic & Reconstructive Surgery had been dismissed and Ms. Sherman had not appealed the decision, and because Mrs. Kaplan was not insured under the policy, MPM would no longer provide a defense for Mrs. Kaplan.[2] The next day, July 8, 2015, Ms. Sherman filed a motion for leave to file an amended petition in case number 14BA-CV02328. The proposed amended petition (which was attached to her motion for leave) included the general negligence claim against Mrs. Kaplan in Count I and added a fraud claim under the Missouri Merchandising Practices Act ("MMPA") against Dr. Kaplan and Mrs. Kaplan in Count II. [3] The Proposed Amended Petition (with MMPA Claim) did not include a medical negligence claim against Dr. Kaplan. Ms. Sherman never noticed up this particular motion for leave to file first amended petition for hearing, and it was never ruled on by the judge in case number 14BA-CV02328.

         On July 29, 2015, Mr. Downard of MPM sent a letter to Dr. Kaplan advising him that MPM had received a copy of Ms. Sherman's Proposed Amended Petition (with MMPA Claim). The July 29, 2015 MPM letter specifically indicated that "[t]he amended petition fails to make a claim for medical malpractice against [Dr. Kaplan]," and then went on to explain why there was no coverage for the currently filed (or proposed) claims. MPM reiterated its denial of coverage of the currently filed (or proposed) claims against Mrs. Kaplan, who was not a named insured. MPM further stated that the claim alleging a violation of the Merchandising Practices Act against Dr. Kaplan (and Mrs. Kaplan) was a claim for an intentional act of misrepresentation and/or fraud and not one for a medical malpractice, and that the policy excludes such fraud claims from coverage. It denied coverage, both defense and indemnity, for the MMPA fraud claim against Dr. Kaplan. The July 29, 2015 letter made it clear that its refusal to defend was limited to the claims then pending (general negligence against Mrs. Kaplan only) or then proposed (MMPA claims against them both), and, in fact, contrasted them to the type of claims (medical malpractice) it was obligated to defend and indemnify:

"Based on the information contained in the Plaintiff's First Amended Petition for Damages, the policy provisions, and [policy] language set forth above, MPM-PPIA must deny coverage, both defense and indemnity in this matter. You are advised to retain your own separate attorney to represent you and defend the claims excluded from coverage under the MPM-PIAA policy." (emphasis added).

         Like the July 7, 2019 letter, nothing in the July 29, 2015 letter addressed (or denied) the provision of a defense and coverage of a malpractice claim against Dr. Kaplan (should it be refiled). Both letters stated why MPM was providing no defense or coverage of the then currently filed general negligence claim (against Mrs. Kaplan) or for the MMPA claim (against them both) in the Proposed (but never actually filed) First Amended Petition. Neither letter terminated or refused MPM's continued obligation to defend Dr. Kaplan should a medical malpractice claim be filed.

         On August 5, 2015, Dr. Kaplan's personal attorney sent a letter to Mr. Downard demanding that MPM fully defend and indemnify Dr. Kaplan and Mrs. Kaplan, and threatening that the Kaplans would enter into a 537.065 agreement with Ms. Sherman if MPM refused, but did not discuss the terms of the proposed agreement. Dr. Kaplan's August 5, 2015 letter did not respond to the reasons stated in the MPM letter for denying defense of the remaining claim against Mrs. Kaplan (or the proposed MMPA claim against Dr. Kaplan). The August 5 letter made no mention of Ms. Sherman's intention to refile the medical malpractice claim against Dr. Kaplan, which had been omitted in the Proposed Amended Petition (with MMPA Claim).

         A week later, in a letter dated August 12, 2015, MPM's attorney responded to Dr. Kaplan's attorney's August 5, 2015 letter, again explaining that the policy did not cover Mrs. Kaplan because she was not a named insured on the policy, that there was no claim of medical negligence against Dr. Kaplan alleged in the Proposed Amended Petition (with MMPA Claim), and that the only proposed claim against Dr. Kaplan (under the MMPA) was excluded from coverage under the policy. The August 12, 2017 letter was very clear in limiting its denial of defense and coverage to the claims then filed or proposed:

The only pending count against Dr. Michael Kaplan M.D. is alleged under the Missouri Merchandising Practices Act, RSMo. 407. (sic) Therefore, taking into account the procedural posture in this cause and the explicit language in the Policy, no damages can result from the medical negligence of an Insured because there is no claim pending for medical negligence as these counts have been previously dismissed.

         The August 12, 2015 MPM letter then went on to explain why there was no coverage for the intentional acts alleged in the proposed (but ultimately never filed) MMPA claim, and then concluded, "You are advised to retain your own separate attorney to represent you and defend the claims excluded from coverage under the MPM-PIAA Policy. Should you have any questions ...


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