Filed: Jun. 08, 2015
Latest Update: Mar. 02, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 13-1721 FIRST PROFESSIONALS INSURANCE COMPANY, Plaintiff, v. KYRSTEN E. SUTTON, MD, Defendant and 3rd-Party Plaintiff – Appellee, v. THE MEDICAL PROTECTIVE COMPANY, Third Party Defendant – Appellant. No. 13-1722 FIRST PROFESSIONALS INSURANCE COMPANY, Plaintiff - Appellee, v. KYRSTEN E. SUTTON, MD, Defendant and 3rd-Party Plaintiff– Appellant, v. THE MEDICAL PROTECTIVE COMPANY, Third Party Defendant. Appeal from the United Sta
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 13-1721 FIRST PROFESSIONALS INSURANCE COMPANY, Plaintiff, v. KYRSTEN E. SUTTON, MD, Defendant and 3rd-Party Plaintiff – Appellee, v. THE MEDICAL PROTECTIVE COMPANY, Third Party Defendant – Appellant. No. 13-1722 FIRST PROFESSIONALS INSURANCE COMPANY, Plaintiff - Appellee, v. KYRSTEN E. SUTTON, MD, Defendant and 3rd-Party Plaintiff– Appellant, v. THE MEDICAL PROTECTIVE COMPANY, Third Party Defendant. Appeal from the United Stat..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-1721
FIRST PROFESSIONALS INSURANCE COMPANY,
Plaintiff,
v.
KYRSTEN E. SUTTON, MD,
Defendant and 3rd-Party Plaintiff – Appellee,
v.
THE MEDICAL PROTECTIVE COMPANY,
Third Party Defendant – Appellant.
No. 13-1722
FIRST PROFESSIONALS INSURANCE COMPANY,
Plaintiff - Appellee,
v.
KYRSTEN E. SUTTON, MD,
Defendant and 3rd-Party Plaintiff– Appellant,
v.
THE MEDICAL PROTECTIVE COMPANY,
Third Party Defendant.
Appeal from the United States District Court for the District of
South Carolina, at Charleston. Richard Mark Gergel, District
Judge. (2:12-cv-00194-RMG)
Argued: January 28, 2015 Decided: June 8, 2015
Before KING and FLOYD, Circuit Judges, and DAVIS, Senior Circuit
Judge.
Affirmed in part and vacated and remanded in part by unpublished
opinion. Senior Judge Davis wrote the opinion, in which Judge
King joined. Judge Floyd wrote an opinion concurring in part and
dissenting in part.
ARGUED: Gabriela Richeimer, TROUTMAN SANDERS LLP, Washington,
D.C., for Appellant The Medical Protective Company. George J.
Kefalos, GEORGE J. KEFALOS, P.A., Charleston, South Carolina,
for Appellee/Cross-Appellant Kyrsten E. Sutton, M.D. Thomas C.
Salane, TURNER PADGET GRAHAM & LANEY P.A., Columbia, South
Carolina, for Appellee First Professionals Insurance Company.
ON BRIEF: John T. Lay, Laura W. Jordan, Janice Holmes, GALLIVAN,
WHITE & BOYD, P.A., Columbia, South Carolina; John R. Gerstein,
TROUTMAN SANDERS LLP, Washington, D.C., for Appellant The
Medical Protective Company. Oana D. Johnson, GEORGE J. KEFALOS,
P.A., Charleston, South Carolina, for Appellee/Cross-Appellant
Kyrsten E. Sutton, M.D. R. Hawthorne Barrett, TURNER PADGET
GRAHAM & LANEY P.A., Columbia, South Carolina, for Appellee
First Professionals Insurance Company.
Unpublished opinions are not binding precedent in this circuit.
2
DAVIS, Senior Circuit Judge:
These cross-appeals arise out of an insurance coverage
dispute related to claims for alleged birth injuries resulting
from professional negligence. Dr. Kyrsten Sutton attended the
birth of Richard and Amy Moore’s son, Nathan. The Moores filed
suit in state court for medical malpractice against Dr. Sutton.
Dr. Sutton’s former insurers, First Professional Insurance
Company (“FirstPro”) and the Medical Protective Company
(“MedPro”) disagree as to which, if either, insurer owes Dr.
Sutton a duty to defend the lawsuit; accordingly, FirstPro filed
this declaratory judgment action in federal court. After a
bench trial, the district court ruled that MedPro, but not
FirstPro, has a duty to defend Dr. Sutton and pay damages as may
be required under the MedPro policy. For the reasons that
follow, we affirm in part and vacate and remand in part.
I.
A.
Dr. Sutton is a board certified obstetrician-gynecologist
who has practiced medicine in South Carolina since 2000. She
admitted Amy Moore to St. Francis Hospital in South Carolina for
labor and delivery of her child, Nathan Moore, on June 22, 2004.
When Nathan was born, he “was documented to be abnormally
depressed with poor color, muscle tone, and respiratory effort,”
3
and “required resuscitation in the delivery room.” J.A. 715.
Eventually, he was transferred to the Medical University of
South Carolina Hospital after experiencing seizures in the
nursery.
After Nathan’s birth, Amy Moore continued to be treated by
Dr. Sutton. With respect to her son’s prognosis, she told Dr.
Sutton at first that Nathan’s treating physicians were uncertain
about it, but then “informed [her] that [they] expected him to
have some deficits but they may be mild.” Id. During a later
visit with Dr. Sutton in August 2004, Amy Moore told her that
Nathan’s tests were expected to be normal and that Nathan’s
treating physician “was hopeful there would be little to no
residual [health] problems.”
Id. at 716. During this time, Amy
Moore never complained to Dr. Sutton about her care, treatment,
or the delivery, and never expressed an intention to bring a
lawsuit.
When Nathan was nearly four years old, Dr. Sutton received
a letter from the Risk Management Department at St. Francis
Hospital disclosing that it had received a request for Amy
Moore’s medical records from June 22, 2004 (the day Nathan was
born). The letter noted that it was informing Dr. Sutton of the
request because of “ongoing Risk Management activities to
identify potential claims within our health care system.” J.A.
596. The letter further stated that Dr. Sutton could review the
4
medical record, but gave no further details about any treatment
or hospitalization provided. At the time she received the
letter, Dr. Sutton did not remember Amy Moore as her patient or
the treatment she provided her; thus, the only information she
knew about Amy Moore was contained in the St. Francis letter.
Critical to the district court’s findings and conclusions
in this case, Dr. Sutton testified that upon her receipt of the
letter, she called her then-insurance company, MedPro, whose
policy provided coverage from May 1, 2003 to May 1, 2009. She
further testified that during this call, she advised the MedPro
representative with whom she spoke of the contents of the letter
from St. Francis. There is no documentation of this call in the
files of MedPro, and Dr. Sutton has none.
In 2011, Dr. Sutton received a notice of intent to sue from
counsel for the Moores, acting as parents and guardians ad litem
of Nathan, for the injuries he suffered in connection with his
birth (“the Moore Lawsuit”). She referred this claim to her
then-current insurer, FirstPro, whose policy insured her from
April 1, 2009 to April 1, 2012.
In January 2012, FirstPro filed a complaint based on
diversity jurisdiction against Dr. Sutton in the District of
South Carolina, seeking a declaratory judgment that FirstPro
“has no duty to defend or indemnify [Dr.] Sutton for the claims
made in the [Moore] Lawsuit.” J.A. 26. FirstPro argues that
5
the claim is excluded from coverage based on three exclusions in
the relevant policy. Only one of these provisions, Exclusion
11(b), was considered by the district court. That provision
states that FirstPro refuses to “defend or pay” for injury or
damages “arising out of a medical incident or committee incident
which prior to the effective date of this policy was” “reported
to an insurer.” J.A. 644. FirstPro argues that this exclusion
was triggered because Dr. Sutton’s 2008 call to MedPro
disclosing her receipt of the medical records request qualifies
as a “medical incident” that was reported to another insurer.
In response to the declaratory judgment action, Dr. Sutton
counterclaimed against FirstPro and filed a third-party
complaint against MedPro, arguing that if FirstPro did not owe
her coverage, then MedPro did. MedPro argues that it does not
owe coverage to Dr. Sutton because it has no record of receiving
the call from Dr. Sutton in 2008, and thus, Dr. Sutton failed to
notify MedPro about the potential claim as required under the
MedPro policy. MedPro’s policy explicitly states that “the
Company shall have no duty to defend or pay damages” “on a
potential claim unless it was reported to the Company during the
term of this policy and the report includes all reasonably
obtainable information, including the time, place and
circumstances of the incident; the nature and extent of the
patient’s injuries; and the names and addresses of the patient
6
and any available witnesses.” J.A. 592. Dr. Sutton denies that
the medical records request put her on notice of a potential
claim arising from her delivery of Nathan. In any event, she
contends that her call was enough to relieve her of (or satisfy)
her duty to report to MedPro a potential claim.
In due course, the Moores intervened as defendants and
argued that FirstPro owed Dr. Sutton coverage for the Moore
Lawsuit. 1
B.
After the close of discovery, the insurers moved for
summary judgment, each arguing, inter alia, that as a matter of
law, it had no duty to provide coverage for the Moore Lawsuit.
The district court denied both motions. With respect to
MedPro’s motion, the district court stated that there was a
genuine issue of fact as to “whether Dr. Sutton reported the
2008 Letter to MedPro” and “whether the information allegedly
provided by Dr. Sutton to MedPro was sufficient to report a
potential claim regarding Nathan Moore.” J.A. 135, 136. As to
FirstPro’s motion, the court stated that there was a genuine
1
Counsel have disclosed that MedPro and the Moores have
entered into an agreement under which MedPro will provide
coverage no matter the outcome of this appeal, explaining that
“[t]his agreement ensures that Dr. Sutton is not left without
coverage and . . . is not personally exposed to a verdict . . .
.” Reply Br. of MedPro at 11. We are satisfied that this
agreement does not moot the disputes presented in this case.
7
issue of fact with respect to whether Dr. Sutton’s phone call to
MedPro regarding the St. Francis letter triggered Exclusion
11(b) of the FirstPro policy.
To resolve these issues of fact, the district court held a
bench trial on March 2, 2013. It heard testimony from only two
witnesses, Dr. Sutton and Joseph Costy, MedPro’s claims
specialist. Dr. Sutton testified to the following: (1) she
called MedPro and notified the representative that she had
received a medical records request letter from St. Francis
Hospital; (2) she told the MedPro representative the name ‘Amy
Moore’, gave the representative the date for which the medical
records were being requested, and basically read the contents of
the letter to the representative; (3) the MedPro representative
did not instruct her to take any action with regard to the
letter; (4) she received no follow-up communication from MedPro
after she made the call; and (5) she did not follow up with St.
Francis to review any medical records.
The district court then heard testimony from Costy, who
testified as to the procedures of MedPro’s call and claims
system. He testified that he had conducted multiple searches of
MedPro’s records and could find no record of Dr. Sutton’s call
to the company call center in 2008, and that if Dr. Sutton had
called, “the persons answering the phones in the call center
were trained . . . to document any call regarding a possible
8
claim from a South Carolina insured by opening an electronic
‘ticket’ that was then forwarded to him as the assigned claims
adjuster.” J.A. 717. Upon questioning by the district court as
to the reliability of these call center procedures, Costy
testified that the call center staff and procedures were
generally reliable.
Upon conclusion of the bench trial, the district court made
several findings of fact. Critically, the district court found
credible both Dr. Sutton’s testimony that she called MedPro to
report the contents of the St. Francis letter and Costy’s
testimony that he did not receive notification from the MedPro
call center regarding Dr. Sutton’s call. It further found that
it was “more likely than not [that] the MedPro call center
failed to follow company procedures to create an electronic
‘ticket’ regarding the call and to forward the information to
Mr. Costy upon receipt of the call from Dr. Sutton.” J.A. 719.
It concluded that the “MedPro system is dependent upon the call
center operators undertaking a series of tasks to start the
claims process and, in light of Dr. Sutton’s credible and
specific memory of making the call to MedPro, the Court is
unpersuaded from the evidence in the record that the system is
free of human error generally or in this particular matter.”
J.A. 719.
9
In light of the above findings, the district court
concluded that Dr. Sutton met her burden of showing that she
provided MedPro timely and sufficient notice of a potential
claim under the MedPro policy. With respect to FirstPro, the
court concluded that Dr. Sutton’s call to MedPro about the St.
Francis letter qualified as a report of a medical incident to an
insurer prior to the inception of the FirstPro policy, and as
such, FirstPro met its burden of showing that it is entitled to
exclude coverage under Paragraph 11(b) of its policy.
Consequently, the court stated it was unnecessary to consider
whether the exclusions under Paragraphs 11(a) and (c) of the
FirstPro policy applied.
Following the district court’s decision, MedPro timely
appealed the district court’s order that it had a duty to
provide coverage for the Moore Lawsuit and Dr. Sutton filed a
protective cross-appeal from the district court’s order that
FirstPro was under no duty to do so.
II.
Because the district court’s decision that the exclusion in
Paragraph 11(b) of the FirstPro policy applied rested heavily on
its factual determination that Dr. Sutton notified a MedPro
representative of the contents of the St. Francis letter in
2008, we first address the MedPro appeal and then resolve Dr.
Sutton’s protective cross-appeal.
10
MedPro presents four bases for reversing the district
court’s judgment: (1) the district court erred as a matter of
law in its interpretation of the MedPro policy; (2) the district
court erroneously shifted the burden of proof from Dr. Sutton to
MedPro; (3) the district court’s factual determination that Dr.
Sutton reported a potential claim to MedPro is clearly
erroneous; and (4) the district court lacked impartiality while
conducting the bench trial. None of MedPro’s arguments are
persuasive, and we therefore affirm the district court’s ruling
that MedPro has a duty to defend Dr. Sutton in the Moore
Lawsuit.
A.
This Court “review[s] a judgment following a bench trial
under a mixed standard of review — factual findings may be
reversed only if clearly erroneous, while conclusions of law,
including contract construction, are examined de novo.” Roanoke
Cement Co., LLC v. Falk Corp., 413 F.3d 431, 433 (4th Cir.
2005). Under South Carolina law, 2 which takes a formalistic
approach to the interpretation of contracts, “‘insurance
policies are subject to general rules of contract construction,’
and therefore, [courts] ‘must enforce, not write contracts of
insurance and . . . must give policy language its plain,
2
The parties agree that South Carolina law governs the
construction of the insurance policies at issue in this case.
11
ordinary, and popular meaning.’” Bell v. Progressive Direct
Ins. Co., 757 S.E.2d 399, 406 (S.C. 2014) (quoting Gambrell v.
Travelers Ins. Co.,
31 S.E.2d 814, 816 (S.C. 1983)). Thus, when
a contract is unambiguous, “it must be construed according to
the terms the parties have used.”
Id. (internal quotation marks
omitted).
Under the MedPro policy, the insurer only has a duty to
defend or pay damages on a potential claim that “was reported to
[MedPro] during the term of the policy and the report includes
all reasonably obtainable information, including the time, place
and circumstances of the incident; the nature and extent of the
patient’s injuries; and the names and addresses of the patient
and any available witnesses.” J.A. 592. In concluding that Dr.
Sutton’s 2008 call to MedPro satisfied this provision, the
district court construed this provision in two ways that MedPro
now challenges. First, it determined that Dr. Sutton had to
show only substantial, not strict, compliance with the
provision. And second, it found that specific information
relating to “the time, place and circumstances of the incident;
the nature and extent of the patient’s injuries; and the names
and addresses of the patient and any available witnesses” need
only be reported if that information is reasonably obtainable.
MedPro’s reporting provision is properly understood as a
condition precedent because an insured must perform the act of
12
reporting before MedPro’s duty to defend or pay damages arises.
See Springs and Davenport, Inc. v. AAG, Inc., 683 S.E.2d 814,
816-17 (S.C. Ct. App. 2009) (“A condition precedent is any fact,
other than mere lapse of time, which, unless excused, must exist
or occur before a duty of immediate performance by the promisor
can arise.” (internal quotation marks omitted)). Contrary to
the conclusion expressed by the district court, South Carolina
law requires strict, not substantial, compliance with conditions
precedent. See McGill v. Moore,
672 S.E.2d 571, 575 (S.C. 2009)
(holding that party may not “circumvent the contracts condition
precedent by arguing substantial compliance”). In light of the
clear direction from the South Carolina Supreme Court that
insureds must comply strictly with conditions precedent, the
district court erred in finding that only substantial compliance
was necessary. 3
Notwithstanding the district court’s error in determining
what type of compliance was required, it did not err in
determining that the policy requires the specific type of
information listed to be reported only if that information is
reasonably obtainable. MedPro argues that specific information
relating to “the time, place and circumstances of the incident;
the nature and extent of the patient’s injuries; and the names
3
The district court relied on non-South Carolina law in its
conclusion that only substantial compliance was required.
13
and addresses of the patient and any available witnesses” must
be reported under the reporting provision regardless of whether
that information is reasonably obtainable or not. It therefore
views the provision as a “non-negotiable minimum” for coverage.
MedPro’s argument is strained, and ultimately unpersuasive,
for two reasons. First, the most natural reading of the
provision is that the phrase “reasonably obtainable” modifies
all of the specific types of information that comes after it.
See Schulmeyer v. State Farm Fire and Cas. Co., 579 S.E.2d 132,
134 (S.C. 2003) (“When a contract is unambiguous a court must
construe its provisions according to the terms the parties used;
understood in their plain, ordinary, and popular sense.”).
Second, even if it can be said that the provision is ambiguous
as to whether it requires the specific types of information to
be reported regardless of whether they are reasonably
obtainable, ambiguity must be construed against both the drafter
of the provision and the insurer, i.e., MedPro. See Chassereau
v. Global Sun Pools, Inc.,
644 S.E.2d 718, 722 (S.C. 2007)
(noting that a general principle of contract construction is
that “a court will construe any doubts and ambiguities in an
agreement against the drafter of the agreement”); Helena Chem.
Co. v. Allianz Underwriters Ins. Co.,
594 S.E.2d 455, 459 (S.C.
2004) (“Where the words of an insurance policy are capable of
two reasonable interpretations, the construction most favorable
14
to the insured should be adopted.”). Thus, the district court
correctly interpreted the provision to mean that an insured must
only give the specific types of information listed in the
provision if that information is reasonably obtainable.
Viewing this provision as a whole, MedPro’s duty to defend
or pay damages on the Moore Lawsuit only arises if Dr. Sutton
strictly complied with a reporting provision that required her
to report a potential claim during the term of the policy and
supply all reasonably obtainable information. Although it is
undisputed that Dr. Sutton called MedPro during the term of the
policy, the parties disagree as to whether she (1) reported a
potential claim and (2) supplied all reasonably obtainable
information.
Under MedPro’s policy, a potential claim is “an incident
which the Insured reasonably believes will result in a claim for
damages.” J.A. 593. MedPro argues that because Dr. Sutton has
consistently denied reporting a “potential claim” as defined in
the MedPro policy and has never believed that the letter
described an incident that would result in a damages claim, she
did not report a potential claim as required by the policy. Its
argument, however, overlooks a critical point: the term
“potential claim” is measured with respect to an objective, not
subjective, standard. In this light, the proper inquiry is
whether a reasonable person in Dr. Sutton’s shoes would have
15
believed that the May 2008 letter from St. Francis Hospital
described an incident that would result in a claim for damages.
Cf. Matter of Anonymous Member of S.C. Bar, 432 S.E.2d 467, 468
(S.C. 1993) (explaining that Rule 1.7 of South Carolina’s Rules
of Professional Conduct, which states that “a lawyer shall not
represent a client if the representation of that client will be
directly adverse to another client, unless the lawyer reasonably
believes the representation will not adversely affect the
relationship with the other client,” is measured under an
objective test); Hook v. Rothstein,
316 S.E.2d 690, 703 (S.C.
Ct. App. 1984) (interpreting the term “reasonably believes” in
the context of medical malpractice under an objective standard
of whether “a reasonable physician of the same branch of
medicine as the defendant would have disclosed the risks under
the same or similar circumstances”). Because a reasonable
doctor could view a letter from a hospital’s risk management
department relaying a medical records request as a first step in
a patient’s decision to initiate litigation, the evidence here
supports a finding that there could exist a reasonable belief
that the incident would result in a claim for damages.
Therefore, the district court did not err in determining that
Dr. Sutton (even contrary to her own subjective state of mind)
reported a potential claim under the terms of the policy.
16
We respect the views set forth in our good friend’s
thoughtful dissenting opinion. Contrary to the dissent’s
assertion, however, that “[t]his appeal turns on whether Dr.
Sutton ‘reported’ a ‘potential claim’ to MedPro during the term
of her policy,” post at 1, the outcome of this appeal actually
turns on the correctness, under the proper standard of review,
of the district court’s factual finding that Dr. Sutton did so.
Marshalling support from citations to caselaw 4 that nowhere
makes an appearance in MedPro’s briefs on appeal, and claiming
that “the plain language of the [MedPro] policy requires a
subjective/objective hybrid analysis,” the dissent concludes
4
Darwin Nat’l Assurance Co. v. Matthews & Megna LLC, 36 F.
Supp. 3d 636 (D.S.C. 2014); Greenwich Ins. Co. v. Garrell, No.
4:11-CV-02743-RBH, 2013 WL 869602 (D.S.C. Mar. 7, 2013).
Neither case constitutes controlling authority in this case, nor
is either persuasive. The policies in both Darwin and Garrell
include language that is explicitly subjective. For example, in
Darwin, the policy language provided coverage for a claim only
if the Insured had no basis “(1) to believe that any Insured had
breached a professional duty; or (2) to foresee that any such
wrongful or related act or omission might reasonably be expected
to be the basis of a claim against any
Insured.” 36 F. Supp. 3d
at 653 (emphasis added). Similarly, in Garrell, no coverage
existed unless the Insureds had “a basis to believe that [the
act or omission at issue], or any related act or omission, might
reasonably be expected to be the basis of a claim.”
2013 WL
869602, at *7 (emphasis added). In contrast, the policy
language at issue here states that a potential claim is “an
incident which the Insured reasonably believes will result in a
claim for damages,” with the term “reasonably” modifying the
term “believes.” Therefore, while the policy language at issue
in Darwin and Garrell arguably directs a subjective/objective
hybrid inquiry, no similar language compels such a dual inquiry
here.
17
that MedPro owes Dr. Sutton no coverage because she disavowed
any belief that she had done anything wrong that could give rise
to a claim against her, and would summarily reverse the judgment
against MedPro.
The dissent’s application of such an extreme interpretation
of the policy language yields harsh results. As the district
court properly found, however, in reliance on the testimony of
MedPro’s own witness, had MedPro properly handled Dr. Sutton’s
telephone call upon learning the contents of the letter she
received, the proper MedPro official would have obtained the
records and, upon her review, immediately treated the matter as
a potential claim. The policy language did not require the
district court to blink at this compelling evidence.
The dissent’s harsh result is not justified by any
controlling authority. Not a single opinion from the South
Carolina appellate courts or any federal court of appeals has
adopted the dissent’s insistence that the MedPro policy’s use of
the word “Insured” in its definition of “potential claim”
requires such an extravagant reading as the dissent ascribes to
it. Notably, the one published federal appellate case that
presented an opportunity to deal with this MedPro policy
language actually did not deal with it. See Owatonna Clinic-
Mayo Health Sys. v. Med. Protective Co., 639 F.3d 806 (8th Cir.
2011).
18
In Owatonna, the district court granted summary judgment in
favor of the insured on the issue of whether the insured had an
objectively reasonable belief that a claim would be filed and
conducted a jury trial on the issue of whether the insured
subjectively held that belief. 639 F.3d at 809. The policy
language which necessitated this dual inquiry was materially
different from the language at issue in this case. There, the
claims made policy provided coverage for “any claim for damages”
filed during the policy period and defined a “claim filed” as
the receipt, by MedPro during the term of the policy, of
“written notice of a medical incident from which [Owatonna
Clinic] reasonably believes allegations of liability may
result.”
Id. at 811.
After a trial, a jury found that the insured subjectively
believed that a claim for damages would be filed. Id. at 809.
MedPro appealed and the Eighth Circuit affirmed the judgment on
the jury verdict without once mentioning the district court’s
underlying analysis of the relevant policy provision and,
specifically, without any discussion of or any citation to legal
authorities suggesting that the district court’s analysis of the
policy language was correct.
Thus, the dissent is correct in saying, as it does, post at
9, that “Owatonna is inapposite” but not because “the district
court here never conducted this subjective/objective analysis.”
19
Id. Owatonna is inapposite because it tells us nothing about
what the Supreme Court of South Carolina would do when it is
called upon to interpret the MedPro policy language at issue
here. 5 As many precedents show, South Carolina favors coverage
in its interpretation of insurance contracts. See, e.g., M and
M Corp. of S.C. v. Auto-Owners Ins. Co.,
701 S.E.2d 33, 35 (S.C.
2010) (“Policies are construed in favor of coverage . . . .”);
5
Ironically, the ancestor of MedPro’s “reasonably believes”
clause is a classic exclusion from coverage found in many, if
not all, automobile insurance policies, i.e., occurrence
policies, not claims made policies. This court is not without
experience with so called “reasonable belief” provisions in
automobile insurance policies. See Emick v. Dairyland Ins. Co.,
519 F.2d 1317, 1325 n.12 (4th Cir. 1975).
In fact, the district court in Owatonna simply cited
generally to an unpublished district court opinion applying
Texas law, Empire Indem. Ins. Co. v. Allstate County Mut. Ins.
Co., Civ. No. 3:06–1415, 2008 U.S. Dist. LEXIS 37764, at *22–23,
2008 WL 1989452 (N.D. Tex. May 8, 2008) (“The Allstate policy
also contains an exclusion provision that applies when any
person uses ‘a vehicle without a reasonable belief that that
person is entitled to do so.’”), in reasoning that the term
“reasonable belief” “in this context has an objective and
subjective component.” Owatonna Clinic-Mayo Health Sys. v. Med.
Protective Co., Civ, No. 08–417,
2009 WL 2215002, at *5 (D.
Minn. July 22, 2009). But the “context” is not the same; it is
black letter law that the interpretation of coverage provisions
is not the same as the interpretation of exclusions from
coverage, not in South Carolina and not anywhere. See McPherson
v. Mich. Mut. Ins. Co.,
42 S.E.2d 770, 771 (S.C. 1993) (“[R]ules
of construction require clauses of exclusion to be narrowly
interpreted, and clauses of inclusion to be broadly construed.
This rule of construction inures to the benefit of the
insured.”); Erik S. Knutsen, Confusion About Causation In
Insurance: Solutions for Catastrophic Losses, 61 ALA. L. REV. 957,
967 (2010) (“Most American courts also interpret coverage
clauses broadly and exclusion clauses narrowly.”).
20
S.C. State Budget & Control Bd. v. Prince, 403 S.E.2d 643, 646
(S.C. 1991) (“[I]nsurance contracts are generally construed
against the party who prepares them and liberally in favor of
the insured.”); Walde v. Ass’n Ins. Co.,
737 S.E.2d 631, 635
(S.C. Ct. App. 2012) (same); Cook v. State Farm Auto. Ins. Co.,
656 S.E.2d 784, 786 (S.C. Ct. App. 2008) (“In South Carolina,
clauses of inclusion should be broadly construed in favor of
coverage, and when there are doubts about the existence or
extent of coverage, the language of the policy is to be
understood in its most inclusive sense.” (internal quotation
marks omitted)).
Accordingly, we are unpersuaded by the dissent’s arguments
and hold that the district court did not err in discounting Dr.
Sutton’s ill-informed belief about the potential outcome of a
lawyer’s request for medical records for the treatment of one of
her patients.
The only remaining question is whether Dr. Sutton supplied
all reasonably obtainable information when reporting the
potential claim. We note that this is a close question. The
insurance provision lists specific types of information such as
the “time, place and circumstances of the incident; the nature
and extent of the patient’s injuries; and the names and
addresses of the patient and any available witnesses,” J.A. 592,
almost none of which Dr. Sutton relayed to the MedPro
21
representative she called in 2008. Although she fully reported
the contents of the letter, she did not identify Amy Moore as
her former patient or report any details about her labor and
delivery of Nathan. Before reporting the contents of the letter
to MedPro, she did not review Amy Moore’s records because she
had left the practice at which Amy Moore was her patient, and
did not contact St. Francis Hospital to review any medical
records. Therefore, the nature of the information she gave to
MedPro was limited, although she could have obtained at least
two sets of Amy Moore’s medical records (the private practice’s
records and St. Francis Hospital’s records). The district court
reasoned that Dr. Sutton nevertheless complied with the terms of
the provision because she relayed all information that was then
known to her at the time of the call. It further stated:
She could have obviously undertaken further inquiry
and investigation to obtain additional information,
with a consequential delay in reporting the St.
Francis letter to Med Pro, but she provided Med Pro at
the time of her call “all reasonably obtainable
information” then available to her. Had her call
received the proper company follow up, she would have
most probably been requested to obtain (and would have
had the duty to provide) a copy of the hospital and
office notes to provide the company additional
information concerning the nature of the claim and
extent of the child’s injuries. The St. Francis
letter, with the name of the patient, the date of the
hospitalization, and the reference to the matter as a
“potential claim” by the hospital’s Risk Management
Department, provided Med Pro sufficient information to
alert the company of a potential claim and to begin
its claims processing. Med Pro had its duty to
investigate the potential claim, which it would have
22
undoubtedly done had information concerning Dr.
Sutton's report to the call center been conveyed to
Mr. Costy. Thus, the Court finds that Dr. Sutton
complied with the notice requirements . . . .
J.A. 725-26.
We accept the district court’s finding that Dr. Sutton
testified credibly that she made the call “shortly after”
receiving the letter. In light of its finding, it was not
clearly erroneous for the court to find, as it did, that the
information described above regarding the details of Amy Moore’s
treatment was not reasonably obtainable. Thus, the further
finding that its disclosure was not required to trigger coverage
is likewise not clear error. This is especially so considering
that there was testimony that had the call been properly
processed, Costy would have followed up with Dr. Sutton to
provide additional information. This suggests that both Dr.
Sutton and MedPro had a continuing duty to provide information
and to investigate the claim, and that the term “reasonably
obtainable” must be measured with respect to the time period
during which the information was being given.
In sum, the district court did not commit clear error in
finding that Dr. Sutton provided all reasonably obtainable
information as required by MedPro’s reporting provision. It
therefore did not err in its legal conclusion that Dr. Sutton
23
complied with the required reporting provision under the MedPro
policy.
B.
Next, MedPro argues that, as a matter of law, Dr. Sutton’s
uncorroborated testimony that she called MedPro in 2008 and
reported the contents of the St. Francis letter was insufficient
to carry her burden of proof to show that she met MedPro’s
reporting requirement. But the cases it cites in support of its
argument are inapposite. For example, MedPro relies on S.C.
National Bank v. Lumbermens Mut. Cas. Co., 526 F. Supp. 94
(D.S.C. 1981), in which the district court held that the
defendant insurer failed to carry its burden of establishing
that notice of cancellation of the policy was mailed to
plaintiff, where defendant “had neither a certificate of mailing
nor a record or any notation in its file to show that
notification was actually mailed to Plaintiff.”
Id. at 95 . It
also cites a tax reporting case in which the Tenth Circuit held
that “absent some proof of an actual postmark or dated receipt,
a presumption that tax documents allegedly mailed to the IRS
were in fact received does not arise based solely upon a
taxpayer’s self-serving testimony.” Sorrentino v. IRS,
383 F.3d
1187, 1195 (10th Cir. 2004). But these cases involve self-
serving testimony that a litigant mailed notice or some other
legally significant paperwork. In the context of mailing, there
24
is usually some other objective evidence, such as a copy of the
paperwork mailed, receipt of mailing, or proof of postmark that
accompanies a mailing. Cf. id. at 1195 (noting that “the
taxpayer is in the best position with the clock running to
protect himself by procuring independent evidence of postmark
and/or mailing, whether by mail receipt, corroborating
testimony, or otherwise”). By contrast, in the context of phone
calls, there is usually no similarly accessible corroborating
evidence that one expects to record the fact of making a phone
call. Thus, the district court’s reliance on Dr. Sutton’s
testimony, which it found to be credible, is not unreasonable
under the circumstances of this case.
Additionally, MedPro relies on the reasoning of Feldman v.
Charlotte-Mecklenburg Board of Education, No. 3:11–cv–34–RJC–
DSC., 2012 WL 3619078 (W.D.N.C. Aug. 21, 2012), for the
proposition that “[c]ourts should put aside self-serving
testimony from a plaintiff where it is unsupported by
corroborating evidence and undermined by other credible
evidence.”
Id. at *5 . But here, although there is no
corroborating evidence that Dr. Sutton called MedPro in 2008,
there is no credible evidence that undermines her testimony of
having the “specific memory of sitting at her desk with the
letter and calling MedPro to report the receipt of this
correspondence.” J.A. 719. The only evidence that could be
25
viewed to undermine this testimony is the testimony from Costy
that there was no record of a call from Dr. Sutton to the MedPro
call center in 2008. But whether any member of this panel might
have reached the same finding is of no moment; the district
court found that evidence of “a number of different persons
performing call center duties” and “turnover in those positions
and phones being answered by trainees” showed that MedPro’s
system was prone to “human error or a failure to follow standard
company procedures,” J.A. 718, and that therefore testimony
that MedPro received no call from Dr. Sutton in 2008 did not
undermine her otherwise credible testimony. In this light,
although Dr. Sutton’s specific testimony of calling MedPro in
2008 is uncorroborated, there is evidence in the record to
explain why MedPro might not have had any record of such a call
that is consistent with Dr. Sutton having called and reported
the contents of the letter. It is surely unremarkable to
observe that a litigant’s credible testimony alone may be
sufficient to carry the burden of proof. See, e.g., United
States v. Jones, 977 F.2d 105, 111 (4th Cir. 1992) (“There may
be circumstances under which a defendant’s self-serving
testimony, uncorroborated by other testimonial or documentary
evidence, about events this distant in time could properly be
thought to carry his heavy burden of proof . . . .”).
26
Considering that MedPro’s cited cases in favor of its
argument are inapposite, that there was no credible evidence in
the record that undermined Dr. Sutton’s credible and specific
testimony of making the call to MedPro, and that there was
evidence in the record to support the district court’s finding
of potential human error in MedPro’s call center, we conclude
that the district court did not err in finding that Dr. Sutton
carried her burden to show that she complied with the reporting
provision of the MedPro policy.
C.
MedPro next argues, in what amounts to a restatement or
variation on its sufficiency challenge to the district court’s
factual findings, that the district court should not have relied
on Dr. Sutton’s testimony that she called MedPro to report her
receipt of the medical request letter. As we have said
repeatedly, we review a district court’s factual findings for
clear error. Roanoke Cement, 413 F.3d at 433. A finding is
clearly erroneous if “although there is evidence to support it,
the reviewing court on the entire evidence is left with the
definite and firm conviction that a mistake has been committed.”
Jiminez v. Mary Washington Coll.,
57 F.3d 369, 379 (4th Cir.
1995) (quoting United States v. United States Gypsum Co.,
333
U.S. 364, 395 (1948)). “This standard plainly does not entitle
a reviewing court to reverse the finding of the trier of fact
27
simply because it is convinced that it would have decided the
case differently.” United States v. Heyer, 740 F.3d 284, 292
(4th Cir. 2014) (internal quotation omitted). “If the district
court’s account of the evidence is plausible in light of the
record viewed in its entirety, [we] may not reverse it even
though convinced that had [we] been sitting as the trier of
fact, [we] would have weighed the evidence differently.”
Id.
(internal quotation omitted). Indeed, as we have said: “In
cases in which a district court’s factual findings turn on
assessments of witness credibility or the weighing of
conflicting evidence during a bench trial, such findings are
entitled to even greater deference.” FTC v. Ross,
743 F.3d 886,
894 (4th Cir. 2014); see also Benner v. Nationwide Mut. Ins.
Co.,
93 F.3d 1228, 1234 (4th Cir. 1996) (“On review, we may
neither weigh the evidence nor judge the credibility of
witnesses.”); Pigford v. United States,
518 F.2d 831, 836 (4th
Cir. 1975); United States v. Bagdasian,
291 F.2d 163, 166 (4th
Cir. 1961).
MedPro attacks the district court’s finding that Dr. Sutton
reported a claim to MedPro in two ways: (1) by arguing that the
district court failed to consider the self-serving nature of Dr.
Sutton’s testimony and (2) by arguing that the district court
erroneously found that MedPro’s procedures were subject to human
error. The first assertion is not reviewable on appeal as it
28
essentially asks this Court to review the district court’s
finding that Dr. Sutton was a credible witness. See Benner, 93
F.3d at 1234.
MedPro’s second argument about the district court’s finding
on the reliability of MedPro’s procedures is reviewable. It
argues that there was insufficient evidence in the record of the
unreliability of MedPro’s reporting procedures. The district
court found that human error was possible in MedPro’s reporting
procedures because of turnover; MedPro sought to rebut that
finding by arguing that the only evidence of turnover stemmed
from Costy’s testimony that one of the call center employees
with whom he had been talking had been on the job for only a
year. It is true that the testimony of Costy is alone a thin
basis for determining that there existed a high rate of turnover
that affected the reliability of the call center, and there does
not appear to be other evidence of turnover of employees at the
call center. But the district court relied on more than just
evidence of turnover in concluding that the call center was
prone to human error — it relied on records produced at trial
that showed that a number of different persons were performing
call center duties and that phones were being answered by
trainees. In this light, although the question is close one,
there is sufficient evidence for a finding of unreliability, and
29
the district court’s finding was plausible when viewed in light
of the entire record. See Heyer, 740 F.3d at 292.
Furthermore, after finding both Dr. Sutton and Costy’s
testimony credible, and reviewing records about trainees
answering the phone, the district court reasonably inferred that
the most probable cause for Costy’s lack of documentation of Dr.
Sutton’s call was human error in the call center. The district
court is entitled to draw such reasonable inferences during a
bench trial. Cf. United States v. Bishop, 740 F.3d 927, 935
(4th Cir. 2014) (“In reviewing the district court’s judgment, we
are mindful that, as the trier of fact, that court was in a
better position than we are to evaluate the credibility of
witnesses, take into account circumstances, and make reasonable
inferences.”).
Thus, although the evidence supporting the district court’s
finding that MedPro’s reporting procedures were unreliable is
not particularly robust, we cannot say it reaches the outer
limit of the deferential standard for clear error. The district
court could plausibly find that MedPro’s procedures were prone
to unreliability and that this unreliability explained why Costy
did not receive receipt of Dr. Sutton’s call to MedPro to report
the contents of the St. Francis letter; the district court,
therefore, did not err.
D.
30
MedPro’s last assignment of error is that the district
court denied MedPro a fair trial by manifesting bias in favor of
Dr. Sutton. “Although courts do not generally address the
standard of review applicable to assessing judicial bias, we
should conduct a plenary review of such an issue because it
raises due process concerns.” ePlus Tech., Inc. v. Aboud, 313
F.3d 166, 178 n.12 (4th Cir. 2002). But, because MedPro failed
to raise the issue of bias in the proceedings below and failed
to make a motion for recusal, “any alleged errors are subject to
plain-error review.” Murphy v. United States, 383 F. App’x 326,
332 (4th Cir. 2010) (unpublished).
As to a district court’s questioning of litigants during
bench trials, we have stated:
The judge, for example, is entitled to propound
questions pertinent to a factual issue which requires
clarification. He may intercede because of apparent
inadequacy of examination or cross-examination by
counsel, or to draw more information from relevant
witnesses or experts who are inarticulate or less
than candid. This privilege or duty, however, is
subject to reasonable limitations. A trial judge must
assiduously perform his function as governor of the
trial dispassionately, fairly, and impartially. He
must not predetermine a case . . . .
Crandell v. United States, 703 F.2d 74, 77-78 (4th Cir. 1983).
MedPro argues that the district court’s questioning of Costy and
Dr. Sutton revealed a predetermination that Dr. Sutton had
reported the contents of the St. Francis letter to MedPro in
2008. This is not so. MedPro’s characterization of “grilling”
31
Costy with “extensive” questioning is not borne out by the trial
transcript. There were only three periods during Costy’s
testimony in which the district court asked questions, which can
hardly be viewed as extensive or overwhelming for Costy. It is
clear that the district court’s purpose in asking these
questions was to gain greater insight into the procedures used
by MedPro to document incoming calls from insureds.
Specifically, the district court questioned Costy as to the
reliability of MedPro’s reporting procedures — something that
counsel had not yet specifically addressed in great detail in
its questioning of Costy. Its questioning, therefore, did not
reveal a prejudgment in favor of Dr. Sutton as much as an intent
to understand what procedures might have or have not been in
place that could explain Dr. Sutton credibly testifying that she
had placed the call and Costy credibly testifying that MedPro
lacked documentation of such a call.
MedPro further contends that the district court’s hostility
towards Costy during its questioning also reveals bias against
MedPro and in favor of Dr. Sutton. But we discern no such
hostility. In fact, the district court explicitly stated in its
findings of fact that it found Costy’s testimony to be credible,
and during the bench trial, the district court stated that it
found Costy to be “a very fine [and very honest] witness.” J.A.
356. And, although the district court certainly followed up
32
Costy’s responses with additional questions, its questioning was
measured; indeed, the district court stopped questioning Costy
on a particular point when he stated that he did not know or was
unsure of the answer. MedPro therefore cannot show hostility
towards Costy that evinces a bias against MedPro or in favor of
Dr. Sutton.
In any event, hostility towards or critical questioning of
one party does not in and of itself equate to bias:
[O]pinions formed by the judge on the basis of facts
introduced or events occurring in the course of the current
proceedings, or of prior proceedings, do not constitute a
basis for a bias or partiality motion unless they display a
deep-seated favoritism or antagonism that would make fair
judgment impossible. Thus, judicial remarks during the
course of a trial that are critical or disapproving of, or
even hostile to, counsel, the parties, or their cases,
ordinarily do not support a bias or partiality challenge.
Liteky v. United States, 510 U.S. 540, 555 (1994). What MedPro
actually challenges is the district court’s opinion and judgment
stemming from the testimony of Dr. Sutton, that Dr. Sutton
testified credibly, and its resulting inquiry into MedPro’s
reporting procedures based on that reasoned opinion. But
without a scintilla of evidence that the district court formed
these judgments on the basis of “extrajudicial sources,” see
id., these determinations must be challenged on their merits,
not on the basis of bias.
* * *
33
In sum, MedPro has failed to point to persuasive
indications that any one of its bases for reversal of the
district court’s judgment has merit. We therefore affirm the
district court’s judgment that MedPro has a duty to defend Dr.
Sutton against the Moore Lawsuit and pay damages as may be
required under its policy.
III.
Although we are not required to do so, see supra n.1, in
the interest of a thorough treatment of the issues presented by
the parties, we next address Dr. Sutton’s protective cross-
appeal of the district court’s judgment that FirstPro has no
duty to defend Dr. Sutton in the Moore Lawsuit. The district
court found that Dr. Sutton’s call to MedPro constituted a
report of a medical incident to an insurer prior to the
inception of the FirstPro policy, which triggered Exclusion
11(b) of the FirstPro policy.
The legal issue presented here is narrow: whether Dr.
Sutton’s call to MedPro to convey the contents of the St.
Francis letter constitutes a report of a medical incident under
the FirstPro policy. Dr. Sutton correctly contends that the
district court’s finding that Dr. Sutton gave MedPro notice of a
potential claim does not automatically mean that Dr. Sutton
reported a medical incident under exclusion 11(b) of the
FirstPro policy. That is because the terms “notice” and
34
“potential claim” are not necessarily equivalent to the terms
“report” and “medical incident.”
Whether an exclusion is triggered is a question of contract
construction that we review de novo. See Roanoke Cement Co.,
413 F.3d at 433. “Insurance policy exclusions are construed
most strongly against the insurance company,” and FirstPro, as
the insurer, “bears the burden of establishing the exclusion’s
applicability.” Owners Ins. Co. v. Clayton,
614 S.E.2d 611, 614
(S.C. 2005).
Exclusion 11(b) of FirstPro’s policy reads:
We will not defend or pay under this coverage part for:
* * *
11. Any injury or damages:
b. arising out of a medical incident or committee
incident which prior to the effective date of
this policy was:
I. reported to any insurer; or
II. a pending claim or proceeding; or
III. a paid claim
J.A. 644. As FirstPro points out, this provision is a “prior
knowledge provision” which is designed to ensure that insurers
do not “contract to cover preexisting risks and liabilities
known by the insured.” Bryan Bros. Inc. v. Continental Cas.
Co., 419 F. App’x 422, 425 (4th Cir. 2011) (unpublished).
“Thus, it is generally the insured’s duty to provide truthful
35
and complete information so the insurer can fairly evaluate the
risk it is contracting to cover.” Id.
“Medical incident,” as defined by the FirstPro policy,
means “any act, error or omission in the providing of or failure
to provide professional services to a patient by [the doctor] or
by persons described in the Individual Professional Liability
Coverage Part for whom [the doctor is] determined to be legally
responsible.” J.A. 636. Of particular importance to this case
is that the policy treats “all bodily injury(ies) caused by a
course of treatment(s) of a patient or of a mother and fetus (or
fetuses) from conception through postpartum care” as a single
medical incident. J.A. 637. The term “report” or “reported” is
not defined by FirstPro’s policy in the same manner as “medical
incident.” Because the FirstPro policy does not define the term
“reported,” we look to its “commonly accepted meaning.”
Bardsley v. GEICO,
747 S.E.2d 436, 440 (S.C. 2013). According
to the Oxford English Dictionary, the verb “to report” is
commonly defined as “to give an account of (a fact, event,
etc.),” “to describe,” or “to convey, impart, pass on (something
said, a message, etc.) to a person as knowledge or information.”
Oxford English Dictionary Online (last visited April 17, 2015)
(saved as ECF opinion attachment). As FirstPro points out in
its brief, it is therefore commonly understood as communicating
or conveying information to someone, synonymous with the term
36
“to inform.” Against this background, when Dr. Sutton called
MedPro to convey the contents of the St. Francis letter, she
“reported” the information in the letter.
But she did not necessarily report a “medical incident” as
defined by the FirstPro policy. Beyond reporting the contents
of the St. Francis letter, which merely identified Amy Moore as
a patient who visited Dr. Sutton on June 22, 2004, Dr. Sutton
did not report to MedPro any details about the acts she
performed, any treatment she provided, or any potential errors
or omissions that arose during her interactions with Amy Moore.
The sparse information provided, detailing merely the fact that
Amy Moore was a patient of Dr. Sutton’s, can hardly be said to
describe a medical incident. Because the policy defines
“medical incident” as “any act, error, or omission in the
providing of . . . professional services,” it contemplates the
reporting of acts, errors, or omissions beyond the mere fact of
a doctor’s provision of professional services. We therefore
decline to adopt FirstPro’s argument that reporting the mere
fact of having seen a patient can qualify as a “medical
incident” when that report includes no description of any acts,
errors, or omissions that took place during the provision of
services. Thus, Dr. Sutton’s call to MedPro to report the
contents of the St. Francis letter does not trigger the
exclusion in 11(b) of the FirstPro policy.
37
Although the exclusion in 11(b) is not applicable, we
remand to the district court to determine (if the case is not
otherwise resolved) whether the exclusion in 11(c) of the
FirstPro policy applies, an issue the district court did not
reach. That exclusion states that FirstPro will not defend or
pay for any injury or damages “arising out of a medical incident
or committee incident disclosed or which should have been
disclosed on our applications, renewal applications, or during
the application or renewal process.” FirstPro argues that Dr.
Sutton should have disclosed the Moore medical incident in
response to two questions in the application for insurance.
Question 5(a) of the Application states: “Do you know or is it
reasonably foreseeable from the facts, reasonable inferences or
circumstances that any of the following circumstances might
reasonably lead to a claim or suit being brought against you,
even if you believe the claim will not have merit: a request for
records from a patient and or attorney related to an adverse
outcome.” J.A. 597. Relatedly, Question 7 of the application
states: “Do you know or is it reasonably foreseeable from the
facts, reasonable inferences or circumstances that there are
outstanding incidents, claims, or suits (even if you believe the
outstanding claim or suit would be without merit) that have not
been reported to your current or prior professional liability
carrier.” J.A. 597. Dr. Sutton responded “no” to these
38
questions. J.A. 597. We remand to the district court to
determine whether it was reasonably foreseeable that the St.
Francis medical records request letter might reasonably lead to
a claim or suit being brought against Dr. Sutton and whether the
claim arising from the birth of Nathan Moore was reasonably
foreseeable, thereby triggering the exclusion in 11(c).
IV.
For the reasons set forth, the judgment is
AFFIRMED IN PART AND
VACATED AND REMANDED IN PART.
39
FLOYD, Circuit Judge, concurring in part and dissenting in part:
I agree with all of the majority opinion except for its
conclusion that Dr. Sutton reported a potential claim as defined
by the MedPro policy. I therefore dissent from part II.A. of
the majority opinion.
I.
This appeal turns on whether Dr. Sutton “reported” a
“potential claim” to MedPro during the term of her policy – a
condition precedent to coverage. J.A. 592. The policy defines
a potential claim as “an incident which the Insured reasonably
believes will result in a claim for damages.” J.A. 593
(emphasis added). Both below and here on appeal, Dr. Sutton has
consistently denied believing that she ever reported such a
claim. Because South Carolina law requires strict compliance
with conditions precedent, her admission would seem to end the
matter. But the majority concludes her subjective belief is
irrelevant, and instead misconstrues the policy as imposing a
solely objective test.
I disagree for two reasons. First, the plain language of
the policy requires a subjective/objective hybrid analysis. And
second, even assuming that a purely objective standard applies,
the record is devoid of any evidence or factual findings
supporting the majority’s conclusion that a reasonable physician
40
in Dr. Sutton’s shoes would have viewed the medical records
request as a first step to a medical malpractice action.
Accordingly, I would reverse.
II.
As my friends in the majority correctly recognize, South
Carolina law requires that we enforce insurance contracts
according to their plain terms. Maj. Op. at 11-12 (citing Bell
v. Progressive Direct Ins. Co., 757 S.E.2d 399 (S.C. 2014)).
Here, MedPro’s policy defines a “potential claim” as “an
incident which the Insured reasonably believes will result in a
claim for damages.” J.A. 593. By focusing on the Insured’s
reasonable belief, this language requires a mixed
subjective/objective analysis. First, did the Insured believe
the relevant incident would result in a claim for damages? If
the answer to that question is yes, we turn to the second
question: is that belief reasonable? Here, Dr. Sutton denies
believing that the records request would lead to a claim for
damages. Accordingly, we never get past the first step. 1 As
such, I would hold that Dr. Sutton failed to comply with the
1
The word “reasonably” modifies the phrase “believes will
result in a claim for damages.” Because Dr. Sutton never had
any such belief we need not consider whether her non-existent
belief is reasonable.
41
notice requirements in the MedPro policy, and so MedPro does not
owe her any coverage.
Courts that have interpreted similar insurance policy
language repeatedly apply a similar two-step
subjective/objective inquiry. See Owatonna Clinic-Mayo Health
Sys. v. Med. Protective Co. of Fort Wayne, Ind., No. CIV. 08-
417DSDJJK, 2009 WL 2215002, at *5 (D. Minn. July 22, 2009), as
amended (Aug. 10, 2009), aff’d in part,
639 F.3d 806 (8th Cir.
2011) (holding that a MedPro policy conditioning coverage on
receipt of notice of an incident which the insured “reasonably
believes allegations of liability may result” requires both “an
objective and subjective” analysis); Darwin Nat’l Assurance Co.
v. Matthews & Megna LLC,
36 F. Supp. 3d 636, 653-54 (D.S.C.
2014) (applying a hybrid subjective/objective standard in
analyzing so-called “prior knowledge” provisions in insurance
contracts, which exclude coverage for unreported incidents
predating the policy period which the insured knew or should
reasonably have known would give rise to a claim); Greenwich
Ins. Co. v. Garrell, No. 4:11-CV-02743-RBH,
2013 WL 869602, at
*7 (D.S.C. Mar. 7, 2013) (citing Seiko v. Home Ins. Co.,
139
F.3d 146, 152 (3rd Cir. 1998)) (same). 2
2
Cf. Am. Cont’l Ins. Co. v. Phico Ins. Co., 512 S.E.2d
490, 493 (N.C. Ct. App. 1999) (“The policy sets up a subjective
standard . . . under which a claim is deemed filed if the
(Continued)
42
Yet the majority concludes the MedPro policy calls for an
“objective, not subjective, standard.” Maj. Op. at 15.
According to the majority, the “proper inquiry” is “whether a
reasonable person in Dr. Sutton’s shoes” would have believed
that the medical records request “described an incident that
would result in a claim for damages.” Maj. Op. 15-16. But that
is not what the policy says. Rather, the policy plainly states
that Dr. Sutton’s reasonable belief controls. Simply put, the
majority is not free to rewrite the definition of a “potential
claim” by swapping the phrase “what a reasonable person in Dr.
Sutton’s shoes believes” for the phrase “what the Insured
reasonably believes.” See, e.g., Torrington Co. v. Aetna Cas. &
Sur. Co., 216 S.E.2d 547, 550 (S.C. 1975) (“[P]arties have a
right to make their own contract and it is not the function of
this Court to rewrite it or torture the meaning of a policy to
extend coverage never intended by the parties.”).
The majority only musters two cases purportedly supporting
its conclusion that the phrase “reasonably believes” means an
objective analysis applies: In re Anonymous Member of the South
Carolina Bar, 432 S.E.2d 467 (S.C. 1993), and Hook v. Rothstein,
insured reasonably believes that an express demand for damages
will be forthcoming. Therefore, we must view Ms. Chapman’s
actions to determine whether she . . . had a reasonable belief
that a suit would be filed in the Watson case.”).
43
316 S.E.2d 690 (S.C. Ct. App. 1984). In my view, both are
inapposite. Neither addresses contract law, much less language
in insurance policies similar to the language at issue here.
And both are distinguishable on their facts.
In In re Anonymous Member of the South Carolina Bar, the
court addressed Rule 1.7 of the South Carolina Rules of
Professional Conduct. That Rule states that “a lawyer shall not
represent a client if the representation of that client will be
directly adverse to another client, unless the lawyer reasonably
believes the representation will not adversely affect the
relationship with the other client.” 432 S.E.2d at 468. The
court concluded this Rule sets up an objective standard. But
the court did not do so, as the majority implies, because the
phrase “reasonably believes” per se requires an objective
analysis. Rather, it did so only because the comment to that
Rule expressly states that conflicts governed by the Rule are to
be measured under the view of a “disinterested lawyer.” See
id.
In contrast, nothing in the MedPro policy states that a
potential claim should be measured under the view of a
“disinterested insured” – rather, the policy is clear that the
view of “the Insured,” Dr. Sutton, controls.
Hook v. Rothstein is similarly inapposite. That case
establishes that whether a physician departed from a standard of
reasonable medical care in a lack-of-informed-consent action is
44
evaluated under the same objective standard applicable to
medical malpractice actions. 316 S.E.2d at 703. Standards for
medical malpractice and lack-of-informed-consent actions have no
bearing on the meaning of a “potential claim” as expressly
defined in MedPro’s policy.
Admittedly, South Carolina courts have yet to interpret
identical contractual language in a published opinion. Contrary
to the majority’s assertion, however, I do not believe they
would apply a purely objective standard. The plain language of
the policy states that Dr. Sutton’s reasonable belief controls –
not, as the majority concludes, the belief of “a reasonable
person in Dr. Sutton’s shoes.” Because South Carolina courts
enforce insurance contracts according to their plain terms,
Bell, 757 S.E.2d at 406, I am confident they would join courts
in other jurisdictions considering similar language and apply a
two-part subjective/objective analysis.
The district court also appeared to recognize that the two-
step inquiry applies in some instances. In fact, it applied an
analogous inquiry in analyzing FirstPro’s claim that Exclusion
11(a) in its policy precluded coverage. J.A. 116. That
exclusion states that FirstPro will not defend or pay for any
injury or damages arising out of claims made before the
effective date if Dr. Sutton “knew or could have reasonably
foreseen from the facts, reasonable inferences or circumstances
45
that a claim might be made.” J.A. 647. As the district court
acknowledged, this language contains “both a subjective and
objective element.” J.A. 116.
Yet the district court concluded that Dr. Sutton’s
subjective belief was entirely irrelevant under the similar
language in MedPro’s policy, i.e. whether she “reasonably
believe[d]” that an incident would “result in a claim for
damages”:
Well, she might not have a reasonable belief of a
lawsuit, I understand your argument there, but the
purpose of the notice provision is to protect, to
bring it to your attention so you can do the
investigation during the policy period. And now you
want to turn it into some, Oh, no, if there is not a
subjective belief by the insured that she’s going to
get sued, then we don’t have to do it. I’m sorry.
J.A. 108. In doing so, the court – like the majority – ignored
the plain language of MedPro’s policy and instead rewrote it to
reflect its purported “purpose.” Because courts “must enforce,
not write contracts of insurance,” Bell, 757 S.E.2d at 406
(quotation omitted), the district court erred as a matter of
law. Accordingly, I would reverse.
III.
Even assuming an objective standard applies as the majority
contends, nothing suggests that this standard was satisfied
here. As an initial matter, the district court never applied an
46
objective standard. Rather, it concluded that the notice
provision was satisfied because MedPro – not Dr. Sutton – would
have considered the medical records request to be a “potential
claim.” J.A. 102-10, 136, 390. 3 In doing so, the district court
rewrote the policy’s definition of a “potential claim” to read
“an incident which MedPro reasonably believes will result in a
claim for damages.” Again, the court was not free to rewrite
the policy in this way. See Hutchinson v. Liberty Life Ins.
Co., 743 S.E.2d 827, 829 (S.C. 2013) (stating that courts can
interpret, but not rewrite, provisions in insurance policies).
The district court relied on Owatonna Clinic-Mayo Health
Sys. v. Medical Protective Co., 639 F.3d 806 (8th Cir. 2011) for
this point. See J.A. 136. But that case is inapposite. In
Owatonna, the district court held that a MedPro policy with
similar notice language required a subjective-objective
analysis.
2009 WL 2215002, at *5. The district court granted
summary judgment as to the objective component, and held a trial
on the subjective component. Id.; see also
714 F. Supp. 2d 966,
967 (D. Minn. 2010). MedPro appealed only the district court’s
3
Similarly, the court concluded that after Dr. Sutton
reported the medical records request to MedPro, MedPro was then
responsible for investigating whether the request amounted to a
potential claim triggering coverage, regardless of Dr. Sutton’s
subjective belief that it would not lead to a claim. J.A. 136.
47
ruling on the objective component, but did not appeal the jury’s
findings as to the subjective component. 4
The Eighth Circuit rejected MedPro’s assertions, concluding
that the insured’s belief that it would be sued was objectively
reasonable. 639 F.3d at 813. At a minimum then, Owatonna
establishes that the district court should have applied an
objective analysis here (which it failed to do). And the Eighth
Circuit only declined to address the subjective component
because MedPro did not raise that issue on appeal. 5 As such,
Owatonna does not support the district court’s decision to
ignore the subjective inquiry required by the plain language of
the MedPro policy (and indeed the objective inquiry as well).
Finally, there is little, if any, evidence in the record
that a reasonable physician would have believed that the medical
4
MedPro also made an additional argument on appeal: that
the insured’s notice failed to literally comply with the
requirements of the notice provision because it did not include
any names, addresses, or other details required by the policy.
639 F.3d at 811-13. The Eighth Circuit disagreed, concluding
that the insured’s notice provided sufficient facts to put
MedPro on notice of a claim under Minnesota law.
Id. at 812-13.
The district court here appears to have relied on this portion
of the Eighth Circuit’s analysis (see J.A. 136), while
overlooking the portion of the Eighth Circuit’s opinion
analyzing whether the insured’s belief that a claim would be
filed was objectively reasonable.
5
639 F.3d at 810-11 (“In our case . . . the only issue on
which there was a trial was the matter of the [Insured’s]
subjective belief, as to which there was no doubt as to the
sufficiency of the evidence, and as to which, more relevantly,
there is no issue raised on appeal.”).
48
records request would result in a claim for damages. In fact,
the district court’s findings in the related context of
FirstPro’s Exclusion 11(a) suggest just the opposite: that a
reasonable physician would not have believed the request would
result in a claim. For example, in denying FirstPro’s motion
for summary judgment, the district court found that the “record
evidence suggests that a reasonable physician would not view a
request for records by an attorney as a definite sign of an
impending claim.” J.A. 139. And at trial, the court denied Dr.
Sutton’s motion for a directed verdict as to this Exclusion,
finding that additional evidence was needed as to whether Dr.
Sutton’s belief was objectively reasonable. J.A. 260-62.
Ultimately, the court determined a different exclusion applied
as to FirstPro, and thus never decided whether Dr. Sutton’s
belief was objectively reasonable under Exclusion 11(a). The
court’s comments, however, suggest that this was a much closer
issue than the majority suggests. See, e.g., J.A. 363
(inquiring why there was “no evidence [as to] what a reasonable
physician would have” believed).
Moreover, unrebutted testimony established that requests
for medical records typically do not give rise to medical
malpractice claims, but rather arise in other contexts, such as
worker’s compensation claims or personal injury lawsuits. J.A.
104; 208-09. Thus, as I read the record, equally strong
49
evidence exists that a reasonable physician would not have
viewed the medical records request as a first step to a medical
malpractice action. In any event, the district court never
undertook this fact-intensive inquiry. Accordingly, assuming an
objective standard applies as the majority contends, I would
remand to the district court to decide whether Dr. Sutton’s
belief was objectively reasonable in the first instance.
IV.
For the above reasons, I respectfully dissent from Part
II(a) of the majority opinion.
50
