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A federal appeals court has issued a mixed verdict in a dispute between American International Group Inc. unit and a Berkshire Hathaway Group Inc. in a medical professional liability case involving a $12.2 million jury award.
The complex case involves an October 2002 laparoscopic hysterectomy that was performed on Vicki Bramlett, a 36-year-old mother and wife who, while still hospitalized, suffered internal bleeding and died four days later after being removed from life support, according to Tuesday’s ruling by the 7th U.S. Circuit Court of Appeals in Chicago in The Medical Protective Co. of Fort Wayne, Indiana v. American International Specialty Lines Insurance Co., now known as AIG Specialty Insurance Co.
In May 2003, Mrs. Bramlett’s husband and children filed a wrongful death lawsuit against the doctor, his clinic, the hospital and the hospital’s nurses. The doctor held a $200,000 health care professional ability insurance policy with Fort Wayne, Indiana-based MedPro, a Berkshire Hathaway unit.
MedPro refused to settle the case against the doctor for the $200,000 limit. At trial, a jury issued a $14 million verdict against the doctor, which was reduced by the court to $12.2 million by the trial court.
MedPro paid the Bramletts about $1.7 million for which the doctor was liable under a statutory cap. The family then sued the insurer for the remaining portion of the verdict. MedPro settled with the Bramletts for a confidential amount greater than $5 million, according to the ruling.
In the midst of this lawsuit, MedPro had purchased a $5 million professional liability policy with AIG unit AISLIC. In June 2006, when MedPro renewed its policy, at MedPro’s request, AISLIC deleted questions as to whether claims or allegations had been made against MedPro in the previous five years because they were not applicable to a renewal application, according to the ruling.
AISLIC refused to cover MedPro’s settlement with the family, and MedPro filed suit in U.S. District Court in Fort Wayne for breach of contract.
The district court ruled in AIG’s favor, holding that a policy exclusion, which excluded wrongful acts that occurred prior to the first professional liability insurance policy issued, applied because when MedPro first contracted with AISLIC it knew, or should have foreseen, its failure to settle the case.
The appeals court overturned the ruling in AIG’s favor in its unanimous ruling. “Viewing the evidence in the light most favorable to MedPro, there is a genuine factual dispute as to whether MedPro committed a Wrongful Act,” the appeals court panel said.
However, the panel said the district had correctly determined that by June 2005, when MedPro renewed its policy, it “should have known that it was facing a potential claim. “
The case was remanded for further proceedings.
A federal appeals court has upheld a lower court ruling that an American International Group Inc. unit is not liable under its property coverage for financial losses stemming from its policyholder’s defective material.