In the Missouri Court of Appeals Western District
TRACY LYNN SHERMAN, WD82569 Appellant, OPINION FILED: v. January 14, 2020 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 Special Division: Mark D. Pfeiffer, P.J., Edward R. Ardini, and Thomas N. Chapman, JJ.
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 Background1
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
1 In this court-tried case, the evidence and reasonable inferences are viewed in the light most favorable to the judgment, and contrary evidence and inferences are disregarded. Lewellen v. Universal Underwriters Ins. Co., 574 S.W.3d 251, 259 (Mo. App. W.D. 2019).
2 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
2 In particular, the July 7, 2015, MPM letter indicated, “Unfortunately, [Mrs. Kaplan] is not named in the policy nor is she covered by the policy. MPM-PPIA must therefore deny coverage, both indemnity and defense and will provide no further benefits or payment of legal representation for the claim against [Mrs. Kaplan].” At oral argument, Ms. Sherman’s counsel conceded that this letter did not constitute a termination or denial of coverage for Dr. Kaplan, ant that it only addressed coverage of Mrs. Kaplan. 3 Ms. Sherman never called up for hearing her July 8, 2015, motion seeking to file her proposed “First Amended Petition for Damages,” which added an MMPA claim against both Kaplans, and that particular “First Amended Petition for Damages” was never actually filed. Mrs. Sherman later sought, and was granted leave on September 28,
3 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).
2015, to file a different amended petition, also entitled “First Amended Petition for Damages”, which did not include the MMPA claim, and instead refiled the medical malpractice claim against Dr. Kaplan. For the sake of simplicity, we will refer to the initial, and unfiled, amended petition, as “Proposed Amended Petition (With MMPA Claim),” and will refer to the amended petition filed on September 28, 2015, as “First Amended Petition (With Refiled Medical Malpractice Claim).”
4 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:
5 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 concerning this matter please feel free to contact me at your convenience.” (emphasis
added).
Twelve days later, on August 24, 2015, Dr. Kaplan, Mrs. Kaplan, and Plastic &
Reconstructive Surgery entered into a section 537.065 agreement (“537.065 Agreement”) with
Ms. Sherman.4 In the 537.065 Agreement, Ms. Sherman agreed that in the event she obtained a
judgment against either of the Kaplans, she would levy execution or garnishment only against
4 The statute in effect when the parties entered into the contract provided:
Any person having an unliquidated claim for damages against a tort-feasor, on account of bodily injuries or death, may enter into a contract with such tort-feasor or any insurer in his behalf or both, whereby, in consideration of the payment of a specified amount, the person asserting the claim agrees that in the event of a judgment against the tort-feasor, neither he nor any person, firm or corporation claiming by or through him will levy execution, by garnishment or as otherwise provided by law, except against the specific assets listed in the contract and except against any insurer which insures the legal liability of the tort-feasor for such damage and which insurer is not excepted from execution, garnishment or other legal procedure by such contract. Execution or garnishment proceedings in aid thereof shall lie only as to assets of the tort-feasor specifically mentioned in the contract or the insurer or insurers not excluded in such contract. Such contract, when properly acknowledged by the parties thereto, may be recorded in the office of the recorder of deeds in any county where a judgment may be rendered, or in the county of the residence of the tort-feasor, or in both such counties, and if the same is so recorded then such tort-feasor's property, except as to the assets specifically listed in the contract, shall not be subject to any judgment lien as the result of any judgment rendered against the tort-feasor, arising out of the transaction for which the contract is entered into.
Section 537.065, RSMo 2016.
6 the Kaplans’ insurer and would dismiss the other Kaplan with prejudice. The Kaplans agreed to
consent to an amended petition being filed in case number 14BA-CV02328 that would reassert
the previously dismissed medical malpractice claim without the necessity of including a section
538.225 affidavit of merit. Additionally, the Kaplans agreed to entry of judgment against Dr.
Kaplan in an amount up to $500,000, and that the only issue to be decided by the court would be
the dollar amount of damages in the judgment. The 537.065 Agreement further stated, “[T]he
Kaplans have consistently denied, and continue to deny, any negligent conduct, fraudulent
conduct or wrongdoing in connection with the surgery,” and “[N]othing herein shall be construed
as an admission of liability by Kaplans for the injuries and damages alleged by Sherman arising
out of the incident.” Dr. Kaplan was not a party to case number 14BA-CV02328 on August 24,
2015, when he entered into the 537.065 Agreement with Ms. Sherman. MPM had no knowledge
of the terms of the 537.065 Agreement at the time it was entered into by its insured, Dr. Kaplan.
Nor was MPM made aware that its insured intended to stipulate to judgment on a future medical
malpractice claim—the same claim which had previously been successfully defended by MPM
on behalf of its insured.
The next day, August 25, 2015, Ms. Sherman moved for a special setting for a hearing on
a consent judgment in case number 14BA-CV02328. Thereafter, she gave notice scheduling a
consent judgment hearing on September 28, 2015, though such notice was not provided to MPM.
On September 22, 2015, Ms. Sherman moved for leave to amend her petition in order to add the
same medical malpractice claim against Dr. Kaplan that had originally been filed but dismissed
because it lacked an affidavit of merit. However, Dr. Kaplan agreed that the medical malpractice
claim could be refiled and prosecuted to a judgment up to $500,000 without an affidavit of merit,
and agreed that he would waive any right to require it (as was his right under section 538.225).
7 Ms. Sherman and the Kaplans appeared before the court at the September 28, 2015,
consent judgment hearing. Ms. Sherman’s counsel indicated that MPM had “cut off coverage”
and that Ms. Sherman and the Kaplans had entered into a section 537.065 agreement whereby
Dr. Kaplan consented to judgment against him and Ms. Sherman agreed to only attempt recovery
of the judgment against the insurance policy. The trial court granted Ms. Sherman leave to file
her First Amended Petition (With Refiled Medical Malpractice Claim). Ms. Sherman
immediately dismissed her action against Mrs. Kaplan. Dr. Kaplan did not file an answer or
other responsive pleading to the First Amended Petition (With Refiled Medical Malpractice
Claim). At no time did Ms. Sherman file a section 538.225 affidavit of merit in case number
14BA-CV02328. The trial court heard evidence only on Ms. Sherman’s damages. Ms. Sherman
presented evidence of economic loss of $16,654 related to her claim against Dr. Kaplan,
including the cost of the tummy tuck surgery performed by Dr. Kaplan. At the conclusion of the
hearing, the court asked, “So are we calling this a consent judgment pursuant to 537.065?” Dr.
Kaplan’s attorney responded, “Yes, sir.” The court asked, “So is everybody in agreement I fill in
500,000 in this blank? Because it’s blank.” Ms. Sherman’s counsel asked for the maximum
allowed under the policy, $500,000. The trial court then entered a judgment in favor of Ms.
Sherman and against Dr. Kaplan in the amount of $500,000 in case number 14BA-CV02328.
MPM had no knowledge of the September 28, 2015, hearing and had no representation at it. Dr.
Kaplan did not notify MPM of the First Amended Petition (With Refiled Medical Malpractice
Claim) deemed filed on that day.5
5 The trial court allowed MPM to intervene after entry of September 28, 2015 judgment and declared the judgment void and set it aside. Ms. Sherman appealed, and this court held that the trial court lacked jurisdiction to grant MPM’s motion to intervene and lacked authority to grant MPM’s Rule 74.06(b) motion to set aside the judgment, and reinstated the judgment. Sherman v. Kaplan, 522 S.W.3d 318, 326-27 (Mo. App. W.D. 2017).
8 Ms. Sherman filed the instant garnishment action against MPM a month later, on October
29, 2015, and a bench trial was conducted in July 2018. The parties presented jointly stipulated
facts and exhibits. MPM presented additional evidence through the testimony of Mr. Downard
(its Executive V.P. and General Counsel).
Thereafter, the trial court entered judgment in favor of MPM and against Ms.
Sherman. It concluded that MPM did not terminate Dr. Kaplan’s insurance coverage or
improperly refuse to defend Dr. Kaplan on claims that fell within the policy and which MPM had
received notice thereof. The trial court determined that Dr. Kaplan had breached his duties under
the policy and was, thus, not entitled to indemnification under the policy. The trial court
likewise held that Ms. Sherman was not entitled to garnish insurance policy proceeds from Dr.
Kaplan’s policy with MPM in her attempt to collect the consent judgment she had obtained
against Dr. Kaplan. This appeal by Ms. Sherman followed.
Standard of Review
Review of a court-tried equitable garnishment action is governed by Murphy v. Carron,
536 S.W.2d 30, 32 (Mo. banc 1976). McDonald v. Ins. Co. of State of Pa., 460 S.W.3d 58, 64
(Mo. App. W.D. 2015). Accordingly, the trial court’s judgment will be affirmed unless it is not
supported by substantial evidence, it is against the weight of the evidence, or it erroneously
declares or applies the law. Id.
Duty to Defend
In point one of her appeal, Ms. Sherman contends that the trial court misapplied the law
in finding that MPM did not violate its duty to defend Dr. Kaplan. She argues that MPM
violated its duty to defend Dr. Kaplan when it denied coverage in case number 14BA-CV02328
in its July 29, 2015 letter.
9 An insurer owes two distinct duties to its insured—a duty to defend and a duty to
indemnify. Allen v. Cont’l W. Ins. Co., 436 S.W.3d 548, 552 (Mo. banc 2014). “The duty to
defend is broader than the duty to indemnify.” Piatt v. Ind. Lumbermen’s Mut. Ins. Co., 461
S.W.3d 788, 792 (Mo. banc 2015). The duty to defend arises only when there is a possibility or
potential for coverage at the outset of the case. Id.; Allen, 436 S.W.3d at 552. The potential for
coverage must be based on facts (1) alleged in the petition, (2) that the insurer knows at the
outset of the case, or (3) that are reasonably apparent to the insurer at the outset of the case.
Piatt, 461 S.W.3d at 792; Allen, 436 S.W.3d at 553. If those facts do not support a potential for
coverage, then the insurer has no duty to defend. Id. “To extricate itself from a duty to defend
the insured, the insurance company must prove that there is no possibility of coverage.” Truck
Ins. Exch. v. Prairie Framing, LLC, 162 S.W.3d 64, 79 (Mo. App. W.D. 2005) (internal quotes
and citation omitted). The duty to defend is determined by comparing the insurance policy
language with the allegations in the petition from the underlying lawsuit. Allen, 436 S.W.3d at
552.
The interpretation of an insurance policy is an issue of law that is reviewed de novo.
Piatt, 461 S.W.3d at 792; Allen, 436 S.W.3d at 553. The general rule in insurance policy
interpretation is to give the policy language its plain meaning. Piatt, 461 S.W.3d at 792; Allen,
436 S.W.3d at 554. “Definitions, exclusions, conditions, and endorsements are necessary
provisions in insurance policies. If they are clear and unambiguous within the context of the
policy as a whole, they are enforceable.” Id. (internal quotes and citation omitted).
The medical professional liability policy issued by MPM provided coverage to Dr.
Kaplan for professional services rendered. Specifically, section I(a) of the policy provided
coverage for a claim for a “Medical Incident” that “(i) arose out of an act or omission by an
10 Insured Individual or by any person for whose acts or omissions the Insured Individual is
legally responsible” and that “(ii) occurred while providing, or legally obligated to provide,
Professional Services for which such persons hold the required licenses.” Section II of the
policy defined “Insured Individual” as “[a] healthcare provider duly licensed and in good
standing in Missouri and designated as an Insured Individual on the Policy Declaration.”
“Medical Incident” was defined as “a single act or omission or a series of related acts or
omissions arising out of the rendering of, or the failure to render, Professional Services to any
one person, which result(s) in, or is likely to result in, damages.” “Professional Services” was
defined as “the provision of medical services in the Insured’s area of specialty, including
medical treatment, making medical diagnoses, and rendering medical opinions or medical
advice[.]” The policy excluded certain acts from coverage. Specifically, section IV(f) provided
that MPM was not liable for any loss nor obligated to provide a defense to any claim alleging or
arising out of “[l]iability arising out of any willful, wanton, fraudulent, criminal, unlawful, or
intentionally wrongful activity or any Insured, including but not limited to participation by any
Insured in any conspiracy.”
Ms. Sherman’s original petition asserted a medical malpractice claim against Dr. Kaplan,
as well as a general negligence claim against Mrs. Kaplan. Specifically, the general negligence
claim against Mrs. Kaplan alleged that Mrs. Kaplan was negligent in performing or assisting in
performing a medical procedure without proper licensure and in failing to inform Ms. Sherman
of her role in the procedure. The medical malpractice claim alleged that Dr. Kaplan was
negligent in allowing Mrs. Kaplan to perform significant portions of the tummy tuck procedure,
in failing to inform Ms. Sherman that Mrs. Kaplan would be performing significant portions of
the procedure, and in otherwise improperly performing the procedure.
11 MPM’s Executive V.P. and General Counsel Jonathan Downard testified that MPM
determined that the medical malpractice claim against Dr. Kaplan fell within the coverage of the
policy, and MPM provided a defense to Dr. Kaplan and a courtesy defense to Mrs. Kaplan (while
the case was pending against Dr. Kaplan) even though she was not insured under the policy and
not a licensed healthcare provider. Through the defense provided by MPM, the medical
malpractice case against Dr. Kaplan was dismissed without prejudice on April 6, 2015, based on
Ms. Sherman’s failure to file an affidavit of merit as required by section 538.225.6 In that there
was no claim to defend for Dr. Kaplan, and in that Mrs. Kaplan was not an insured or a licensed
healthcare provider, MPM sent its July 7, 2015 letter, indicating that it would no longer provide a
courtesy defense to Mrs. Kaplan (who was the only remaining defendant in the suit).
MPM sent Dr. Kaplan the July 29, 2015 letter in response to Ms. Sherman’s Proposed
Amended Petition (with MMPA Claim), which contained the same general negligence claim
against Mrs. Kaplan and added a fraud claim under the Merchandising Practices Act against both
Kaplans. Specifically, the fraud claim alleged that the Kaplans intentionally presented Mrs.
Kaplan as a licensed healthcare professional knowing that she was not and never had been one
and that their act of intentionally presenting her as such was a clear and direct misrepresentation
and a deceptive practice under the Act.
The claims in the Proposed Amended Petition (with MMPA Claim) were not covered
under the policy. The fraud exclusion in section IV(f) of the policy barred coverage of the fraud
6 “The affidavit procedure of § 538.225 serves to free the court system from frivolous medical malpractice suits at an early stage of litigation….” Mahoney v. Doerhoff Surgical Servs., Inc., 807 S.W.2d 503, 510 (Mo. banc 1991). It is “a reasonable means to hinder a plaintiff whose medical malpractice petition is groundless from misuse of the judicial process in order to wrest a settlement from the adversary by the threat of the exaggerated cost of defense.” Id. at 508.
12 claim against Dr. Kaplan, and Mrs. Kaplan was not an Insured Individual as defined by section II
of the policy. In that the potential for coverage must be based on facts alleged in the petition, or
that were known or reasonably apparent to the insurer, Piatt, 461 S.W.3d at 792, in that the facts
plead in the then pending or proposed pleadings did not support a possibility of coverage, in that
there were no facts then known or reasonably apparent to the insurer to give rise to the
possibility of coverage (the medical malpractice claim having been dismissed, lacking an
affidavit of merit), the insurer had no duty to defend when it indicated (in its letters of July 7 and
July 29, 2015) that it would not be providing a defense to the pending (or proposed) claims
against Dr. and Mrs. Kaplan. At the time those letters were written, it appeared that Ms.
Sherman had abandoned her claim of medical malpractice (having never provided an affidavit of
merit), and was pursuing a different claim against Dr. Kaplan (under the MMPA in her Proposed
Amended Petition) that was excluded from coverage. Those letters, together with MPM’s
follow-up letter of August 12, 2015, made it patently clear that MPM was willing to continue to
defend any medical malpractice claim against Dr. Kaplan, but that none were then pending or
threatened. In fact, at oral argument, counsel for Ms. Sherman agreed that MPM would not have
had a duty to indemnify the MMPA claims had they gone forward, and acknowledged that MPM
likely would have defended the reasserted medical malpractice claim in the First Amended
Petition filed in September 2015, had it been notified. 7
7 Ms. Sherman argues that MPM violated its duty to defend because, when it denied coverage in the July 29, 2015 letter, Dr. Kaplan had already been sued for medical malpractice for his role in the tummy tuck surgery, and that, although the original medical malpractice case had been dismissed without prejudice, Dr. Kaplan was subject to being deposed in the remaining case against his wife, leaving him vulnerable to the potential medical malpractice claim (as it could be refiled). Ms. Sherman fails, however, to cite any authority supporting this specific argument. In that the facts alleged in the pending or proposed petition did not support coverage, and in that the facts then known to MPM were that Ms. Sherman had not provided an affidavit of merit and had abandoned her medical malpractice claim in her Proposed Amended Petition (with MMPA Claim), there was not then a potential obligation to cover or indemnify the claims being asserted by Mrs. Sherman. Piatt, 461 S.W.3d at 792.
13 Despite Ms. Sherman’s counsel’s statements at the consent judgment hearing that “this is
a medical malpractice case” that has “been progressing for a while,” the malpractice claim had
not been progressing at all, but had instead been dismissed for months (after being successfully
defended by MPM-provided counsel) and had been omitted from the Proposed Amended Petition
(with MMPA Claim). The malpractice claim had only been allowed to be refiled the very same
day as the consent judgment was entered, without notice to MPM and without an affidavit of
merit. Nor had MPM “cut off coverage” (as also alleged by Ms. Sherman’s counsel at the
consent judgment hearing). Rather MPM had declined to defend a person not covered under the
policy (Mrs. Kaplan); had declined to defend the abandoned MMPA claim against Dr. Kaplan
(that was excluded from coverage); and had made it clear that it was not defending those claims
because they were not the sort of claims (i.e. medical malpractice) which would be covered and
defended. The July 29, 2015 letter did not terminate malpractice coverage for Dr. Kaplan or
refuse to defend any potentially covered claim for professional malpractice. Put in simple
terms: MPM did not breach its duty by refusing to defend persons (Mrs. Kaplan) and claims
(MMPA) not covered under its policy (as explained in its letter of July 29, 2015). Nor did it
breach its duty in failing to defend Dr. Kaplan from Ms. Sherman’s malpractice claim – as it had
successfully done so at the onset of the suit, and had been provided no opportunity to do so when
the malpractice claim was refiled (on the day the consent judgment was entered).
Finally, the general negligence claim arising out of the tummy tuck surgery that remained
pending against Mrs. Kaplan did not support the possibility for coverage under the policy. Nor
did the proposed (but never filed) fraud claim against Dr. Kaplan support a possibility for
coverage. There was simply no claim made against Dr. Kaplan regarding medical services
rendered to support a potential for coverage under the policy when MPM sent its letter on July
14 29, 2015. Case number BA-CV02328 then only included uncovered claims. MPM, therefore,
did not have a duty to defend. See Allen, 436 S.W.3d at 553, 556 (insurer had no duty to defend
because there was no potential for coverage for a petition that sought only intentional damages
excluded by the policy); Piatt, 461 S.W.3d at 793-94 (insurer had no duty to defend because
there was no potential coverage for a wrongful death claim asserting only failure to provide a
safe work environment, which is exclusively the employer’s duty, and the policy excluded
employer liability, specifically bodily injury to an employee of the insured arising out of
employment by the insured). But cf. Fostill Lake Builders, LLC v. Tudor Ins. Co., 338 S.W.3d
336 (Mo. App. W.D. 2011) (insurer had duty to defend claims alleging that architect had failed
to design condominium in compliance with handicap accessibility requirements where such
claims were not clearly and unambiguously excluded as discrimination claims under architect’s
professional liability insurance policy); Truck Ins. Exch., 162 S.W.3d at 82-87 (insurer had a
duty to defend where a claim of negligent supervision, although inartfully drafted, was
potentially within the policy’s coverage even though an alternative respondeat superior claim
beyond coverage was also asserted). The trial court in the instant action did not misapply the law
in finding that MPM did not breach its duty to defend. Point one is denied.
Policy Coverage for Consent Judgment
In points two and three, Ms. Sherman contends that the trial court misapplied the law in
finding that MPM was not responsible for the consent judgment. The trial court based this
finding on two grounds: (1) the consent judgment did not result from an actual trial on the issue
of liability or whether the amount of Ms. Sherman’s damages was reasonable, and (2) Dr. Kaplan
did not comply with the terms and conditions of the policy thereby relieving MPM of its
obligations under the policy. Point two challenges the first ground, and point three challenges
15 the second. Because the second ground (in point three) supports the trial court’s finding that
MPM was not obligated to indemnify the consent judgment (as will be discussed below), point
two need not be addressed.
As a condition precedent to coverage, the MPM policy required Dr. Kaplan to timely
report every claim or suit brought against him. Specifically, section I(c) provided, “Timely
Reporting to the Company…is a condition precedent to coverage under this policy.” Section
VII(a) further provided,
If there is a Medical Incident or Claim involving any Insured, the Insured must comply with the Policy Reporting provisions stated in Section I. INSURANCE COVERAGE AGREEMENT at (c) or the Company will have no duty or obligation to pay Loss or defend that Claim or any Claim arising out of that Medical Incident….If a Claim is made or suit is brought against any Insured, such Insured shall immediately forward to the Company every demand, notice, summons or other process received by such Insured or such Insured’s representative. The Company will have no duty or obligation to pay Loss or defend any Claim where the Insured shall fail to forward a demand, notice, summons or other process as provided by this Policy and such failure operates to prejudice the rights of the Company.
Ms. Sherman contends that, once MPM violated its duty to defend, Dr. Kaplan was
relieved of these duties under the policy and was free to enter into the 537.065 Agreement with
her. Ms. Sherman is correct that, where an insurer wrongly refused to defend an insured in
litigation, the insurer is precluded from complaining that insured did not cooperate or provide
notice of an amended petition. Columbia Cas. Co. v. HIAR Holding, L.L.C., 411 S.W.3d 258,
272 (Mo. banc 2013). Section 537.065 authorizes a claimant and tortfeasor to contract to limit
recovery to specified assets or insurance proceeds. Taggart v. Maryland Cas. Co., 242 S.W.3d
755, 758 (Mo. App. W.D. 2008). Section 537.065 settlements are valid only if they are free from
fraud and collusion and if the settlement amount is reasonable. Id. (citing Gulf Ins. Co. v. Noble
Broad., 936 S.W.2d 810, 815-16 (Mo. banc 1997)).
16 Contrary to Ms. Sherman’s contention (and as we concluded in denying point one of her
appeal), MPM did not violate its duty to defend Dr. Kaplan. After dismissal of the original
medical malpractice claim against Dr. Kaplan, Dr. Kaplan was no longer a party in case number
BA-CV02328; and the only remaining claim (general negligence) and defendant (Mrs. Kaplan)
were not covered under the policy. Nor was the proposed MMPA claim against Dr. Kaplan
covered under the policy. MPM’s July 29 letter did not “cut off” malpractice coverage for Dr.
Kaplan, and did not unjustifiably refuse to cover the claims that were then actually pending or
proposed. Since MPM did not unjustifiably refuse to defend Dr. Kaplan, Dr. Kaplan was not
relieved of his duty to notify MPM and to forward it a copy of the Amended Petition (With
Refiled Medical Malpractice Claim).
Generally, after an injured person has obtained a judgment against an insured defendant,
the judgment creditor stands in the shoes of the insured and has rights no greater than (and no
less than) the insured’s rights would have been if the insured paid the judgment and then sought
reimbursement from the insurer. Greer v. Zurich Ins. Co., 441 S.W.2d 15, 30 (Mo. 1969).
Policy conditions requiring the insured to notify the insurance company of a claim as soon as
practicable and forward all legal documents to the insurer are valid and enforceable. Johnston v.
Sweany, 68 S.W.3d 398, 401 (Mo. banc 2002); Greer, 441 S.W.2d at 30. “[O]ne of the factors to
be considered in determining if an insured provided notice within a reasonable period of time is
whether the insurance company was prejudiced by the delay.” Tresner v. State Farm Ins. Co.,
913 S.W.2d 7, 11 (Mo. banc 1995)(citing Greer, 441 S.W.2d at 32). See also Johnston, 68
S.W.3d at 402. Prejudice substantially disabling the insurer in its defense is considered. Greer,
441 S.W.2d at 32. The inclusion of a prejudice factor reflects the historical reluctance of
Missouri courts to excuse an insurer from its obligations under the policy because of the
17 insured’s breach of a policy provision that does not prejudice the insurer. Tresner, 913 S.W.2d
at 11.
Missouri courts have consistently placed the burden of demonstrating prejudice on the
insurer, and the presence or absence of prejudice is typically a question of fact for the fact-finder.
Columbia Cas. Co., 411 S.W.3d at 272; Tresner, 913 S.W.2d at 11, 16. But when the facts
bearing on the issues of whether an insured provided notice to the insurer within a reasonable
time and whether the insurer suffered substantial prejudice as a result are not disputed, then the
notice issues reflect questions of law. Columbia Cas. Co., 411 S.W.3d at 272. See also Tresner,
913 S.W.2d at 14 (“[W]here all reasonable persons would conclude that notice…was not given
or made within [a reasonable] time, under all of the circumstances, then it becomes a question of
law for the court.”).
The evidence on the notice issue was not disputed in this case, and can therefore be
decided as a matter of law. The undisputed evidence showed that Dr. Kaplan failed to comply
with the policy reporting requirements set forth under section VII(a) mandating that he notify
and forward copies of the Amended Petition (With Refiled Medical Malpractice Claim) to MPM.
Dr. Kaplan did not notify MPM of (and MPM had no knowledge of) Ms. Sherman’s motion for
leave to amend her petition, which was filed on September 22, 2015, a month after entering into
the 537.065 Agreement and just six days before being granted leave to file it and obtain a
consent judgment upon it. MPM had no knowledge of the hearing and no representation at the
hearing on September 28, 2015, wherein Ms. Sherman was granted leave to refile the medical
malpractice claim, and to obtain (without an affidavit of merit nor any other evidence of
causation) a consent judgment in the sum of $500,000.
18 This undisputed evidence showed that Dr. Kaplan’s failure to notify MPM of the new
medical malpractice claim prejudiced MPM. Dr. Kaplan assumed an obligation for a claim that
was identical to the one MPM had previously, successfully defended and that failed to cure the
previous defect (lack of an affidavit of merit). MPM did not learn of the 537.065 Agreement, the
reasserted medical negligence claim against Dr. Kaplan, or the consent judgment, until after they
were entered. MPM was substantially disabled in its defense and denied the opportunity to
protect its interests. It was deprived of the opportunity to settle the dispute before trial, to defend
against liability at trial, and to dispute the amount of damages. The trial court correctly
concluded that, because of Dr. Kaplan’s noncompliance with the terms and conditions of the
policy, MPM was not responsible for the consent judgment. 8 Point three is denied.
8 The trial court relied on a line of cases holding that prejudice will be presumed where the failure to forward suit papers to the insurer is unexcused because such a disadvantage is difficult to prove, and it would be unjust to force the insurer to demonstrate prejudice in such a case. See Rocha v. Metro. Prop. & Cas. Ins. Co., 14 S.W.3d 242, 247- 248 (Mo. App. W.D. 2000), and Anderson v. Slayton, 662 S.W.2d 575, 577-78 (Mo. App. W.D. 1983). These cases are not necessarily incompatible with Missouri Supreme Court cases that provide that prejudice to the insurer will not be presumed from the mere fact of an insured’s delay in giving notice, and the burden is on the insurer to prove prejudice. See Columbia Cas. Co., 411 S.W.3d at 272; Tresner, 913 S.W.2d at 11, 16. As stated, the Missouri Supreme Court has also explained that the issue of prejudice may become a question of law when the facts bearing on the issue are undisputed. Columbia Cas. Co., 411 S.W.3d at 272; Tresner, 913 S.W.2d at 14. Regardless, in reviewing a court-tried case, the appellate court is primarily concerned with the correctness of the trial court’s judgment rather than the route taken to reach it. McQueen v. Gadberry, 507 S.W.3d 127, 138 (Mo. App. E.D. 2016). Thus, the trial court’s judgment will be affirmed if the appellate court determines that the trial court reached the correct result regardless of whether its proffered reasons are wrong or insufficient. Id. In the instant case, it was not merely a matter of delay in providing notice, as MPM was not apprised of the amended claims until after the consent judgment had been entered. The undisputed evidence showed that MPM was (as a matter of law) prejudiced by Dr. Kaplan’s failure to notify it of the medical malpractice claim before voluntarily agreeing to entry of a judgment against him.
19 Conclusion
The trial court did not misapply the law in concluding that MPM did not violate its duty
to defend and that MPM was not responsible for the section 537.065 consent judgment. The
judgment of the trial court is affirmed.
/s/ Thomas N. Chapman Thomas N. Chapman, Judge
All concur.