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Mt. Hawley Insurance Co. v. Mesa Medical Group, PLLC

United States District Court, E.D. Kentucky, Central Division, Lexington

July 19, 2017

MESA MEDICAL GROUP, PLLC, et al., Defendants.


          Joseph M. Hood Senior U.S. District Judge

         This matter is before the Court upon Plaintiff's Motion for Judgment on the Pleadings [DE 15]. Plaintiff argues that, assuming the truth of all allegations in Defendants' Answer and Counterclaim, it is entitled to a declaration as a matter of law that the policy language in a professional services liability insurance policy with Defendants is valid and enforceable and (1) that Plaintiff's duty to defendants with respect to a lawsuit filed by Haley Clontz in the Pulaski Circuit Court terminated at the time it tendered its policy limit to Defendants, (2) that Plaintiff has not breached the Agreement, (3) that Plaintiff has not committed bad faith, and (4) that, thus, Defendants' Counterclaims for breach of contract and for breach of the implied covenant of good faith and fair dealing are without merit and should be dismissed. Defendants have filed a Response [DE 17], setting forth their objections, and Plaintiff has filed a Reply [DE 19] in further support of its Motion.


         Mt. Hawley Insurance Company (“Mt. Hawley”) issued Medical Professional Liability Policy number MME0000012 to Marshall Medical Management, LLC, with a Policy Period of October 1, 2013 to October 1, 2014. Pursuant to an endorsement, MESA Medical Group, LLC, is a Named Insured under the Policy. The remaining Defendants also claim either Insured or Named Insured status under the Policy for the claims in the Clontz lawsuit. Mt. Hawley paid for counsel to represent Defendants in the Clontz lawsuit through the time that it tendered Policy limits to Defendants and then ceased providing a defense to defendants.

         On July 9, 2015 Haley Clontz filed a lawsuit in Pulaski Circuit Court alleging medical malpractice which, after amendment, named Defendants, MESA Medical Group, PLLC (“MESA”), Southeastern Emergency Physicians, PLLC, Southeastern Emergency Services, P.C., Dr. Timothy Ziolkowski and Jennifer Dick (“the Contz lawsuit”). (Complaint at ¶14). Clontz alleged that Defendants failed to diagnose or treat a popliteal artery injury resulting from a fall, causing severe and permanent bodily injury, after she was brought by ambulance to the emergency room at Lake Cumberland Regional Hospital. With respect to the Clontz lawsuit, Mt. Hawley tendered the policy limit “jointly to you as the Insured, and notifies you that it will discontinue defending you in the Litigation up on payment of the limit to you (jointly) or the plaintiff in the Litigation.” Defendants argue that the Policy and Kentucky law do not allow Plaintiff to “dump” its policy limits and avoid its duty to defend, so they have rejected the tender.

         The Policy has a $1 million liability limit and originally provided that:

With respect to the insurance provided hereunder, the duty to defend and duty to pay are not separate. The Company shall have the right and duty to defend any suit against the Insured seeking Damages which are payable under the terms of this policy, even if the allegations of the suit are groundless, false, or fraudulent. It is further agreed that the Company may make such investigations as it deems expedient and may settle any Claim, but the Company shall not be obligated to pay any Claim or judgment or to defend or to continue to defend any suit or Claim after the applicable limit of the Company's liability has been tendered to the Insured or the claimant or exhausted by the payment of judgments, settlements or by Claims Expenses.

         At some point, however, the parties agreed to a change endorsement which provided that, “[i]n consideration of the premium charged, [Plaintiff] hereby agrees to pay Claims Expenses in addition to the limits of liability as specified on the DECLARATIONS page.” This endorsement alone did not impact Mt. Hawley's right to effect what Defendants term a “dump and run” because “[n]othing contained in this endorsement shall operate to prevent the Company from tendering its limits of liability hereunder as provided under the policy to which this endorsements is attached . . . and by such action eliminating its responsibility for future Claims Expenses.” [DE 11-1 at 18.]

         Defendants argue, however, that a subsequent endorsement did. The General Change Endorsement (Consent to Settle Endorsement), provides that,

The Company will not settle any Claim without the consent of the named Insured. If the Named Insured refuses to consent to a settlement that the Company recommends and the claimant will accept, then the Company will have the right, but not the duty or obligation, to continue to defend any such Claim or suit. The Company's liability for any settlement or judgment shall not exceed the amount for which the Company could have settled if the Named Insured had consented less all of the Claims Expense incurred from the date of the Company's recommendation. This amount constitutes the applicable limits of the liability of the policy.

[DE 11-1 at 31.].


         With respect to Plaintiff's motion,

“For purposes of a motion for judgment on the pleadings, all well-pleaded material allegations of the pleadings of the opposing party must be taken as true, and the motion may be granted only if the moving party is nevertheless clearly entitled to judgment.” Southern Ohio Bank v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 479 F.2d 478, 480 (6th Cir.1973). But we “need not accept as true legal conclusions or unwarranted factual inferences.” Mixon v. Ohio, 193 F.3d 389, 400 (6th Cir. 1999). A Rule 12(c) motion “is granted when no material issue of fact exists and the party making the ...

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