978-1285770178 Case Printout Case CPC-30-06

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C.A.8 (Mo.),2010.

Medical Protective Co. v. Bubenik

594 F.3d 1047 United States Court of Appeals,

Eighth Circuit.

The MEDICAL PROTECTIVE COMPANY, Plaintiff-Appellee,

v.

James E. BUBENIK, D.M.D.; James E. Bubenik, D.M.D., P.C., Defendants,

Joseph C. Johnston, individually; Mary Johnston, through her legal guardian, Joseph C. Johnston, Defendants–

Appellants.

No. 09-2324.

judgment in favor of insurer. Thereafter, the District Court, Webber, J., 2009 WL 1298351, denied judgment credi-

tors’ motion to amend. Judgment creditors appealed.

ment creditors, who had obtained a state court judgment against the dentist for malpractice. The United States Dis-

trict Court for the Eastern District of Missouri, E. Richard Webber, J., 2008 WL 5070042, entered a declaratory

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Insurance 217 3205

217k3205 k. Materiality in general. Most Cited Cases

Insurance 217 3212

217 Insurance

prove (1) a material breach of the cooperation clause; (2) the existence of substantial prejudice as a result of the

breach; and (3) the exercise of reasonable diligence to secure the insured‘s cooperation.

[3] Federal Courts 170B 776

[4] Insurance 217 1820

217 Insurance

217XIII Contracts and Policies

[5] Insurance 217 1809

217 Insurance

217XIII Contracts and Policies

217XIII(G) Rules of Construction

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If insurance policy contains ambiguities, under Missouri law, courts must resolve them in favor of the insured.

[7] Insurance 217 1808

217 Insurance

[8] Insurance 217 3204

217 Insurance

217XXVII Claims and Settlement Practices

217XXVII(B) Claim Procedures

217 Insurance

217XXVII Claims and Settlement Practices

217XXVII(B) Claim Procedures

217XXVII(B)3 Cooperation

217k3203 What Constitutes Cooperation; Failure to Cooperate

[9] Insurance 217 3212

217 Insurance

217XXVII Claims and Settlement Practices

217XXVII(B) Claim Procedures

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insurer did not need to show that it would have won the underlying case with insured’s cooperation; rather, it only

had to prove how insured’s noncooperation actually was prejudicial.

[10] Insurance 217 3212

217 Insurance

217XXVII Claims and Settlement Practices

217XXVII(B) Claim Procedures

217XXVII(B)3 Cooperation

217k3210 Effect of Failure to Cooperate

217k3212 k. Prejudice to insurer. Most Cited Cases

es leading to patient’s death.

[11] Insurance 217 3204

217 Insurance

to deny liability coverage, insurer must present evidence to show what steps it took in order to locate insured and to

secure his cooperation in defending the action.

[12] Insurance 217 3204

Medical malpractice insurer exercised reasonable diligence to secure insured dentist’s cooperation in malpractice

suit, as required to deny liability coverage arising out of that lack of cooperation under Missouri law; insurer con-

tacted insured by telephone and by letter on multiple occasions in an attempt to secure his cooperation, insurer re-

quested insured submit to a deposition, answer interrogatories, assist in forming a defense strategy, release state den–

tal board documents, and testify at trial, and when its requests went unanswered, insurer provided repeated notice of

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217k3132 k. Questions of law or fact. Most Cited Cases

An insurer’s waiver of a defense is a question of fact.

[14] Insurance 217 3093

217 Insurance

217XXVI Estoppel and Waiver of Insurer’s Defenses

217k3093 k. Acts and conduct of insurer or agents in general. Most Cited Cases

If an insurer’s waiver of a defense is implied from conduct, the conduct must clearly and unequivocally show a pur-

pose to relinquish the right.

217XXVII(B)3 Cooperation

217k3214 k. Insurer’s waiver or estoppel. Most Cited Cases

Medical malpractice insurer’s alleged conduct, in continuing to defend insured dentist without issuing a reservation

of rights letter despite knowledge that dentist would invoke Fifth Amendment in medical malpractice suit, did not

give rise to waiver of insurer’s right to deny coverage for insured’s ultimate noncooperation under Missouri law;

156III Equitable Estoppel

156III(A) Nature and Essentials in General

156k52.15 k. Essential elements. Most Cited Cases

Estoppel 156 56

Estoppel 156 58

156 Estoppel

156III Equitable Estoppel

156III(A) Nature and Essentials in General

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[17] Insurance 217 3214

217 Insurance

217XXVII Claims and Settlement Practices

217XXVII(B) Claim Procedures

217XXVII(B)3 Cooperation

217k3214 k. Insurer’s waiver or estoppel. Most Cited Cases

Medical malpractice insurer‘s failure to withdraw when insured dentist’s noncooperation in medical malpractice suit

first arose did not estop it from denying coverage for insured’s noncooperation under terms of medical malpractice

policy under Missouri law; before issuing reservation of rights letter, insurer had advised insured on multiple occa-

Bruce Baty, argued, Jodi M. Hoss, on the brief, Kansas City, MO, for appellee.

Before MURPHY and BYE, Circuit Judges, and STROM,FN1 District Judge.

FN1. The Honorable Lyle E. Strom, United States District Judge for the District of Nebraska, sitting by

designation.

The district court FN2 entered a declaratory judgment in favor of MPC and the Johnstons appeal. We affirm.

FN2. The Honorable E. Richard Webber, United States District Judge for the Eastern District of Missouri.

Dr. Bubenik was a dentist specializing in conscious sedation dentistry and MPC provided his medical malpractice

insurance. A patient named Marlon Jaudon died in July 2004 during a procedure at Dr. Bubenik’s office. Six months

his insurance coverage. MPC’s counsel sent Dr. Bubenik a letter on April 3, 2006 stating that his continued refusal to

testify might be a material breach of the cooperation clause in his policy. That clause provided that “[t]he Insured

shall at all times fully cooperate with the Company in any claim hereunder and shall attend and assist in the prepara-

tion and trial of any such claim.”

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During the course of the Johnston litigation, Dr. Bubenik again asserted his Fifth Amendment privilege. He refused

to answer interrogatories, submit to a deposition, or testify at trial. When asked about the merits of his defense, Dr.

Bubenik told MPC that the Johnston case was defensible but that he was unwilling to discuss how it could be de-

fended. He also refused to release to MPC a state dental board report completed six days after Johnston’s death. That

report related what had occurred on Johnston’s visit and contained Dr. Bubenik’s opinion as to the cause of his death,

information that was not contained in the dental records released to MPC.

MPC sent Dr. Bubenik‘s personal attorney a letter in August 2006 which stated:

Pursuant to the policy terms, including the provisions pertaining to his duty to cooperate, Dr. Bubenik is required

to “fully cooperate” and “assist in the preparation and trial” of claims against him. Specifically, this duty to coop-

erate requires Dr. Bubenik to answer interrogatory requests, provide testimony in his defense at deposition and at

Neither Dr. Bubenik nor his counsel responded to the August letter. A similar letter was sent in October 2006. Again

MPC received no response. Finally at an October mediation in the Johnston case, MPC hand delivered to Dr. Bu-

benik a letter stating that he had breached the cooperation clause and that MPC was reserving its rights under the

policy.

benik. The federal district court subsequently concluded that MPC was not liable for that judgment because Dr. Bu-

benik had breached the cooperation clause in his policy by failing to testify and assist with his defense. The court

also concluded that MPC neither waived nor should be estopped from asserting its affirmative defense.

The Johnstons appeal, asserting that MPC failed to make the showing required by Missouri law to deny coverage for

provision, an insurer must prove: (1) a material breach of the cooperation clause; (2) the existence of substantial

prejudice as a result of the breach; and (3) the exercise of reasonable diligence to secure the insured’s cooperation.

Wiles v. Capitol Indem. Corp., 215 F.Supp.2d 1029, 1031 (E.D.Mo.2001).

The policy cooperation clause provides that, “[t]he Insured shall at all times fully cooperate with the Company in

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less it was explicit and conspicuous.

[3][4][5][6][7] Whether a contract is ambiguous as written is a question of law which we review de novo. United

States v. Brekke, 97 F.3d 1043, 1049 (8th Cir.1996). Missouri law accords the terms of an insurance policy “the

meaning which would be attached by an ordinary person of average understanding.” Seeck v. Geico General Ins.

Co., 212 S.W.3d 129, 132 (Mo.2007). If the language of the contract is clear and unambiguous, it must be enforced

as written. Krombach v. Mayflower Ins. Co., Ltd., 827 S.W.2d 208, 210 (Mo.1992). If the policy contains ambigui-

ties, however, we must resolve them “in favor of the insured.” Seeck, 212 S.W.3d at 132. “An ambiguity exists when

there is duplicity, indistinctness, or uncertainty in the meaning of the language in the policy.” Id.

[8] The Johnstons assert that the general terms of the cooperation clause are ambiguous because they “do not ex-

There are a number of Missouri cases in which general cooperation clauses like the one at issue here have been in-

terpreted to require the insured to perform acts not explicitly stated in the insurance policy. See, e.g., Smith v. Pro-

gressive Cas. Ins. Co., 61 S.W.3d 280, 283 (Mo.Ct.App.2001); Hayes v. United Fire & Cas. Co., 3 S.W.3d 853,

857-59 (Mo.Ct.App.1999); Riffe v. Peeler, 684 S.W.2d 539, 542-43 (Mo.Ct.App.1984); Meyers, 375 S.W.2d at 15.

In Riffe, the insured breached a general cooperation clause by failing to assist in the preparation of interrogatories

ate” and “assist in the preparation and trial of any [claims]” included the duty to assist MPC in its defense strategy,

provide relevant documents, answer interrogatories, submit to depositions, and testify at trial if necessary.

The cases relied upon by the Johnstons are not to the contrary. American Home Assurance Company v. Pope, 08–

2848, 591 F.3d 992, 999 (8th Cir.2010) involved an insurance policy containing contradictory provisions. There, the

The Johnstons assert that the policy’s cooperation clause should be deemed unenforceable even if unambiguous be-

cause it amounts to a waiver of constitutional rights. They rely primarily on Malan Realty Investors, Inc. v. Harris,

953 S.W.2d 624, 627 (Mo.1997), in which the Missouri Supreme Court stated that “[t]o effectively waive a jury trial

by contract, clear, unambiguous, unmistakable, and conspicuous language is required.” Malan is inapposite, howev-

er, because the MPC insurance policy did not require an actual waiver of Dr. Bubenik’s constitutional rights. He

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sured’s breach in order to be excused from covering the loss. Hayes, 3 S.W.3d at 857. “In determining whether the

failure of an insured … to testify was prejudicial to the insurer, the courts have generally considered the importance

of the insured’s testimony to the defense.” Hendrix v. Jones, 580 S.W.2d 740, 743 (Mo.1979) (en banc). The district

court concluded that MPC was substantially prejudiced by Dr. Bubenik’s refusal to cooperate because he could have

provided the defense valuable information not available from any other source and his ultimate refusal to testify

made it impossible for MPC to produce an expert witness.

[9] The Johnstons further object that MPC could not have been substantially prejudiced by Dr. Bubenik’s failure to

cooperate because the Johnston case was indefensible. This argument rests on a misunderstanding of the applicable

legal standard, however, for MPC does not need to show that it would have won the case with Dr. Bubenik‘s cooper-

resuscitation (CPR) on Johnston. This finding was directly contradicted by the state dental board document complet-

ed by Dr. Bubenik six days after Johnston’s procedure, a document which he refused to release to MPC. The state

court also found instances of medical malpractice based on the amount of medication administered to Johnston and

Dr. Bubenik’s decision to perform the dental procedure at his office rather than at a hospital.

ability to defend the malpractice claims against him.

[11][12] The final element MPC must prove is that it exercised reasonable diligence to secure Dr. Bubenik’s cooper-

ation. Hayes, 3 S.W.3d at 857. MPC must present evidence to show “what steps it took in order to locate insured and

to secure his cooperation in defending the action.” Colson v. Lloyd’s of London, 435 S.W.2d 42, 45

The Johnstons maintain that even if Dr. Bubenik materially breached the terms of the insurance policy, MPC waived

denying coverage or should be estopped from it because the insurer knew in late 2005 that Dr. Bubenik was invok-

ing the Fifth Amendment but continued to defend him without issuing a reservation of rights letter until October

2006.

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[15] The district court rejected the Johnstons’ waiver argument, finding that they had presented insufficient evidence

to support a finding that MPC intended voluntarily to waive its right to deny coverage for noncooperation. MPC’s

conduct prior to issuing the reservation of rights letter is consistent with the insurer’s stated belief that Dr. Bubenik

to Dr. Bubenik during which MPC attempted to persuade him to assist in the preparation and trial of the malpractice

claims against him. The district court did not clearly err in finding that MPC had not waived its defense under the

cooperation clause.

[16] The Johnstons‘ estoppel argument also fails. Estoppel requires (1) an admission, statement or act by the party to

noncooperation first arose. This argument “flies in the face of the duty imposed upon [MPC] to exercise ‘reasonable

diligence’ to secure [Dr. Bubenik’s] cooperation.” Riffe, 684 S.W.2d at 543. Similar to the argument rejected by the

Missouri Court of Appeals in Riffe, the Johnstons’ argument ignores the second element of estoppel that “there must

be a showing of reliance-that the injured party relied on the conduct of the insurer or was misled by it to his preju-

dice.” Spalding v. Agri-Risk Serv., 855 F.2d 586, 588 (8th Cir.1988) (quoting Martinelli v. Security Ins. Co., 490

continued to defend Dr. Bubenik despite his persistent noncooperation, it did not take inconsistent positions on the

matter. Rather, its continued defense of Dr. Bubenik was in accord with its duty to defend and to attempt to secure

his cooperation. The district court did not err by ruling that MPC was not estopped from denying coverage.

For these reasons we affirm the judgment of the district court.