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Admiral Insurance Co. v. Fisher

Supreme Court of West Virginia

June 5, 2018

Admiral Insurance Company, Defendant Below, Petitioner
Philip Fisher, D.O., and Pairodocs, Inc., Defendants Below, Respondents

          (Cabell County 11-C-0826 and 12-C-65)


         In July 2011, Petitioner Admiral Insurance Company ("Admiral") issued a medical professional liability insurance policy to Respondents Philip Fisher, D.O., and Pairodocs, Inc.[1](collectively "Respondents" or individually). Months later, two plaintiffs filed medical malpractice/wrongful death lawsuits against Respondents. The Circuit Court of Cabell County, West Virginia, consolidated and stayed those lawsuits while the parties litigated this protracted declaratory judgment action with regard to the policy.

         Admiral argued that because Dr. Fisher allegedly made fraudulent misrepresentations and omissions during the application process concerning his involvement in multiple opioid drug overdose deaths, it was entitled to rescind the policy pursuant to West Virginia Code § 33-6-7 (2011). The circuit court entered summary judgment for Respondents on the rescission issue, awarded attorneys' fees/costs, [2] and permitted a jury to assess consequential damages for aggravation and inconvenience.[3] Ultimately, the circuit court entered judgment against Admiral for $411, 709 ($211, 709 for attorneys' fees/costs and $200, 000 for aggravation and inconvenience) on July 25, 2017.

         On appeal to this Court, Admiral raises several assignments of error. It argues there are genuine issues of material fact as to whether Dr. Fisher made fraudulent misrepresentations or omissions that were material to Admiral's acceptance of the risk upon issuing this policy. Respondents deny any misrepresentations or omissions and further contend Admiral waived its right to raise that challenge based on its failure to conduct a reasonable inquiry in light of the information it possessed. Because these issues turn on disputed facts, the circuit court's summary judgment ruling cannot stand. This case presents no substantial question of law, satisfies the "limited circumstance" requirement of Rule 21(d) of the West Virginia Rules of Appellate Procedure, and is appropriate for a memorandum decision.[4]

         I. Factual and Procedural History

         Dr. Fisher practiced medicine in Barboursville, West Virginia, from 1996 until August 2011. He specialized in pain management. In December 2010, the federal Drug Enforcement Agency ("DEA") executed a search warrant for Dr. Fisher's home and offices. The affidavit for the subpoena stated that Dr. Fisher was under investigation for having "unlawfully obtained controlled substances from patients and re-distributed them to girlfriends and others . . . and for his own personal consumption." That affidavit further alleged that Dr. Fisher was "potentially complicit in the overdose deaths of at least fourteen (14) individuals, including the death of a former girlfriend." This event was reported in the local media; however, no criminal charges resulted from this investigation.

         The West Virginia Board of Osteopathic Medicine (WVBOOM) investigated similar complaints against Dr. Fisher in January 2011. The complaints alleged Dr. Fisher engaged in various misconduct, including that he unlawfully provided controlled substances to patients and other persons; unlawfully possessed opioid medications for his own use; engaged in sexual relationships with multiple patients; and was responsible for the overdose death of one of those individuals. This investigation ultimately resulted in the revocation of Dr. Fisher's license to practice medicine.[5]

         In March 2011, Dr. Fisher's previous insurer, National Fire and Marine, cancelled his medical malpractice insurance due to his failure to produce certain requested information.

         In June 2011, Dr. Fisher submitted the application for medical professional liability insurance at issue here to an agent, James Crouse of Wells Fargo Insurance Services of West Virginia. Mr. Crouse forwarded the application to Mark Walker of National Specialty Underwriters, Inc. ("NSUI"), a wholesale insurance broker who submitted it to Admiral. Relevant here are the following questions and responses in the application:

Q: Are you or any organization proposed for this insurance aware of any act, error, omission, fact, circumstance, or records request from any attorney which may result in a malpractice claim or suit?
A: No.
. . .
Q: Have you ever been notified to respond to, appear before or have you ever been investigated by any licensing or regulatory agency on a complaint of any nature, including but not limited to unprofessional or unethical conduct?
A: Yes.

         In the explanatory memorandum for that answer, Dr. Fisher stated:

There is a current complaint open with the [WVBOOM.] There has been three hearing dates scheduled and cancelled in regards to this issue. The next date is scheduled for some time in September of 2011, a definite date has not been set yet. The complaint consists of treating former girlfriends and pre-signed prescription pads. Dr. Fisher's license has NOT been suspended, limited, or revoked in any manner. Nor has his DEA. As a matter of fact the [WVBOOM] renewed his license was renewed [sic] on 06/12/2011. . . ."

         Admiral assigned the insurance application to Brandon Sollers for underwriting, and he requested "full subjectivities" regarding pending complaints.[6] NSUI forwarded that request to Mr. Crouse, who responded on July 7, 2011, stating that he "met with Dr. Fisher today and he has no patient complaints in the last few years. It turns out that the two employees who turned him in are looking for whistleblower protection. They were fired for embezzling over $300K." On July 12, 2011, Admiral issued the professional liability policy, with prior acts coverage.

         Shortly thereafter, Admiral received notice that Respondents were facing medical malpractice/wrongful death lawsuits related to the deaths of Marian K. Hyden and Barry Blackburn. In November 2011, the Hyden action was filed alleging that Dr. Fisher was responsible for Ms. Hyden's drug overdose death because he routinely gave her prescription pain medication without proper oversight and monitoring. In January 2012, the Blackburn action was filed alleging that Mr. Blackburn's death was caused by Dr. Fisher over-prescribing him methadone. The Blackburn complaint included a claim for declaratory relief against Admiral, seeking a determination that the policy at issue was valid and provided coverage for the claims. The Hyden complaint was amended to include a similar count for declaratory relief. The circuit court consolidated these lawsuits.

         By letter dated February 10, 2012, Admiral advised Respondents that it would "not afford coverage under the policy for these claims for several reasons." Admiral stated:

the fact that the application for this policy contains material misrepresentations is sufficient to avoid the policy ab initio (from the outset). Given those circumstances, Admiral is excused from any duty or obligation that would otherwise be required under the policy. We fully expect that the Court will sustain that position, and will order that the policy is void and of no force and effect from its inception. Given that likelihood, you are hereby advised to take whatever action you and your counsel deem necessary and appropriate to protect your interests[.]

         Nevertheless, Admiral informed Respondents that it would afford a defense in the wrongful death actions on an "interim basis, " while its anticipated litigation against them for rescission of the policy proceeded. Admiral advised Respondents "to employ counsel from the outset at your own expense" because "if and when" Admiral "withdraw[s] from the defense, this will facilitate a prompt, expeditious and orderly transition of the defense from our appointed defense counsel to your selected counsel." [7]

         In February 2013, Admiral filed its answer to the consolidated complaints and asserted a counterclaim to rescind the policy pursuant to West Virginia Code § 33-6-7 on the basis that Dr. Fisher made fraudulent misrepresentations and omissions in his insurance application. Respondents filed a cross-claim against Admiral seeking a declaration that Admiral was required to afford coverage under the policy, as well as attorneys' fees/costs (under Pitrolo) and other consequential damages (under Hayseeds).

         The parties agreed to stay the wrongful death claims pending the outcome of the coverage litigation. In January 2014, the circuit court entered an order formally staying those claims.

         In December 2014, the wrongful death plaintiffs filed a motion for summary judgment arguing that the circuit court should preclude Admiral from rescinding the insurance policy at issue based on Admiral's alleged failure to fully investigate the potential insurance risk presented by Respondents prior to issuing the policy. At a June 1, 2016, hearing, the circuit court granted the motion and stated Admiral improperly engaged in post-claim underwriting when it denied coverage despite having the relevant information at its disposal at the time of application.[8] Shortly thereafter, Admiral settled the wrongful death lawsuits, [9] those claims were dismissed, and Respondents were released from liability.

         In May 2016, Admiral filed a motion for summary judgment against Respondents asserting that the circuit court should dismiss their claim for attorneys' fees/costs and damages for aggravation and inconvenience. Admiral argued that it had afforded all benefits owed under the policy, both defense and indemnification. Respondents cross-moved for summary judgment, asserting that by virtue of the settlements, they had substantially prevailed.

         During a June 27, 2016, hearing on those motions, the circuit court granted summary judgment in favor of Respondents from the bench, with a resulting order entered on or about November 23, 2016. The circuit court concluded that Hayseeds damages are available whenever an insured is forced to litigate with his own insurer and substantially prevails. The parties ultimately agreed on $211, 709 as the reasonable amount of attorneys' fees/costs (but not Respondents' entitlement to them) and a jury trial was set on the issue of Dr. Fisher's damages for aggravation and inconvenience. In a motion in limine, Admiral argued that damages may not properly be awarded to a policyholder for aggravation and inconvenience sustained in connection with an insurer pursuing a legitimate rescission action. The circuit court denied that motion during a June 9, 2017, hearing.

         On July 6, 2017, the declaratory judgment action proceeded to a jury trial. The sole issue was the amount of damages, if any, Dr. Fisher was entitled to recover for the aggravation and inconvenience he endured as a result of the litigation with Admiral. The jury awarded $200, 000. On July 25, 2017, the circuit ...

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