Bad Faith Claim Against Insurer Results in $2.5 Million Verdict.

My friend, and fellow Kentucky bad faith trial attorney, Austin Mehr obtained a $2.5 million dollar verdict last night in a third-party bad faith claim against the Medical Protective Insurance Company.  In short, Austin’s client sued her doctor for causing significant injury to her inner ear. The doctor admitted he made a mistake, but his insurance company refused to settle the claim.  The case was litigated and ultimately resulted in an arbitration award of $1.6 million.  Austin’s client then sued then doctor’s insurance company, MedPro, for violating Kentucky’s Unfair Claims Settlement Practices Act (aka the Bad Faith Statute) alleging, among other things, that MedPro failed to promptly settle the claim when liability became reasonably clear.  After a two-week trial, a Kenton County Kentucky jury agreed and awarded Austin’s client $350,000 for the mental stress caused by the delay in settlement and awarded $2.2 million in punitive damages to punish the medical malpractice insurance company for its behavior.

I have a very similar bad faith case going to trial on Tuesday in Jefferson County Kentucky against American Physicians Assurance.

Below is the “Fact Section” from one of Austin’s briefs and here is the jury’s verdict.

Medical Protective insured Dr. Del Burchell and his physicians’ group Internal Medicine Associates of Northern Kentucky, P.S.C for medical malpractice.  On July 3, 2000, Dr. Burchell attempted to clear earwax out of Aurelia Wiles’ ear using an ear lavage procedure by which a syringe injects water into the ear.  The syringe was not properly attached, and when Dr. Burchell pressed on the plunger, the syringe exploded into Mrs. Wiles’ inner ear. Liability on the part of Dr. Burchell and his clinic was unquestionably clear. Mrs. Wiles had emergency surgery on July 6, 2000, to attempt repair of the injured ear.  On August 17, 2000, Mrs. Wiles’ attorney Terry Moore wrote Dr. Burchell and asked that he have his insurance carrier contact him.   Moore wrote Medical Protective’s adjuster Gary Duechle on September 15, 2000, to advise of the severity of Mrs. Wiles’ injuries, including nausea, ringing in the ears, imbalance, sleep difficulties, and that it was taking her about two hours just to wash her hair because of the nausea and dizziness. Moore wrote again on November 28, 2000, advising Duechle that Mrs. Wiles had a second surgery and based on the poor prognosis was likely totally disabled. On January 12, 2001, after Mrs. Wiles’ condition continued to worsen, Moore specifically demanded the two million dollar policy limits from Medical Protective, which had on December 11, 2000, revealed those limits to Moore. As the one-year statute of limitations approached, Moore had written to Medical Protective to discuss his willingness to extend the statute of limitations so that suit did not have to be initiated against Dr. Burchell, but on March 9, 2001, before suit was filed, Duechle wrote to Moore and instructed him to direct all future correspondence through MedPro’s defense attorney Mark Arnzen.        

Instead of reviewing and giving credence to the opinions of Mrs. Wiles treating physicians, who were documenting the severity and worsening of her medical condition, Medical Protective consulted a neurologist, Dr. Greg Smith, on February 2, 2001.  Dr. Smith developed the opinion that Mrs. Wiles’ traumatic injuries were not the result of the syringe projectile but that they were caused by a coincidental onset of Meniere’s Disease around the same time in July 2000.

Soon after, Arnzen wrote to Duechle on April 4, 2001, and stated, “With respect to the injury itself, Dr. Burchell admitted that there was no product failure and no excuse for the injury which occurred.  He stated that he failed to insure that the top of the syringe was properly secured to the body of the syringe.”Even though it knew its insureds were at fault, Medical Protective still made absolutely no attempt to settle the Wiles’ claim. Medical Protective, likewise, never responded to Moore’s offer to extend the Statute of limitation and suit was filed on May 14, 2001, against Dr. Burchell and his physicians’ group, as well as against Medical Protective for violations of the Unfair Claims Settlement Practices Act. (“UCSPA”)  

In addition to creating a defense with Dr. Smith, surveillance was conducted on Mrs. Wiles.   In December 2001, video footage showed that because of Mrs. Wiles’ condition, she had to be dropped off at her door by her next-door neighbors, who subsequently backed out of her driveway and pulled into their own (about 40 feet away). This verification of the severity of her condition garnered no offer of settlement or negotiation from Medical Protective.  

In January 2002, Mrs. Wiles endured a third surgery, this time a brain surgery that lasted seven hours.  Still Medical Protective made no offer of settlement.  On April 8, 2002, Moore wrote to Storm reiterating his willingness to accept the policy limits on behalf of the Wiles even though there had not been any offer made or even a discussion of an offer from Medical Protective. A letter from Arnzen to Duechle on June 25, 2002, urged Duechle to contact him about the settlement demand.  Soon after, more surveillance was conducted on July 27, 2002. This time the video showed approximately twenty minutes of Mrs. Wiles struggling to slowly work in her garden.  She had to sit on her buttocks because of her imbalance and when she attempted to walk just a short distance, she had to hold a bag and bucket in each arm to balance herself as she battled to stay on her feet. Again, these facts still did not conjure settlement discussions from Medical Protective.

On October 7, 2002, Arnzen wrote to Duechle suggesting that Medical Protective stipulate to liability. Internal correspondence from Duechle to Robert Ignasiak of Medical Protective shows that it “always viewed the case as one of liability…” but that no offer had been extended to settle the case.  Finally, after never discussing an offer of settlement with the Wiles for twenty-seven months, Medical Protective offered $500,000.00 on October 7, 2002.  During this time, Medical Protective had Mrs. Wiles submit to a medical examination with Dr. Smith, who maintained that there was a simultaneous chance occurrence of Meniere’s Disease and that Mrs. Wiles was magnifying her symptoms, even though Medical Protective knew that surveillance footage indicated otherwise.

In the meantime, Dr. Burchell and his physicians’ group grew nervous about MedPro’s claims adjusting, had hired their own counsel to urge Medical Protective to settle for the policy limits.  Attorney Andre Busald wrote to Duechle on November 22, 2002, informing him that Dr. Burchell and his physicians’ group were “extremely concerned about the chances of a verdict being rendered against them in excess of the $2,000,000 policy limits – especially where liability is not an issue.”Busald followed up again on December 2, 2002, and chided Medical Protective for refusing to attempt to settle the case before trial for the policy limits. Throughout the years of correspondence, there was never a question as to liability.

Finally, after agreeing to a high-low arbitration agreement, the parties put the claim before an arbitration panel in April 2003, and the panel awarded $1,650,000 on May 15, 2003.  This settlement process was not without detriment to the Wiles, who had incurred substantial medical bills, legal bills, and litigation expenses while suffering from a sizeable loss of income and emotional suffering during the period of time the claim was active.  

Hans