In the 

United States Court of Appeals 

For the Seventh Circuit ____________________ 

No. 18-1737 

THE MEDICAL PROTECTIVE COMPANY OF FORT WAYNE,

INDIANA, 

Plaintiff-Appellant, 

v.

AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE 

COMPANY, now known as AIG SPECIALTY INSURANCE 

COMPANY, 

Defendant-Appellee. 

____________________ 

Appeal from the United States District Court for the 

Northern District of Indiana, Fort Wayne Division. 

No. 1:13-cv-00357-JTM — James T. Moody, Judge. 

____________________ 

ARGUED NOVEMBER 8, 2018 — DECIDED DECEMBER 18, 2018 

____________________ 

Before FLAUM, MANION, and ST. EVE, Circuit Judges. 

ST. EVE, Circuit Judge. In 2002, thirty-six-year-old Vicki 

Bramlett died from complications following routine surgery. 

Mrs. Bramlett’s family sued Dr. Benny Phillips, her treating 

physician. Dr. Phillips’s malpractice insurer, the Medical Protective Company of Fort Wayne, Indiana (“MedPro”), twice 
2 No. 18-1737 

refused to settle the case for $200,000, Dr. Phillips’s insurance 

policy limit. At trial, a jury awarded a $14 million verdict 

against Dr. Phillips and other defendants. The Supreme Court 

of Texas later capped Dr. Phillips’s liability, and Mrs. Bramlett’s family sued MedPro for the excess verdict. MedPro 

eventually settled with the family. 

MedPro was insured by American International Specialty 

Lines Insurance Company, now known as AIG Specialty Insurance Company (“AISLIC”), for claims made against it. 

AISLIC declined to cover MedPro’s settlement with Mrs. 

Bramlett’s family. When MedPro sued, the parties ultimately 

cross-moved for summary judgment. The district court 

granted summary judgment for AISLIC, concluding that coverage was excluded under the AISLIC policy because MedPro 

should have foreseen the Bramlett family’s claim before contracting with AISLIC. Because there is a genuine issue of material fact regarding whether MedPro should have settled 

with the Bramletts for $200,000, we affirm in part and reverse 

in part. 

I. Background 

A. The Bramlett Lawsuits 

In late October 2002, in Lubbock, Texas, Dr. Benny Phillips 

performed a laparoscopic hysterectomy on Vicki Bramlett, a 

thirty-six-year-old mother and wife. Following the surgery, 

while still hospitalized, Mrs. Bramlett suffered internal bleeding. She was rushed into surgery, but she died four days later 

after being removed from life support. 

In May 2003, Mrs. Bramlett’s husband and children filed a 

wrongful death lawsuit against Dr. Phillips, his clinic (Lubbock Gynecologic Oncology Associates), Covenant 
No. 18-1737 3 

Healthcare System (where Mrs. Bramlett had been hospitalized), and Covenant’s nurses. Dr. Phillips held a $200,000 

healthcare professional liability insurance policy with 

MedPro, and he notified MedPro of the lawsuit. In November 

2003, the hospital settled with the Bramletts for approximately $2.3 million, leaving only Dr. Phillips and his clinic remaining in the suit. 

On December 17, 2003, the Bramletts wrote to Dr. Phillips’s attorney, Benjamin H. Davidson, II, making what is 

known in Texas as a Stowers demand. The Stowers doctrine 

comes from G.A. Stowers Furniture Co. v. Am. Indem. Co., 15 

S.W.2d 544 (Tex. Comm’n App. 1929, holding approved), and 

provides that if a plaintiff makes a demand to an insurer that 

is within the insured’s policy limit and that a reasonably prudent insurer would accept, but the insurer rejects the demand, 

the insurer will later be liable for any amount awarded over 

the policy limit. See also Phillips v. Bramlett, 288 S.W.3d 876, 

879 (Tex. 2009). The Bramletts offered to settle the case for Dr. 

Phillips’s policy limit, $200,000. MedPro did not settle with 

the Bramletts. Discovery was still pending at the time, and 

MedPro wanted to wait and see what information would be 

unearthed during discovery. 

The record reflects that, as early as January 5, 2004, 

MedPro knew that Dr. Phillips did not attend to Mrs. Bramlett’s internal bleeding because he had left the hospital to exercise. MedPro’s case notes from this time, however, suggest 

an understanding that Dr. Phillips had not been informed of 

concerns regarding Mrs. Bramlett’s recovery, and that if he 

had been informed, he would have immediately acted. 

On March 23, 2004, the Bramletts made a second Stowers

demand, again offering to settle for the $200,000 policy limit. 
4 No. 18-1737 

The Bramletts also sent Dr. Phillips’s attorney, Mr. Davidson, 

an expert report from a doctor at the University of Texas. The 

expert opined that Dr. Phillips had breached the standard of 

care by failing to timely follow up on Mrs. Bramlett’s abnormal hemoglobin and fluid challenge tests results, and that this 

breach was a proximate cause of Mrs. Bramlett’s death. 

On April 12, 2004, Mr. Davidson responded to the second 

Stowers demand, rejecting it. Mr. Davidson wrote that he believed settlement was premature given that discovery was not 

complete, particularly because the parties had not yet deposed Mr. Bramlett and the hospital nurses. Mr. Davidson 

sent this response three days after the expiration of the Stowers settlement offer. 

Discovery continued, and in May 2004, Mr. Davidson notified MedPro of defense issues he foresaw in the lawsuit. Notably, it was brought out during discovery that, in the evening 

following the surgery, Dr. Phillips had received a voicemail 

notifying him that Mrs. Bramlett’s hemoglobin levels had 

dropped. Despite this voicemail, Dr. Phillips left the hospital 

to exercise. Had Dr. Phillips gone straight to attend to Mrs. 

Bramlett rather than going to exercise, she likely would have 

lived. Even in the face of these facts, Mr. Davidson told 

MedPro that there was a 60 percent chance that Dr. Phillips’s 

defense would succeed. Mr. Davidson estimated that in the 

event of an adverse jury verdict, the award for the Bramletts 

would be approximately $2.5 to $3 million. 

Dr. Phillips obtained additional counsel, who held a grimmer outlook on the likelihood of a successful defense. Later in 

2004, that attorney, Nevill Manning, wrote to MedPro, stating 

quite bluntly that he believed “without hesitation ... that a 

jury of twelve people in Lubbock County, Texas, will almost 
No. 18-1737 5 

assuredly conclude that the allegations made against Dr. Phillips and [his clinic] are correct, and, thus, liability may be imposed against them in a substantial proportion.” He further 

noted his concern that MedPro had previously declined the 

Bramletts’ two Stowers demands. Mr. Manning demanded 

that MedPro settle with the Bramletts rather than proceed 

with what was likely to be a losing trial. Mr. Davidson also 

began to change his tune. In January 2005, he advised MedPro 

that the probability of a successful defense was about 20 percent and an adverse jury verdict was likely to be approximately $3 million. 

In February 2005, the Bramletts and MedPro attended a 

mediation. According to MedPro’s case notes, the trial judge 

ordered the mediation because the Bramletts sought punitive 

damages against Dr. Phillips and were alleging “Stowers issues” as to MedPro. Prior to the mediation, MedPro made settlement offers to the Bramletts of $100,000, then $200,000. The 

Bramletts rejected both offers and instead demanded $2.3 million to settle the case, which MedPro rejected. After the mediation, a MedPro claims specialist who attended the mediation 

emailed the assigned claims specialist and his supervisor. He 

advised that, based on what he had learned at the mediation, 

an adverse verdict was likely and could be about $3 million. 

He further noted that MedPro’s responses to the Bramletts’ 

two Stowers demands had been inadequate and had not given 

sufficient reasoning for declining to settle the case. The claims 

specialist recommended that MedPro hire an attorney to protect its interests. 

Mr. Manning also wrote to MedPro after the mediation, 

reiterating his belief in the likelihood of an adverse verdict 

and again demanding that MedPro negotiate with the 
6 No. 18-1737 

Bramletts and accept their lowest settlement offer. Mr. Manning noted that “the mediator made it very clear ... that [Dr. 

Phillips] was certain of being held liable.” The mediator had 

further expressed that MedPro faced “severe and certain exposure” for a verdict in excess of Dr. Phillips’s policy limit, 

given MedPro’s failure to accept the Bramletts’ Stowers demands. 

In April 2005, a litigation attorney at MedPro was notified 

of the situation and sought advice from outside counsel. Outside counsel advised that MedPro had not acted in bad faith 

by declining the Stowers demands in order to investigate the 

claims. He stated that, at that time, there was no basis for 

MedPro to offer to settle with the Bramletts for more than the 

$200,000 policy limit—the Bramletts did not have standing to 

sue MedPro for a verdict above the policy limit, and, regardless, a jury had not yet returned any such verdict. MedPro’s 

litigation attorney agreed with this assessment, noting that 

the Bramletts’ Stowers claim was “relatively weak” and that 

settling with them could set a bad precedent for similar cases. 

In August 2005, the case proceeded to trial. According to 

Mr. Davidson, prior to trial, the Bramletts dropped their settlement demand to $1 million, and on the day before trial 

dropped it to $500,000. The demand went back up to $1 million once trial began. MedPro rejected the offer, counteroffering only the policy limit of $200,000, and possibly some litigation costs. 

The trial went as predicted, but the verdict was significantly higher than anticipated. The jury sided with the Bramletts and returned a $14 million verdict—$11 million in actual 
No. 18-1737 7 

damages and $3 million in punitive damages.1 According to 

Dr. Phillips’s counsel, at the time, this verdict represented the 

largest medical negligence verdict ever awarded in Lubbock 

County, Texas. 

After trial, additional counsel for Dr. Phillips wrote to 

MedPro, asserting that, per Stowers, a reasonable and prudent 

insurer would have settled the case for the $200,000 policy 

limit when the Bramletts so demanded. Counsel threatened 

that if MedPro did not agree to indemnify Dr. Phillips from 

liability for the verdict, Dr. Phillips would explore other options, including assigning his Stowers claim to the Bramletts. 

MedPro agreed to indemnify Dr. Phillips and appealed the 

verdict. 

In March 2007, the Court of Appeals of Texas affirmed the 

case in part, reversing the finding of gross negligence and related punitive damages and holding that Mrs. Bramlett’s sons 

should make a remittitur of $220,000. Phillips v. Bramlett, 258 

S.W.3d 158, 183 (Tex. App. 2007). The Supreme Court of 

Texas, however, held that a statutory cap for physicians applied to limit Dr. Phillips’s liability. The court also held for the 

first time that the Bramletts could pursue a direct claim 

against MedPro for the amount of the verdict in excess of the 

statutory cap. Phillips, 288 S.W.3d at 882. The court reasoned 

that, if an insured physician’s liability is capped, he may not 

be incentivized “to enforce the insurer’s duty to settle with 

reasonable care.” Id. Thus, the court held that third parties, 

 1 The trial court later entered a judgment awarding the Bramletts 

$9,196,364.50 in actual damages and $2,972,000 in punitive damages, 

which accounted for prejudgment interest and the hospital’s settlement. 

Phillips v. Bramlett, 258 S.W.3d 158, 164 & n.3 (Tex. App. 2007). 
8 No. 18-1737 

such as the Bramletts, can step “in[to] the shoes” of the insured physician and sue the insurer directly under a theory of 

Stowers liability for the insurer’s failure to settle. Id. 

Per its indemnity agreement with Dr. Phillips, MedPro 

paid the Bramletts approximately $1.7 million—the sum for 

which Dr. Phillips was liable under the statutory cap. The 

Bramletts then sued MedPro for the excess verdict. MedPro 

moved for summary judgment, and the district court denied 

the motion, partially on the grounds that a genuine issue of 

material fact existed as to whether a reasonable insurer would 

have accepted the Bramletts’ Stowers demands. Before trial, 

MedPro settled with the Bramletts for a confidential amount 

greater than $5 million. 

B. MedPro’s AISLIC Policies 

In the midst of the Bramlett-Phillips lawsuit, MedPro purchased a $5 million Insurance Company’s Professional Liability Insurance policy with AISLIC. The policy insured MedPro 

for certain claims made against it. MedPro’s first policy with 

AISLIC became effective on June 30, 2005, about a year and a 

half after the Bramletts’ first Stowers demand and nearly two 

months prior to the Bramletts’ trial against Dr. Phillips. 

MedPro entered into a renewal policy with AISLIC, effective 

July 1, 2006, while the appeal of the Bramlett-Phillips lawsuit 

was pending in the Court of Appeals of Texas. The 2006 Policy 

application included questions about whether claims or allegations had been made against MedPro in the previous five 

years, but at MedPro’s request, AISLIC deleted these questions, because they were not applicable to a renewal application. That policy expired on July 1, 2007. 
No. 18-1737 9 

Because this case turns on the details of the 2006 Policy, 

we recite its relevant provisions here. The 2006 Policy included a preamble stating: 

Except to such extent as may otherwise be provided 

herein, the coverage of this policy is limited generally to liability for only those claims that are first 

made against the insured and reported in writing to 

the company while the policy is in force. 

The 2006 Policy provided that AISLIC agreed: 

To pay on behalf of the Insured all sums which the 

Insured shall become legally obligated to pay as 

damages resulting from any claim or claims first 

made against the Insured and reported in writing to 

the Company during the Policy Period for any 

Wrongful Act of the Insured ... , but only if such 

Wrongful Act occurs prior to the end of the Policy 

Period and occurs solely in the rendering of or failure to render Professional Service. 

Finally, and importantly, the 2006 Policy also included Exclusion M, which excluded from coverage: 

... any claim arising out of any Wrongful Act occurring prior to the inception date of the first Insurance 

Company’s Professional Liability Insurance policy 

issued by the Company to the Insured ... , if on such 

first inception date any Insured knew or could have 

reasonably foreseen that such Wrongful Act could 

lead to a claim or suit. 

The 2006 Policy defined a Wrongful Act as “any breach of 

duty, neglect, error, misstatement, misleading statement, 

omission or other act done or wrongfully attempted.” 
10 No. 18-1737 

C. The MedPro-AISLIC Lawsuit 

On June 28, 2007, just three days before the 2006 Policy expired, MedPro notified AISLIC of the Bramlett lawsuit, describing it as a “Potential Claim.” 

Ultimately, AISLIC refused to cover MedPro’s extra-contractual settlement with the Bramletts, leading MedPro to sue 

AISLIC for breach of contract. The parties cross-moved for 

summary judgment, and the district court granted summary 

judgment for AISLIC. The district court concluded that Exclusion M of the 2006 Policy excluded coverage because, as of 

June 30, 2005, when MedPro first contracted with AISLIC, 

MedPro knew or should have foreseen that its failure to settle 

with the Bramletts could lead to a claim or suit. MedPro appeals.

II. Discussion 

We review de novo the district court’s grant of summary 

judgment to AISLIC. “Summary judgment is appropriate 

when there is no genuine dispute as to a material fact.” Estate 

of Jones v. Children’s Hosp. & Health Sys. Inc. Pension Plan, 892 

F.3d 919, 923 (7th Cir. 2018). “A genuine dispute as to any material fact exists if ‘the evidence is such that a reasonable jury 

could return a verdict for the nonmoving party.’” Daugherty 

v. Page, 906 F.3d 606, 609–10 (7th Cir. 2018) (quoting Anderson 

v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). When reviewing 

cross-motions for summary judgment, “we construe all inferences in favor of the party against whom the motion under 

consideration is made.” Schlaf v. Safeguard Prop., LLC, 899 F.3d 

459, 465 (7th Cir. 2018) (quoting Hendricks-Robinson v. Excel 

Corp., 154 F.3d 685, 692 (7th Cir. 1998)). Thus, we will “view 

the facts in the light most favorable” to MedPro and construe 
No. 18-1737 11 

all reasonable inferences in its favor. Horton v. Pobjecky, 883 

F.3d 941, 944 (7th Cir. 2018) (citing Anderson, 477 U.S. at 255). 

Our jurisdiction in this case is based on the parties’ diversity of citizenship—MedPro is an Indiana Corporation with 

its principal place of business in Indiana, and AISLIC is an 

Illinois corporation with its principal place of business in New 

York. The amount in controversy exceeds $75,000. 28 U.S.C. 

§ 1332. When sitting in diversity, we apply state substantive 

law. Reynolds v. Lyman, 903 F.3d 693, 695 (7th Cir. 2018) (citing 

Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)). We will not 

address a conflict of law issue unless there is a dispute as to 

which state’s law applies. If neither party disputes the issue, 

we will apply the law of the state in which the federal court 

sits. Koransky, Bouwer & Poracky, P.C. v. Bar Plan Mut. Ins. Co., 

712 F.3d 336, 341 (7th Cir. 2013) (citing Citadel Grp. Ltd. v. 

Wash. Reg’l Med. Ctr., 692 F.3d 580, 587 n.1 (7th Cir. 2012)). The 

parties have applied Indiana law here, and so shall we. 

Under Indiana law, the interpretation of an insurance contract presents a question of law for the court. Trinity Homes 

LLC v. Ohio Cas. Ins. Co., 629 F.3d 653, 656 (7th Cir. 2010) (citing Tate v. Secura Ins., 587 N.E.2d 665, 668 (Ind. 1992)). The 

court must “first determine whether the policy is clear or ambiguous.” Id. (citing Reuille v. E.E. Brandenberger Constr., Inc., 

888 N.E.2d 770, 771 (Ind. 2008)). If the language of the policy 

is unambiguous, we will apply its plain meaning. If the language of the policy is ambiguous, the court should interpret 

it in favor of the insured. Id. (citing Tate, 587 N.E.2d at 668). 

A. Applicability of Exclusion M 

We first consider MedPro’s argument that the district 

court improperly granted summary judgment for AISLIC. 
12 No. 18-1737 

The district court reasoned that Exclusion M in the 2006 Policy 

applied to bar coverage for MedPro’s settlement with the 

Bramletts. 2 

Exclusion M precludes coverage for “any claim arising out 

of any Wrongful Act” which occurred prior to June 30, 2005, 

if prior to that date MedPro “knew or could have reasonably 

foreseen that such Wrongful Act could lead to a claim or suit.” 

Exclusion M creates two questions here: (1) was there a 

Wrongful Act; and (2) could MedPro have foreseen prior to 

June 30, 2005 that the Wrongful Act could lead to a claim or 

suit? 

In Koransky, we addressed a similar set of facts under Indiana law, and both parties refer to that decision. 712 F.3d 336. 

The Koransky & Bouwer law firm represented a buyer in a 

real estate transaction. A firm associate failed to send the executed contract signed by the buyer to the seller, and the seller 

rescinded its offer to sell. The buyer and seller then entered 

litigation over the enforceability of the contract. Id. at 338–39. 

At the same time, Koransky & Bouwer renewed its malpractice insurance. The malpractice policy contained language similar to the 2006 Policy here. The policy “required 

Koransky & Bouwer to notify [the insurer] during the policy 

period if, at some point during that policy period, the law firm 

‘first becomes aware of a specific incident, act or omission 

while acting in a professional capacity providing Legal 

 2 The district court disposed of this case without addressing the prerequisite question of whether there was, in fact, coverage under the 2006 

Policy, specifically the Special Reporting Clause in Endorsement #16. The 

parties have not fully developed this issue before us. For the purposes of 

our analysis, we assume that there was coverage under the 2006 Policy. 
No. 18-1737 13 

Services, which may give rise to a Claim.’” Id. at 340. Koransky & Bouwer’s policy excluded coverage if “‘before the Policy effective date,’ the law firm ‘knew, or should reasonably 

have known, of any circumstance, act or omission that might 

reasonably be expected to be the basis of that Claim.’” Id. at 

340. 

We concluded that, based on the facts, as a matter of law 

“[a] reasonable attorney in Koransky & Bouwer’s position 

would realize that his client might bring a malpractice claim 

against him because, as a result of the attorney’s mistake, 

Seller was refusing to complete the negotiated sale.” Id. at 343. 

We acknowledged that, at times, it could be difficult to determine exactly which acts or omissions might lead to a malpractice claim, but that the Koransky facts did not present one such 

close call. Id. at 343. Because Koransky & Bouwer had notice 

of a potential malpractice claim prior to entering the insurance contract, the exclusion applied to bar coverage for the 

malpractice suit. 

With Koransky and Indiana law in mind, we review de novo

whether Exclusion M bars coverage under the 2006 Policy. 

1. The Wrongful Act 

As we have noted, Exclusion M excludes coverage for certain “claim[s] arising out of any Wrongful Act.” The 2006 Policy defines a “Wrongful Act” as “any breach of duty, neglect, 

error, misstatement, misleading statement, omission or other 

act done or wrongfully attempted.” The parties do not dispute this general definition. They do, however, dispute its application. MedPro argues that to exclude coverage, AISLIC 

must establish that the claim arose out of an actual Wrongful 

Act, not merely an alleged Wrongful Act. AISLIC takes the 
14 No. 18-1737 

opposite view. Given the plain language of the Exclusion, we 

agree with MedPro. 

AISLIC seeks to bar coverage because the underlying 

claim asserts a Wrongful Act. But this is not what the plain 

language of Exclusion M states. It refers only to “any Wrongful Act” rather than a possible or alleged Wrongful Act. A comparison to Koransky aids us in our explanation: the exclusion 

in Koransky referred to “any circumstance, act or omission” 

that might be the basis of a claim. Koransky, 712 F.3d. at 340. 

AISLIC’s policy language is not so broad.

MedPro’s interpretation is supported by language elsewhere in the contract. The Special Reporting Clause in Endorsement #16 of the 2006 Policy, for example, refers to a 

“possible Wrongful Act” and provides coverage if a claim ultimately “aris[es] out of” that act.3 Under Indiana law, contracts are to be interpreted to harmonize all provisions and 

not render any words meaningless. U.S. Bank Tr., N.A. for 

LSF9 Master Participation Tr. v. Spurgeon, 99 N.E.3d 671, 675 

(Ind. Ct. App. 2018). Interpreting the term Wrongful Act to 

include alleged or possible Wrongful Acts would render 

 

3 The Special Reporting Clause states: 

If during the Policy Period ... the CFO, General Counsel or CEO 

of the Insured shall become aware of any occurrence which may 

reasonably be expected to give rise to a claim against the Insured 

for a Wrongful Act which first occurs during or prior to the Policy 

Period, and provided the Insured gives written notice to the Company during the Policy Period ... of the nature of the occurrence 

and specifics of the possible Wrongful Act, any claim which is 

subsequently made against the Insured arising out of such 

Wrongful Act shall be treated as a claim made during the Policy 

Period. 
No. 18-1737 15 

meaningless the Special Reporting Clause, which specifically 

provides additional coverage for possible Wrongful Acts.4 

Thus, we interpret Exclusion M to require that AISLIC establish that the claim arose from MedPro’s Wrongful Act.5 See

Berry Plastics Corp. v. Illinois Nat’l Ins. Co., 903 F.3d 630, 635 

(7th Cir. 2018) (noting that, under Indiana law, “the insurer 

has the burden of showing that an otherwise-covered claim is 

barred by an exclusion in the policy”). Viewing the evidence 

in the light most favorable to MedPro, there is a genuine factual dispute as to whether MedPro committed a Wrongful 

Act. 

MedPro argues that it handled the Bramletts’ Stowers demands appropriately and that its rejection of the demands 

was not a Wrongful Act. A reasonable factfinder could agree. 

Outside counsel believed that MedPro had not acted in bad 

faith by declining both Stowers demands in order to investigate the case, and MedPro’s own counsel agreed. Moreover, 

there is some evidence that the largest medical malpractice 

 4 Under Indiana law, the interpretation of an ambiguous contract is a 

question of law for the court. Trinity Homes, 629 F.3d at 656. We do not 

believe the term Wrongful Act as it appears in Exclusion M to be ambiguous. If it were, ambiguities in an insurance contract are to be interpreted 

in favor of the insured, which would also be consistent with interpreting 

Wrongful Acts to include only actual, and not merely alleged, Wrongful 

Acts. See id.

5 MedPro also argues that Exclusion M requires that MedPro subjectively knew it had committed a Wrongful Act. Under Indiana law, contracts are to be given their plain and ordinary meaning. Trinity Homes, 629 

F.3d at 653. Exclusion M does not include any indication of a subjective 

standard for a Wrongful Act. It does not state “known Wrongful Act.” It 

does modify the claim or suit as one that must be “reasonably foreseen,” 

but that modifier does not appear to apply to Wrongful Acts. 
16 No. 18-1737 

verdict in the area at that time was $2 million—a similar verdict, or even a larger verdict (up to $2.5 million), would not 

lead to extra-contractual liability for MedPro, because the 

hospital had already agreed to pay $2.3 million. It was not until after MedPro declined to settle that several people, including Dr. Phillips’s attorneys and a MedPro claims specialist, 

advised that there would be an adverse verdict and it was 

likely to be $3 million or over. 

To be sure, there is also evidence pointing in the other direction. By the time the Bramletts made their second demand, 

MedPro knew of the damaging fact that Dr. Phillips had not 

immediately attended to Mrs. Bramlett because he went to exercise. By that time, the Bramletts had also submitted an expert report supporting Dr. Phillips’s liability for their claim. 

In addition, MedPro knew that the hospital had settled for 

$2.3 million, presumably because it believed that the verdict 

could be adverse and large.

Summary judgment is appropriate only when there is no 

dispute of material fact. Estate of Jones, 892 F.3d at 923. Given 

this genuine dispute of material fact, the district court’s grant 

of summary judgment in favor of AISLIC was improper. 

2. Foreseeability of the Bramletts’ Claim 

If a trier of fact were to find that MedPro committed a 

Wrongful Act by failing to settle with the Bramletts, the next 

question under Exclusion M is whether, prior to June 30, 2005, 

MedPro should have foreseen that the Bramletts could make 

a claim arising from MedPro’s failure to settle. Koransky controls our analysis of whether such a claim was foreseeable. 

And, like in Koransky, even viewing the facts in the light most 

favorable to MedPro, we must conclude as a matter of law 
No. 18-1737 17 

that a reasonable insurer would have foreseen the Bramletts’ 

Stowers claim prior to June 30, 2005.6 

MedPro makes much of the fact that, prior to the Supreme 

Court of Texas’s holding in 2009, it was not clear that the 

Bramletts had an independent right of action against MedPro 

to recover an excess verdict. But MedPro overlooks the fact 

that, under Stowers, Dr. Phillips would have had standing to 

sue MedPro if an excess verdict was rendered against him—a 

claim Dr. Phillips could have assigned to the Bramletts. In 

fact, Dr. Phillips, through counsel, eventually threatened to 

make such an assignment. As long as Dr. Phillips’s Stowers

claim was foreseeable, it was also foreseeable that he could 

have assigned the claim to the Bramletts. 

And Dr. Phillips’s Stowers claim was, in fact, foreseeable. 

Two demand letters from Dr. Phillips’s attorney stated that an 

excess verdict was likely and alleged that Stowers applied. 

MedPro acknowledges that it could have considered these letters “a threat of a potential claim by Dr. Phillips ... should a 

final judgment be entered against Dr. Phillips exceeding $2.5 

million.” Additionally, the MedPro claims specialist who attended the February 2005 mediation advised that an excess 

verdict was likely and that MedPro was facing Stowers problems. Although trial had not yet occurred by June 30, 2005, 

MedPro was undoubtedly on notice that it could face extracontractual liability if the jury rendered a large adverse verdict. Even if MedPro did not believe that it would be found 

liable under Stowers, as we stated in Koransky, it is irrelevant 

 6 Again, we express no opinion on when the Bramletts’ claim against 

MedPro was made or whether there was coverage pursuant to the Special 

Reporting Clause in Endorsement #16. 
18 No. 18-1737 

whether the foreseeable claim would ultimately succeed. It is 

relevant only that there may be a claim at all. Koransky, 712 

F.3d at 343. 

As a medical malpractice insurer, MedPro may often find 

it “difficult to determine” which situations will eventually 

evolve into claims.7 Koransky, 712 F.3d at 343. As in Koransky, 

however, “this case is not a close one.” Id. The district court 

correctly determined that, by June 30, 2005, MedPro should 

have known that it was facing a potential claim. 

B. Indiana’s Known Loss Doctrine 

Finally, although the district court did not reach this issue, 

we briefly address AISLIC’s alternative argument that, even 

if Exclusion M does not apply to bar coverage for MedPro’s 

claim, Indiana’s known loss doctrine does. 

The known loss doctrine is a common law principle that a 

party cannot obtain insurance for a loss that has already occurred. In re Indiana State Fair Litig., 49 N.E.3d 545, 549 (Ind. 

2016). “[I]f an insured has actual knowledge that a loss has 

occurred, is occurring, or is substantially certain to occur on 

or before the effective date of the policy, the known loss doctrine will bar coverage.” Id. (quoting Gen. Housewares Corp. v. 

Nat’l Sur. Corp., 741 N.E.2d 408, 413–14 (Ind. Ct. App. 2000)). 

A “probability of loss” is not enough for the doctrine to apply. 

Gen. Housewares, 741 N.E.2d at 414. Rather, a substantially 

 7 Relatedly, MedPro argues that AISLIC agreed to the deletion of 

questions in the 2006 Policy application because AISLIC recognized that 

MedPro regularly fielded potential claims and did not mean to include 

these in Exclusion M. As the district court recognized, the record reflects 

that these questions were deleted merely because they were not relevant 

for a renewal application. 
No. 18-1737 19 

certain loss is one that is “virtually inevitable.” Id. at 414; compare id. at 418 (company knew that liability was substantially 

certain to occur where it knew that it was strictly liable for an 

environment cleanup, although it did not yet know the cost 

for that cleanup) with Meridian Mut. Ins. Co. v. Majestic Block & 

Supply, Inc., 1 N.E.3d 173, 178–79 (Ind. Ct. App. 2013) (no substantial certainty where company knew that there was possible contamination on its site, but test results had not yet confirmed that contamination). 

When MedPro first contracted with AISLIC, the BramlettPhillips trial had not yet occurred, and no adverse or excess 

verdict had been rendered. Additionally, as we have discussed, it was unclear prior to June 30, 2005, as it remains today, whether MedPro is liable under Stowers. For these reasons, we cannot say that MedPro was facing a “virtually inevitable” loss prior to contracting with AISLIC, and therefore, 

the known loss doctrine does not apply. 

III. Conclusion 

The district court correctly determined that summary 

judgment was appropriate on the question of whether the 

Bramletts’ claim was reasonably foreseeable. We conclude, 

however, that there is a genuine dispute of material fact as to 

whether MedPro committed a Wrongful Act so as to negate 

coverage. For these reasons, we AFFIRM in part and 

REVERSE and REMAND in part for further proceedings consistent with this opinion.