# FILED

February 5, 1999 Cecil W. Crowson Appellate Cou rt Clerk STATE OF TENNESSE

E, ex rel, ) Doug Sizemore, Commissioner of ) Commerce and Insurance for the ) State of Tennessee, ) ) Petitioner, ) Appeal No. ) 01-A-01-9706-CH-00253 v. ) ) Davidson Chancery UNITED PHYSICIANS I NSURANCE ) No. 92 -1120 -I(II) RISK RETENTI

ON GROUP, ) ) Respondent, ) ) RE: ) ) Insured: Billy C. Johnson, M.D. ) Claimant: Blendor

a Ann Echols )



### COURT OF APPEALS OF TENNESSEE

APPEAL FROM THE CHANCERY COURT FOR DAVIDSON COUNTY

AT NASHVILLE, TENNESSEE

THE HONORABLE CAROL L. McCOY, CHANCELLOR

RENARD A. HIRSCH, SR. ROBIN L. HARRIS Smith & Hirsch 619 Woodland Street Nashville, Tennessee 37206 ATTORNEYS FOR JEANNE BARNES BRYANT RECEIVER FOR UNITED PHYSICIANS INSURANCE RISK RETENTION GROUP

MARTIN SIR 221 Fourth Avenue, N

orth Fifth Floor Nashville, Tennessee 37219 ATTORNEY FOR APPELLANT, ESTATE OF BLENDORA ECHOLS

AFFIRMED AND REMANDED

WALTER W. BUSSART, SPECIAL JUDGE-2- 

# OPINION

Thi s is an appeal from

a memora

ndum and order of

the cha ncello r affirming and adopting the Spe

c ial Master's repo

rt pursuant to Rule 53 o

f the Tennessee Rules of Civil Procedure. The issue is whether the lower court erred in this action. Our r

eview is de novo upon the record a ccompan ied by a presu mption

of correctness as to the findings of fact by the chancellor. Tenn.R.App.P.13(d). FACTS The facts here a

re best presented by

a chronology as f

ollows:
05/20/91 Dr. Billy Johnson pe rformed a laprosco pic cauterization on Blen dora Echo ls. 05/22/91 Ms. Echols di ed. 06/17/91 Dr. Johnson execut ed an appl

icati on for a "clai ms mad e" insurance policy with United Physicians Insurance Risk Retention Group ("UPI"). Dr. Johnson checked "yes" in response to a question regarding prior incidents and claims. 06/30/91 Dr. Johnson's malpr actice i nsurance policy w

ith Phys icians National

Risk Rete

ntion Group ( "PNI") expired. 07/01/91 Effective date of UPI policy. (The retroactive eff ective date was 7/1/90). 07/16/91 Dr. Johnson received f ormal notice of a malpractice cl aim brought by Ms. Echols ' estat e ("Claima nt"). The n otice was ma de pursua nt to Virginia C ode sectio n 8.01-58 1. 02/21/92 A Virginia co urt awarde d Claiman t $769,3 29.53. P NI paid a percenta ge of the leg al expenses and

judgmen t. 04/10/92 Elaine A. McR eynolds, Co mmissione r of Comm erce and I nsurance, filed a petition req uestin g the

Davidson County Chancery Court appoint her as receiver of UPI. 05/01/92 The court appointed Jeann e Barnes Bryant, di

rector of Receive

rships for t

he Ins uran

ce Di vision

of the Depart men t of Commerce and Insurance ("the Receiver"), as Special Deputy Receiver for the purpose of rehabilitating UPI. 07/01/92 Dr. Johnson' s UPI policy

expired. 07/16/92 Chancellor C. Allen High issued an order of liquidation against UPI. 07/24/92 The Receiver mailed notice to UPI's insureds informing them of the 8/25/92 incident r eporting deadline. The Receiver did not send a copy of the notice to Dr. Johnson. 08/21/92 Cancellation date of U PI's policies. 08/25/92 Incident report ing deadline. 3/93 Claimant' s attorney, Thomas J. Schilling, cl aimed he did not learn of the UPI policy un til March1993 04/14/93 Claima

nt fi led a pr oof of c laim.The Recei

ver deni ed the c laim. 05/14/93 Claima

nt sen t a for mal obje ction to the Receiver's

denial of the clai m. 07/21/93 Claim filing deadline establi shed by order of liquidation. 08/27/93 The Recei

ver move

d the co urt t o dismi ss th

e clai m or aff irm th e Receiv er's denial of the clai m. 09/13/93 Claimant filed a response to the m otion to dismiss. 09/15/93 The Re ceiver filed a p osition stateme nt. 02/27/95 The Re ceiver filed an amende d position sta tement. 05/01/95 Claima

nt fi led a statem

ent of clai m. 05/02/95 The Receiver f iled a s econd amended posi tion statement whe rein she alleged : 1) Dr. Jo hnson did not listthe Echo ls incid ent as a prior act on his application; 2) the matter was not reported during the life of the p olicy nor pri or to the ti

me establish

ed to report inci

dents; and 3) t

he matter was r

eported to PNI. 06/19/95 S pecial Master, C laudia C. B onnyman ("the M aster"), filed he r report. She found the inc ident did

not occur prior to t

he effecti

ve date of the pol

icy or before t

he applicat

ion process. However, she concluded the policy did not cover the claim because Claimant did not report the claim to UPI o r to the Rece iver until after the ex piration of the policy. 06/30/95 Claimant filed an objec tion to the rep ort. 10/07/96 The Re ceiver filed a m otion to affirm th e report. 01/23/97 Chancell

or McCoy filed a memorandum an d ord er. T he o rde r aff irme d an d ad opt ed t he M aste r's report. 02/19/97 Claimant filed a notice of ap peal.



### To reiterate, the Master concluded that the "medical incident" did not-3-



### occur prior to the e

ffective date

of the policy or before the appli cation process. In other words, the incident occurred during the period of time covered by the UPI policy. However, the M aster found that the

policy did not cove

r this claim because Claimant did not

report the claim to UPI

or to the Receiver unt

il after the expiration

of the policy. The chancellor, in analyzing the

r eport, rejected Claimant's argument that notice was provided when Dr. Johnson answered question #92 on his applica tion for the UPI pol

icy as follows:
92. INC IDE NTS,POTENTIA L CLAIMS (A) Are you aware o f any incidents o r facts which co uld provid e a basis for a c laim or suit but whi ch have not bee n acted upon or r

esult ed in l egal pr oceedin gs? x yes no (B) Have you notified your present insur er of any such inciden ts or circumstances? If no, for your own prot ection, please r

eport any

such inc

ident or circumstances

to your present ca

rrier immediat

ely. Li st any s uch inci dents or circumstanc es on the rev erse side.
x yes no 

### Claimant has a

ppealed.

The case turns on the cove rage in the UPI pol

icy and the

parti es' respective

rights pursuant t o this policy. See Black v. A etna Ins. Co., 909 S.W.2d 1, 3 (Tenn.App. 1995). In the absenc e of fraud, overr

eaching , o r unconscionabil ity, we must give effe ct to an insurance pol

icy if its language is clear and its intent certa in. See Quintana v. Tennessee Farmers Mut. Ins. Co. , 774 S.W.2d 630, 632 (Tenn.App.1989).

BlendoraEchols died on May 2 2, 1992, two days a fter Dr. Johnson performed

a laproscopic caute

rization. Dr. Johnson must hav e realized at the time that he was exposed to liability because he later conceded that his "conduct failed to meet the standard of medical care" when he was sued by her estate.

Less than onemonth after Ms. Echols' death, Dr. Johnson applied to UPI for a claims m

ade policy. In

this application , he sta

ted that he had never been involved in a malpractice claim, suit, or inc ident. He also did not request prior acts coverage, a

nd in fact, signed a "prior acts waive r" which stated: I understand tha

t if there are any

circumstances or incidents which are likely

to res ult i n a cla im and w hich are kn own to me or should have been known to me on the date of this application, but are not disclosed her

ein, any suchresulting claim will not be covered by UPI under any policy in force.-4-



### In addition, Dr. Johnson stated in his application that he was "awar e" of "incidents or facts which cou ld provide a basis

for a claim or suit but which have not been acted upon or resulted in legal proce edings" and that he

had notified his present insurer of these incidents or fa cts.

Based on this application, UPI issued Dr. Johnson a policy that included a rider in paragraph XIIamending the prior acts cove

rage. This rider

states, in part: Furthermore,

if the Insured

had personal knowle

dge prior to the original inceptio

n date of the UPI policy as stated on the Declarations Page, no coverage shall apply ; nor will it

apply to those medicalincidents, claims, or compensable events that were previously

reported to the insurance carriers that provided coverage prior to UPI's cover age, even if cover age is denied. This coverage only a

pplies if a prem

ium has been paid

and a RETROACTIVE DATE shown which predates the inception

of the date of this policy . (emphasis in original)

In ligh t of these facts, i

t seems that the

following is undisputed

in the record: (1) Dr. Johnson was aware of a m edical incident, c

laim, or compensable event when he first applied for coverage with

UPI; (2) he repo

rted this event to his previous insurance carrier; (3) he did not seek prior acts covera

ge from UPI and, in fact, signed a w

avier explicitly

waivingthis coverage; and (4) he did not reportthe details of the co mpensable even

t involving Ms. Echols to UPI. I n light of these facts, it

is clear that UPI

never contracted to cover any of Dr. Johnson's prior acts, including those

associated with Ms.

Echols'death. If

Dr. Johnson did

n ot obtain prior acts co

verage from U

PI, UPI can not

be liable to Ms. Ec

hols' estate.

Accordi ngly, the chancery c ourt is affirm

ed and the caseis remanded. The costs are taxe

d against the appella

nt, the estate of B lendora Echols.

________________________________ WALTER W

. BUSSART, S PECIAL JUDG E CONCUR:

__________________________________________-5-

HENRY F. TODD, PRE

SIDING JUD

GE, M.S.
CONCURRING IN SEPARATE OPINI ON WILLIA M C. KOCH, JR., JUDGE