FILED

February 5, 1999

Cecil W. Crowson

Appellate Court Clerk

STATE OF TENNESSEE, 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 INSURANCE ) No. 92-1120-I(II)

RISK RETENTION GROUP, )

)

Respondent, )

)

RE: )

)

Insured: Billy C. Johnson, M.D. )

Claimant: Blendora 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, North

Fifth Floor

Nashville, Tennessee 37219

ATTORNEY FOR APPELLANT, 

 ESTATE OF BLENDORA ECHOLS

AFFIRMED AND REMANDED

WALTER W. BUSSART, SPECIAL JUDGE
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OPINION

This is an appeal from a memorandum and order of the chancellor

affirming and adopting the Special Master's report pursuant to Rule 53 of the

Tennessee Rules of Civil Procedure. The issue is whether the lower court erred

in this action. Our review is de novo upon the record accompanied by a

presumption of correctness as to the findings of fact by the chancellor.

Tenn.R.App.P.13(d).

FACTS

The facts here are best presented by a chronology as follows:

05/20/91 Dr. Billy Johnson pe rformed a laprosco pic cauterization on Blen dora Echo ls.

05/22/91 Ms. Echols died.

06/17/91 Dr. Johnson executed an application for a "claims made" 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 malpractice insurance policy with Physicians National Risk Retention Group ("PNI")

expired.

07/01/91 Effective date of UPI policy. (The retroactive effective date was 7/1/90).

07/16/91 Dr. Johnson received formal notice of a malpractice claim brought by Ms. Echols' estate 

("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 legal expenses and

judgmen t.

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

Davidson County Chancery Court appoint her as receiver of UPI.

05/01/92 The court appointed Jeanne Barnes Bryant, director of Receiverships for the Insurance Division of

the Department 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 reporting 

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 reporting deadline.

 3/93 Claimant's attorney, Thomas J. Schilling, claimed he did not learn of the UPI policy until March 1993

04/14/93 Claimant filed a proof of claim. The Receiver denied the claim.

05/14/93 Claimant sent a formal objection to the Receiver's denial of the claim.

07/21/93 Claim filing deadline established by order of liquidation.

08/27/93 The Receiver moved the court to dismiss the claim or affirm the Receiver's denial of the claim.

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 Claimant filed a statement of claim.

05/02/95 The Receiver filed a second amended position statement whe rein she alleged : 1) Dr. Jo hnson did not

list the Echols incident as a prior act on his application; 2) the matter was not reported during the

life of the policy nor prior to the time established to report incidents; and 3) the matter was reported

to PNI. 

06/19/95 Special Master, Claudia C. Bonnyman ("the Master"), filed he r report. She found the inc ident did

not occur prior to the effective date of the policy or before the application process. However, she

concluded the policy did not cover the claim because Claimant did not report the claim to UPI or

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 Chancellor McCoy filed a memorandum and ord er. T he o rde r affirme d an d ad opt ed the 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
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occur prior to the effective date of the policy or before the application process.

 In other words, the incident occurred during the period of time covered by the

UPI policy. However, the Master found that the policy did not cover this claim

because Claimant did not report the claim to UPI or to the Receiver until after the

expiration of the policy. The chancellor, in analyzing the report, rejected

Claimant's argument that notice was provided when Dr. Johnson answered

question #92 on his application for the UPI policy as follows:

92. INCIDENTS, POTENTIAL 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 which have not been acted upon or resulted in legal proceedings? x yes no

(B) Have you notified your present insurer of any such inciden ts or circumstances?

If no, for your own protection, please report any such incident or

circumstances to your present carrier immediately. List any such incidents or

circumstanc es on the rev erse side. 

 x yes no

Claimant has appealed.

The case turns on the coverage in the UPI policy and the parties'

respective rights pursuant to this policy. See Black v. Aetna Ins. Co., 909

S.W.2d 1, 3 (Tenn.App.1995). In the absence of fraud, overreaching, or

unconscionability, we must give effect to an insurance policy if its language is

clear and its intent certain. See Quintana v. Tennessee Farmers Mut. Ins. Co.,

774 S.W.2d 630, 632 (Tenn.App.1989).

Blendora Echols died on May 22, 1992, two days after Dr. Johnson

performed a laproscopic cauterization. Dr. Johnson must have 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 one month after Ms. Echols' death, Dr. Johnson applied to UPI

for a claims made policy. In this application, he stated that he had never been

involved in a malpractice claim, suit, or incident. He also did not request prior

acts coverage, and in fact, signed a "prior acts waiver" which stated: 

I understand that if there are any circumstances or incidents

which are likely to result in a claim and which are known to me

or should have been known to me on the date of this application,

but are not disclosed herein, any such resulting claim will not be

covered by UPI under any policy in force.
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In addition, Dr. Johnson stated in his application that he was "aware" of

"incidents or facts which could provide a basis for a claim or suit but which have

not been acted upon or resulted in legal proceedings" and that he had notified his

present insurer of these incidents or facts.

Based on this application, UPI issued Dr. Johnson a policy that included

a rider in paragraph XII amending the prior acts coverage. This rider states, in

part:

Furthermore, if the Insured had personal knowledge prior to

the original inception date of the UPI policy as stated on the

Declarations Page, no coverage shall apply; nor will it apply to

those medical incidents, claims, or compensable events that were

previously reported to the insurance carriers that provided

coverage prior to UPI's coverage, even if coverage is denied.

This coverage only applies if a premium has been paid and a

RETROACTIVE DATE shown which predates the inception of

the date of this policy. (emphasis in original)

In light of these facts, it seems that the following is undisputed in the

record: (1) Dr. Johnson was aware of a medical incident, claim, or compensable

event when he first applied for coverage with UPI; (2) he reported this event to

his previous insurance carrier; (3) he did not seek prior acts coverage from UPI

and, in fact, signed a wavier explicitly waiving this coverage; and (4) he did not

report the details of the compensable event involving Ms. Echols to UPI. In 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

not obtain prior acts coverage from UPI, UPI can not be liable to Ms. Echols'

estate.

Accordingly, the chancery court is affirmed and the case is remanded.

The costs are taxed against the appellant, the estate of Blendora Echols.

________________________________

WALTERW.BUSSART, SPECIALJUDGE

CONCUR:

__________________________________________
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HENRY F. TODD, PRESIDING JUDGE, M.S.

CONCURRING IN SEPARATE OPINION

WILLIAM C. KOCH, JR., JUDGE