Court Opinion

ID: 4351511
Source: CourtListenerOpinion
Date Created: 2018-12-18 16:00:45.777747+00
Date Added: 2024-06-11T14:36:29.188815
License: Public Domain

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 Pro-
tective 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. Bram-
lett’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 In-
surance 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 cov-
erage was excluded under the AISLIC policy because MedPro
should have foreseen the Bramlett family’s claim before con-
tracting with AISLIC. Because there is a genuine issue of ma-
terial 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 bleed-
ing. 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 (Lub-
bock Gynecologic Oncology Associates), Covenant
No. 18-1737                                                    3

Healthcare System (where Mrs. Bramlett had been hospital-
ized), 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 approxi-
mately $2.3 million, leaving only Dr. Phillips and his clinic re-
maining in the suit.
    On December 17, 2003, the Bramletts wrote to Dr. Phil-
lips’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 pru-
dent 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. Bram-
lett’s internal bleeding because he had left the hospital to ex-
ercise. 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 abnor-
mal 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 be-
lieved settlement was premature given that discovery was not
complete, particularly because the parties had not yet de-
posed Mr. Bramlett and the hospital nurses. Mr. Davidson
sent this response three days after the expiration of the Stow-
ers settlement offer.
     Discovery continued, and in May 2004, Mr. Davidson no-
tified MedPro of defense issues he foresaw in the lawsuit. No-
tably, 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 grim-
mer 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. Phil-
lips and [his clinic] are correct, and, thus, liability may be im-
posed 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 per-
cent and an adverse jury verdict was likely to be approxi-
mately $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 is-
sues” as to MedPro. Prior to the mediation, MedPro made set-
tlement offers to the Bramletts of $100,000, then $200,000. The
Bramletts rejected both offers and instead demanded $2.3 mil-
lion to settle the case, which MedPro rejected. After the medi-
ation, 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 pro-
tect 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. Man-
ning 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 ex-
posure” for a verdict in excess of Dr. Phillips’s policy limit,
given MedPro’s failure to accept the Bramletts’ Stowers de-
mands.
     In April 2005, a litigation attorney at MedPro was notified
of the situation and sought advice from outside counsel. Out-
side 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, regard-
less, 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 set-
tlement demand to $1 million, and on the day before trial
dropped it to $500,000. The demand went back up to $1 mil-
lion once trial began. MedPro rejected the offer, counteroffer-
ing only the policy limit of $200,000, and possibly some litiga-
tion costs.
    The trial went as predicted, but the verdict was signifi-
cantly higher than anticipated. The jury sided with the Bram-
letts 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 op-
tions, 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 re-
lated 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 ap-
plied 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 in-
sured 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 pur-
chased a $5 million Insurance Company’s Professional Liabil-
ity 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 alle-
gations had been made against MedPro in the previous five
years, but at MedPro’s request, AISLIC deleted these ques-
tions, because they were not applicable to a renewal applica-
tion. 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 in-
cluded a preamble stating:
      Except to such extent as may otherwise be provided
      herein, the coverage of this policy is limited gener-
      ally 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 fail-
      ure to render Professional Service.

   Finally, and importantly, the 2006 Policy also included Ex-
clusion M, which excluded from coverage:
      … any claim arising out of any Wrongful Act occur-
      ring 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 ex-
pired, MedPro notified AISLIC of the Bramlett lawsuit, de-
scribing it as a “Potential Claim.”
    Ultimately, AISLIC refused to cover MedPro’s extra-con-
tractual 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 Exclu-
sion 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 ap-
peals.
                         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 ma-
terial 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 infer-
ences 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’ diver-
sity 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 con-
tract presents a question of law for the court. Trinity Homes
LLC v. Ohio Cas. Ins. Co., 629 F.3d 653, 656 (7th Cir. 2010) (cit-
ing Tate v. Secura Ins., 587 N.E.2d 665, 668 (Ind. 1992)). The
court must “first determine whether the policy is clear or am-
biguous.” 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 lan-
guage 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 In-
diana 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 exe-
cuted 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 mal-
practice insurance. The malpractice policy contained lan-
guage 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

     2The district court disposed of this case without addressing the pre-
requisite 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. Koran-
sky & Bouwer’s policy excluded coverage if “‘before the Pol-
icy 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 deter-
mine exactly which acts or omissions might lead to a malprac-
tice 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 insur-
ance 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 cer-
tain “claim[s] arising out of any Wrongful Act.” The 2006 Pol-
icy 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 dis-
pute this general definition. They do, however, dispute its ap-
plication. 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 Wrong-
ful Act” rather than a possible or alleged Wrongful Act. A com-
parison 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 else-
where in the contract. The Special Reporting Clause in En-
dorsement #16 of the 2006 Policy, for example, refers to a
“possible Wrongful Act” and provides coverage if a claim ul-
timately “aris[es] out of” that act.3 Under Indiana law, con-
tracts 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 Com-
     pany 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 es-
tablish 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 fac-
tual dispute as to whether MedPro committed a Wrongful
Act.
    MedPro argues that it handled the Bramletts’ Stowers de-
mands 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 investi-
gate 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 ambigu-
ous. 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 subjec-
tively knew it had committed a Wrongful Act. Under Indiana law, con-
tracts 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 ver-
dict, 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 un-
til after MedPro declined to settle that several people, includ-
ing 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 di-
rection. 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 ex-
ercise. By that time, the Bramletts had also submitted an ex-
pert 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 con-
trols 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 let-
ters “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 at-
tended the February 2005 mediation advised that an excess
verdict was likely and that MedPro was facing Stowers prob-
lems. Although trial had not yet occurred by June 30, 2005,
MedPro was undoubtedly on notice that it could face extra-
contractual liability if the jury rendered a large adverse ver-
dict. Even if MedPro did not believe that it would be found
liable under Stowers, as we stated in Koransky, it is irrelevant

   6Again, 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 oc-
curred. 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 doc-
trine 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; com-
pare 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 sub-
stantial certainty where company knew that there was possi-
ble contamination on its site, but test results had not yet con-
firmed that contamination).
    When MedPro first contracted with AISLIC, the Bramlett-
Phillips trial had not yet occurred, and no adverse or excess
verdict had been rendered. Additionally, as we have dis-
cussed, it was unclear prior to June 30, 2005, as it remains to-
day, whether MedPro is liable under Stowers. For these rea-
sons, we cannot say that MedPro was facing a “virtually inev-
itable” 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 con-
sistent with this opinion.