*fn1 REPORTER'S NOTE: MICHAEL CORRIGAN, District Judge, was
appointed to hear case No. 63,968, vice Justice Abbott pursuant
to the authority vested in the Supreme Court by Article 3, § 6(f)
of the Kansas Constitution.
The opinion of the court was delivered by
St. Paul Fire and Marine Company (St. Paul) paid $600,000 to
settle a medical malpractice action in which two of its insureds,
Dr. Robert Buckner and Obstetrics & Gynecology Limited of Kansas
City, Inc., (Corporation) were named defendants.
Through this action, St. Paul is seeking to recoup $500,000 of
the settlement from the Kansas Health Care Stabilization Fund
(Fund). The district court granted judgment in favor of St. Paul
in the amount of $400,000. Fletcher Bell, Commissioner of
Insurance and administrator of the Fund, appeals from the
judgment. St. Paul cross-appeals from the district court's denial
of prejudgment interest and the $100,000 reduction of its claim.
The underlying facts must be set forth in considerable detail.
The Corporation is incorporated as a professional corporation
under the laws of Missouri. It is not a "health care provider" as
defined by K.S.A. 1989 Supp. 40-3401(f) as it is not "a
professional corporation organized pursuant to the professional
corporation law of Kansas." The parties agree the Corporation is
not subject to the Health Care Provider Insurance Availability
Act, K.S.A. 40-3401 et seq. (the Act).
St. Paul issued a Physicians and Surgeons Professional Policy.
The basic coverage stated:
Buckner, Robert C.
Bickley, James E.
Youngblood, James P.
Drs. Knoch, Buckner, Youngblood & Bickley, Inc."
Limits of coverage were $100,000 each person with a total limit
of $300,000. The premium paid was $22,980.
The following endorsement, in pertinent part, was a part of the
"KANSAS NON-RESIDENT PHYSICIAN ENDORSEMENT
. . . .
"Drs. Knoch Buckner,
Youngblood & Bickley, Inc.
"What this endorsement does
"If you are a non-resident physician, this
endorsement increases the limits of coverage for your
Physician Professional Liability Protection. But the
increased Limits shown below apply only to the
providing or withholding of Limits of your coverage
Professional services outside the State of KANSAS.
"The additional premium of $5,848.00 increase[s] your
$1,000,000 each person
1,000,000 total limit
"This endorsement applies only to the following
individuals or organizations:
James P. Youngblood
Drs. Knock, Buckner, Youngblood & Bickley, Inc.
"All other terms of your policy remain the same."
As noted in the case caption, the name of the professional
corporation was changed to its present name after the issuance of
Appropriate notice of basic coverage was sent to Bell as to
physicians Knock, Buckner, Bickley, and Schaeffer, who were
health care providers within the definition of K.S.A. 1989 Supp.
40-3401(f), but not as to Youngblood or the Corporation, who were
not subject to the Act. The business address of all physicians
and the Corporation was listed as 1010 Carondelet Dr., Suite 328,
Kansas City, Missouri 64114.
On December 11, 1977, Dr. Buckner delivered a baby, Christine
Loetel, at St. Mary's Hospital in Kansas City, Missouri. On July
6, 1982, a lawsuit was filed in Missouri on behalf of the child
by her mother, Pamela J. Loetel, as mother and next friend,
alleging that the delivery had been negligently performed and
that Christine had been damaged as a result thereof. Dr. Buckner
was a named defendant as was the Corporation on the basis of the
doctrine of respondeat superior, Dr. Buckner being an employee of
St. Paul defended the action on behalf of its two insureds.
Demand was made upon Bell by St. Paul for participation. A basic
disagreement developed as to the respective obligation of the
Fund and the policy of insurance. St. Paul contended the Fund had
liability for any amount over $100,000. Bell contended St. Paul's
liability extended to the first $1,100,000 of the claim. St. Paul
ultimately settled the Loetel action for $600,000 on behalf of
its two insureds. In its bookkeeping, St. Paul attributed
$100,000 to Buckner's coverage and $500,000 to the Corporation's
coverage. There is no contention the $600,000 settlement was
unreasonable in amount.
St. Paul wanted to force the Fund to reimburse it for the
$500,000 it believed it had been compelled to pay by Bell's
wrongful refusal to participate. However, there was an impediment
to the pursuit of the claim. There was no judgment against
Buckner for $600,000. The settlement had been paid on behalf of
Buckner and the Corporation, who were each insureds under the
policy, and the settlement was within the total coverage
afforded. St. Paul developed a strategy to overcome the
impediment and achieve its goal. On November 18, 1986, an action
was filed in the United States District Court for the District ...