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July 13, 1990.

OBSTETRICS & GYNECOLOGY LIMITED OF KANSAS CITY, INC., a Missouri Professional Corporation, Formerly Known as Knock, Buckner, Youngblood, Bickley & Zeller, Inc., a Missouri Professional Corporation, Appellee, and ST. PAUL FIRE AND MARINE COMPANY, a Minnesota Corporation, Appellee/Cross-Appellant,
ROBERT C. BUCKNER, M.D., Defendant, and FLETCHER BELL, Commissioner of Insurance for the State of Kansas, Appellant/Cross-Appellee.

*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.

[247 Kan. 171]

      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:
"Who's protected:
INDIVIDUAL Knoch, Kermit Buckner, Robert C. Bickley, James E. Youngblood, James P.
ORGANIZATION 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 policy:
. . . .
"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 coverage to:
  $1,000,000 each person 1,000,000 total limit

[247 Kan. 172]


  "Who's protected

"This endorsement applies only to the following individuals or organizations:
James P. Youngblood
Drs. Knock, Buckner, Youngblood & Bickley, Inc.
"Other terms
"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 the policy.

  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 the Corporation.

  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

[247 Kan. 173]

      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 ...

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