No. 05-11-01040-CV IN THE FIFTH COURT OF APPEALS AT DALLAS, TEXAS Medicus Insurance Company, Appellant v. Frederick Todd, II, M.D. d/b/a/ Arlington Neurological Spine Association, Appellee On Appeal from the 134th District Court of Dallas County, Texas Trial Court Case No. 09-01913 APPELLANT S BRIEF ACCEPTED 225EFJ016720881 FIFTH COURT OF APPEALS DALLAS, TEXAS 12 February 9 P6:31 Lisa Matz CLERK 5th Court of Appeals FILED: 02/10/2012 14:00 Lisa Matz, Clerk Kevin F. Risley State Bar No. 16941200 Brian S. Martin State Bar No.13055350 Jamie Carsey State Bar No. 24045620 THOMPSON, COE, COUSINS & IRONS, L.L.P. One Riverway, Suite 1600 Houston, Texas 77056 Telephone: 713.403.8295 Facsimile: 713.403.8299 COUNSEL FOR APPELLANT ORAL ARGUMENT REQUESTED
IDENTITY OF PARTIES AND COUNSEL APPELLANT: Counsel: Medicus Insurance Company Kevin F. Risley State Bar No. 16941200 Brian S. Martin State Bar No.13055350 Jamie Carsey State Bar No. 24045620 THOMPSON, COE, COUSINS & IRONS, L.L.P. One Riverway, Suite 1600 Houston, Texas 77056 Telephone: 713.403.8295 Facsimile: 713.403.8299 APPELLEE: Counsel: Frederick Todd, II, M.D. d/b/a Arlington Neurological & Spine Association Michael Scott Thomas THOMAS & WILLIAMS, LLP 2626 South Loop West, Suite 561 Houston, Texas 77054 Telephone: (713) 665-8558 Facsimile: (713) 665-8562 Michael J. Todd LAW OFFICES OF MICHAEL J. TODD, PC 700 Pearl, Suite 2170 Dallas, Texas 75201 Telephone: (214) 748-8633 Facsimile: (214) 748-4348 JUDGE: The Honorable Dale Tillery 134 th District Court of Dallas County, Texas i
TABLE OF CONTENTS IDENTITY OF PARTIES AND COUNSEL...i TABLE OF CONTENTS...ii INDEX OF AUTHORITIES...iv INDEX OF APPENDICES...vi STATEMENT OF THE CASE... 2 ISSUES PRESENTED... 2 STATEMENT OF FACTS... 4 SUMMARY OF THE ARGUMENT... 10 ARGUMENT... 10 1. Standard of Review... 13 a. Denial of motion for directed verdict... 13 b. Submission of jury question... 13 c. Failure to submit jury instructions... 13 d. Denial of motion for mistrial and motion for new trial... 13 e. Abuse of discretion... 13 2. The Trial Court Erred in Not Granting a Directed Verdict that the Policy Issued to Dr. Todd was Void Under Tex. Ins. Code. 705.004... 13 a. The Insurane Code creates a ground for voiding a policy based on misrepresntations in the application that does not exist at common law... 13 b. Medicus established its right to have the policy declared void under 705.004... 13 3. Alternatively, the Trial Court Erred in Not Submitting a Jury Question on 705.004... 13 ii
4. The Trial Court erred in Failing to Submit Jury Instructions that Would Have Provided Essential Guidance to the Jury on the issue of Intent to Decieve... 20 5. The Trial Court Should Have Admitted Evidence Showing Dr. Todd s History of Failing to Disclose His True Malpractice Experience or the Court Should Have Granted a New Trial When the Jury was Given Non-Admitted Evidence During its Deliberations... 24 CONCLUSION AND PRAYER... 29 CERTIFICATE OF SERVICE... 30 iii
INDEX OF AUTHORITIES CASES Allen v. United States, 164 U.S. 492, 17 S.Ct. 154, 41 L.Ed. 528 (1896)... 9 Bocquet v. Herring, 972 S.W.2d 19 (Tex.1998)... 23 Bryan v. Watumull, 230 S.W.3d 5038 (Tex. App. - Dallas 2007, pet. denied)... 23 Champion Int'l Corp. v. Twelfth Court of Appeals, 762 S.W.2d 898 (Tex.1988) (orig. proc.)... 14 Collora v. Navarro, 574 S.W.2d 65 (Tex.1978)... 13 Cortameglia v. Herron, 281 S.W. 305 Tex. Civ. App. -Wago 1926, writ refd)... 25 Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238 (Tex.1985)... 14 Elbaor v. Smith, 845 S.W.2d 240 (Tex.1992)... 16 European Crossroads' Shopping Ctr., Ltd. v. Criswell, 910 S.W.2d 45 (Tex. App. - Dallas 1995, writ denied)... 24 Golden Eagle Archery, Inc. v. Jackson, 24 S.W.3d 362 (Tex.2000)... 14, 26 Insurance Co. of State of Pennsylvania v. Muro, 295 S.W.3d 524, 530 (Tex. App Dallas 2009), rev d on other grounds, 347 S.W.3d 268 (Tex. 2011)... 19 Kupchynsky v. Nardiello, 230 S.W.3d 685 (Tex. App. - Dallas 2007, pet. denied)... 13 La.-Pac. Corp. v. Knighten, 976 S.W.2d 674 (Tex.1998)... 13 Lopez v. La Madeleine of Tex., Inc., 200 S.W.3d 854 (Tex. App. - Dallas 2006, no pet.)... 14 Mayes v. Mass. Mut. Life Ins. Co., 608 S.W.2d 612 (Tex. 1980)... 15 Nash v. Fisher, 325 S.W.2d 187 (Tex. Civ. App. Beaumont 1959, no writ)... 25 Park N. Serv. Ctr., L.P. v. Applied Circuit Tech., Inc., 338 S.W.3d 719 (Tex. App. - Dallas 2011, no pet.)... 28 Prudential Ins. Co. v. Fin. Review Servs., Inc., 29 S.W.3d 747 (Tex.2000)... 13 iv
Republic Bankers Life Ins. Co. v. Hoffman, 483 S.W.2d 268 (Tex. Civ. App. - Dallas 1972, no writ)... 15 Robinson, In re The Estate of, 140 S.W.3d 782 (Tex. App. Corpus Christi-Edinburg 2004)... 20 Shupe v. Lingafelter, 192 S.W.3d 577 (Tex.2006)... 13, 14 Till v. Thomas, 10 S.W.3d 730 (Tex. App. - Houston [1st Dist.] 1999, no pet.)... 14 Tex. Workers' Comp. Ins. Fund v. Mandlbauer, 34 S.W.3d 909 (Tex. 2000)... 14, 19, 22 Walker v. Gutierrez, 111 S.W.3d 56 (Tex.2003);... 14 Walker v. Packer, 827 S.W.2d 833 (Tex.1992)... 15 White v. Southwestern Bell Tel. Co., 651 S.W.2d 260 (Tex.1982)... 13 Union Pac. R.R. Co. v. Williams, 85 S.W.3d 162 (Tex.2002)... 19 STATUTES AND RULES Tex. Ins. Code 705.004...1, 3, 7, 10, 11, 15-20 Tex. Ins. Code 705.005... 16 Tex. R. App. P. 44(a)... 23 Tex. R. Civ. P. 278... 19 Tex. R. Civ. P. 327... 23, 30 Tex. R. Evid. 606(b)... 28 v
INDEX OF APPENDICES 1. First Amended Final Judgment signed July 18, 2011 (CR 232) 2. Excerpts from the applications submitted by Todd to Medicus (Pl. Ex. 7, 13) 3. Plaintiff s Requested Jury Question No. 1 (Ex. 57) 4. Plaintiff s Requested Jury Instructions 3, 5, and 6 (Pl. Ex. 58, 59, 60) 5. Questions asked by jury during deliberations and court answers (RR vol. IX) 6. Excerpts from Pl. Ex. 11A, 51, and 52 7. Tex. Ins. Code 705.004 and 705.005 vi
No. 05-11-01040-CV IN THE FIFTH COURT OF APPEALS AT DALLAS, TEXAS Medicus Insurance Company, Appellant v. Frederick Todd, II, M.D. d/b/a/ Arlington Neurological Spine Association, Appellee On Appeal from the 134th District Court of Dallas County, Texas Trial Court Case No. 09-01913 APPELLANT S BRIEF TO THE HONORABLE JUSTICES OF THE COURT OF APPEALS: Appellant Medicus Insurance Company ( Medicus ) asks that the judgment in favor of Dr. Frederick Todd II ( Todd ) be reversed for four reasons: 1. Medicus conclusively established the elements for voiding an insurance policy under Texas Insurance Code 705.004 due to misrepresentations in the policy application and the trial court erred in not granting a directed verdict on that issue. 2. Alternatively, the trial court erred in refusing to submit a question to the jury containing the elements of 705.004. 3. The trial court also erred in refusing to submit jury instructions concerning the intent necessary to have an insurance policy voided under the common law for misrepresentations in the application. 1
4. The trial court erred in refusing to admit applications for insurance submitted to other carriers that contained the same type of misrepresentations contained in the application Dr. Todd submitted to Medicus. Due to a mistake by the court reporter, those exhibits were sent to the jury room during deliberations and the jury relied on them heavily in reaching its verdict. The trial court also erred in refusing to grant a new trial when presented with proof that the jury had based its decision on inadmissible evidence. STATEMENT OF THE CASE Medicus brought suit against Dr. Todd seeking to void a medical malpractice policy of insurance issued to Dr. Todd based upon significant misrepresentations in the application for insurance submitted by Dr. Todd. At trial, after the trial court denied a motion for directed verdict presented by Medicus, the jury returned a verdict in favor of Dr. Todd. The trial court also denied multiple post-trial motions filed by Medicus. ISSUES PRESENTED 1. In its petition, Medicus sought a declaration that the medical malpractice policy it issued to Dr. Todd was void under Texas Insurance Code 705.004 because of significant misrepresentations contained in the policy application submitted by Dr. Todd. At trial, Medicus presented uncontroverted evidence that Dr. Todd failed to include more than a dozen prior malpractice claims in his application for insurance, that the omissions were material to the risk Medicus was asked to assume, and that Medicus would not have issued the policy if the true facts of Dr. Todd s malpractice history were known. Did the trial court commit error in denying a motion for directed verdict filed by Medicus on its claim under 705.004? 2
2. Medicus sought a declaration that the medical malpractice policy it issued to Dr. Todd was void under Texas Insurance Code 705.004 and Medicus introduced evidence in support of each element of 705.004. Did the trial court commit error in not submitting a question to the jury based on 705.004? 3. Medicus requested that the trial court submit three instructions to the jury that would explain the element of intent to deceive under the common law basis for voiding an insurance policy due to misrepresentations in the application. The trial court refused those instructions. During its deliberations, the jury sent out one question asking for the definition of intent and two questions indicating the jury was deadlocked on the question involving intent to deceive. Did the trial court commit error in failing to submit instructions to the jury that would have provided important guidance on the issue of intent to deceive? 4. Medicus sought the admission of three applications for medical malpractice insurance submitted by Dr. Todd to other carriers that contained the same type of misrepresentations that were contained in the application he submitted to Medicus. Due to an error by a member of the court staff, the documents were delivered to the jury room as part of the evidence in the case and the jury relied heavily on those non-admitted documents in reaching its verdict. Did the trial court commit error in (1) refusing to admit the documents into evidence or (2) in refusing to grant a mistrial in the face of proof that the jury s verdict was based in large part on documents the court had refused to admit into evidence? 3
STATEMENT OF FACTS Medicus is an insurance company that was established in 2006 to provide medical malpractice insurance to doctors in several states. RR 3:14-17. Medicus concentrates its efforts on those doctors who present a very low risk of being sued for malpractice in order to keep premiums low. RR 3:15-16. That is a recognized market in the area of medical malpractice insurance. RR 20001. Less than one percent of the doctors Medicus insures has a history of more than five malpractice claims. RR 3:20. Todd is a neurosurgeon who practices in Arlington, Texas. RR 4:100. Since 1988, he has used Larry Zimmer, an independent insurance agent, to assist him in obtaining medical malpractice coverage. RR 4:101-02. Todd relies on Zimmer to get him the best possible coverage at the best possible price and it is Todd s understanding that Larry Zimmer is acting in [Todd s] best interest whenever he is dealing with obtaining insurance coverage. RR 4:102. In 2006, Todd, acting through Zimmer, sought insurance coverage from Medicus. RR 4:105. In support of the request for coverage, Todd submitted a credentialing application which indicated that Todd had experienced four malpractice claims in the previous years and that Todd had never been the subject of an investigation by state licensing authorities. RR 3:25, 4:105; Pl. Ex. 3. Based on the credentialing application showing only five prior malpractice claims Medicus issued Policy Number TX580000034.001-1 to Todd, which was in effect from November 16, 2007 through November 16, 2007. Pl. Ex. 14. 4
In early 2007, Todd completed an application form for the coverage that had been issued to him. Pl. Ex. 13. Todd returned the application in February 2007. Id. In response to a question asking about Todd s malpractice history for the last five years, Todd identified only five malpractice claims that had been asserted against him, all of which he indicated were closed. Id. at 15. Todd s policy came up for renewal in 2007. In order to obtain renewal coverage, Todd submitted a new application that asked about his entire malpractice history. Pl. Ex. 7. The form was initially prepared by Medicus based on past information obtained from Todd, was delivered by Medicus to Zimmer, who in turn delivered it to Todd with instructions to review the form, make any corrections, sign the form, and return it to Zimmer so he could forward it to Medicus. RR :220-21. Dr. Todd reviewed and signed the application and reported that he had only been the subject of five previous malpractice claims. Pl. Ex. 7 ay 15, 18. After renewal, Todd was named as a defendant in two more malpractice suits, known as the McKinney and Boyer suits. RR 3:41. Medicus provided a defense for Todd in those suits and Medicus also paid $200,000, the per-occurrence limit under the policy, to settle the McKinney suit. RR 3:42, 48. Because of those additional claims, when Todd s policy was up for renewal again, there was an increase in his malpractice premium. RR 3:133. In October of 2008, the attorney representing Todd in the McKinney suit forwarded a letter she had received from opposing counsel. The letter stated that Todd 5
is no stranger to malpractice cases. He has been a party to 15. Dr. Todd is no stranger to Texas State Board Investigations. He has had two. Pl. Ex. 17. Prior to receiving that letter, Medicus had no knowledge of the true extent of Todd s malpractice history and relied upon the information provided by Dr. Todd in deciding to issue malpractice coverage to him. RR 3:46. Eighty-eight days after the letter was sent to Dr. Todd s defense counsel, Medicus informed Todd by certified mail that based upon material misrepresentations in the application Todd had made to Medicus Medicus Insurance Company refuses to be bound by the policy. P. Ex. 18. Upon further investigation, Medicus learned that Todd had at least twelve previous malpractice claims he had not reported to Medicus. See Pl. Ex. 10, 20-31, 54. To properly underwrite a medical malpractice policy, it is vital that the doctor insured provide the insurance company with an accurate history of malpractice claims against the doctor. RR 3: 191-93. Even Todd testified that an accurate claims history is important and something that malpractice carriers rely on in deciding whether to insure a particular doctor. RR 4:140. In underwriting a medical malpractice policy, it is important that the insurer be informed about all malpractice claims against the doctor, not just those that resulted in a settlement or judgment, because of the additional risks inherent in insuring a doctor who is sued frequently. RR 3:192-93. Because Medicus focuses on low-risk physicians in order to keep premiums down, RR 3:15-16, Medicus writes almost no policies for doctors who have more than five prior malpractice claims. RR 3:20, 3:183. At the time of trial, Medicus had never 6
written a policy for a doctor with more than ten malpractice claims. RR 3:23-24. A doctor with between ten and fifteen prior malpractice claims would not be issued malpractice coverage by Medicus. RR 3:54. The underwriting guidelines followed by Medicus are reasonable in light of the market they seek to serve and the practices in the medical malpractice insurance market. RR 3:208-09; RR 4:21. Medicus would not have issued any policy to Todd if he had been honest and disclosed his entire malpractice history. RR 3:53. Todd admits that he knows that an accurate malpractice history is important to an insurer who is considering issuing a malpractice policy and that he, as the applicant, is responsible for insuring the accuracy of the information provided to the insurance company. RR 4:138, 140. Both Todd and Zimmer admit that the application submitted by Todd to Medicus was inaccurate and incomplete. RR 4:110, 139, 161, 248. Medicus brought this suit seeking a declaration that it was not bound by the policy issued to Todd because of the misrepresentations in his policy application. CR 8. In its live pleading at trial, Medicus asserted that it was entitled to be relieved of any obligation under the policy both because of the common law basis for voiding a policy as well as the statutory basis for voiding a policy provided in 705.004 of the Texas Insurance Code. CR 75-77. During trial, the trial court refused to allow the introduction of three applications that Todd had submitted to other insurance companies in which he had also failed to disclose the majority of his malpractice history. Pl. Ex. 11A, 51, 52: RR 3:62, 4:252-60; RR 3:60-65; RR 4:71-93. 7
At the close of the evidence, Medicus submitted a proposed question on its request for a declaration that the policy issued to Todd was void under 705.004. Pl. Ex. 57. Medicus also submitted proposed instructions that would have provided guidance to the jury on the issue of intent to deceive under the common law elements of misrepresentation and the role of Zimmer in the relationship between Medicus and Todd. Pl. Ex. 56, 58, 59, 60. The trial court refused the requested question on 705.004 and also refused the instructions requested by Medicus. RR 5:57-61.. While the jury was deliberating, it sent out four questions to the court. First, the jury asked for a legal definition of intent. RR vol. X. 1 The court declined to provide the definition requested by the jury. Id. Second, the jury asked for a copy of a deposition that was read in part during trial, and the court instructed the jury that it could not do so. Id. The third note informed the court that the jury was unable to reach a decision on the first question in the charge (which set forth the common law elements for voiding an insurance policy due to misrepresentation): We have been deliberating since 13:30 p.m. on 3-31-11. Our vote on Question #1 is 7-5 and remains at 7-5 on 4-1-11 at 10:05 a.m. We can not get pass [sic] a required verdict in either direction on Question #1. We are deadlocked. Id. The court s response was Thank you for your update. You have all the law and the evidence. Please continue with your deliberations. Id. 1 Each of the questions asked by the jury, and the trial court s response to each question, is found at the end of Volume X of the Reporter s Record, but are not paginated. Copies of the questions and answers are found in App. 5 to this Brief. 8
The jury s final note came later that same day when the jury asked the trial court to instruct us on the procedure providing we are unable to reach a verdict? Id. The trial court responded by providing the jury with an Allen Charge. 2 Id. The jury later returned a 10-2 verdict in favor of Todd. RR 6: 7-8. After the jury returned its verdict, but before the entry of judgment, Todd submitted affidavits from two jurors to the trial court. CR 198-201. The substantive portions of both affidavits were identical and stated: 3. Amongst the Exhibits submitted to us were applications for physician professional liability insurance from Advocate MD dated October 20, 2006 (Plaintiff s Exhibit 11A), American Physicians Insurance Exchange dated October 18, 2001 (Plaintiff s Exhibit 51), and American Physicians Insurance Exchange dated March 31, 2009 (Plaintiff s Exhibit 52).... 4. During our deliberations, we reviewed the above-mentioned applications and extensively discussed the information contained in said application in relation to the elements of misrepresentation and they were an integral part of the jury deliberations. Based on the uncontroverted evidence that the jury had extensively discussed three documents that the trial court had specifically excluded from the evidence submitted to the jury, and that those three documents were an integral part of the jury deliberations, Medicus moved for a mistrial and a new trial because of the jury s misconduct in considering matters outside the record. CR 188, 212. The trial court acknowledged that the verdict was based on an error, and agreed that the exhibits should not have gone to the jury without being subject to explanation through testimony and 2 An Allen Charge refers to an instruction from the court that a jury that has says it is deadlocked keep deliberating in hopes of avoiding the need for a mistrial. The name derives from the decision in Allen v. United States, 164 U.S. 492, 17 S.Ct. 154, 41 L.Ed. 528 (1896). 9
argument by counsel, RR 7:22-24, 28-29, 30-31, 34, but the court denied both the prejudgment motion for mistrial and the postjudgment motion for new trial filed by Medicus. RR 7:50, CR 223. The trial court originally entered a Final Judgment on May 20, 2011, CR 210, and before the court s plenary power expired, the trial court entered a First Amended Final Judgment on July 18, 2011. CR 232. SUMMARY OF THE ARGUMENT Medicus brought this action seeking a declaration that a medical malpractice policy issued to Todd was void because Todd only disclosed five out of seventeen prior malpractice claims against him. Medicus sought to void the policy under both the common law action for misrepresentation and the statutory remedy provided by Tex. Ins. Code 705.004 On its statutory claim, Medicus introduced uncontroverted proof on each element in the statute (1) the policy had issue had the requisite language to bring it within the statute; (2) Todd made misrepresentations in his application; (3) the misrepresentations were material because Medicus would not have issued the policy if it had known the true facts of Todd s prior malpractice experience; (4) Todd s failure to disclose a large number of malpractice claims directly contributed to Medicus damages; and (5) Medicus gave notice to Todd that it did not intend to be bound by the policy within the time required by the statute. The trial court erred in not granting Medicus s motion for 10
directed verdict on its claim for declaratory relief under 705.004. The trial court erred in failing to submit a controlling question on the statutory issue. Alternatively, if the elements of 705.004 were not conclusively established, Medicus pled that ground for relief and offered evidence in support of the elements required to void a policy under the statute. If Medicus was not entitled to a directed verdict on that issue, it was entitled to a jury submission on 705.004. Medicus submitted a question that tracked the language of the statute, but the trial court refused a request by Medicus to submit the question to the jury. The trial court erred in failing to submit a controlling question on the statutory issue. The trial court submitted a jury question on the common law ground for voiding a policy based on misrepresentations in the application that included the requirement that Todd had an intent to deceive. Before the court read the charge to the jury, Medicus submitted three instructions that would have provided important assistance to the jury in determining whether, under the particular circumstances and facts of this case, Todd had an intent to deceive Medicus. The trial court refused all three instructions. During its deliberations, the jury first sent out a note asking for the definition of intent. The court declined to provide a definition. Later, the jury sent out two notes saying it was deadlocked, one of which expressly stated that the deadlock was 7-5 on the question that included the intent to deceive issue. After the second deadlock note, the court presented an Allen Charge to the jury, and the jury subsequently returned a 10-2 verdict in favor of Todd. Because of the confusion on the question of intent to deceive, the closely- 11
contested nature of the issue, and the unique facts of this case; the trial court erred in not submitting the instructions requested by Medicus on the issue of Todd s intent to deceive. One of the main evidentiary issues at trial was a repeated effort by Medicus to introduce applications Todd made to other malpractice insurers in which Todd also significantly underreported his malpractice history. This evidence was offered to rebut a suggestion by Todd that his failure to report his complete history of malpractice claims to Medicus was inadvertent by showing that Todd repeatedly hid the large number of malpractice claims against him from prospective insurers. The trial court suggested that the documents could just as easily show that Todd was always sloppy in his applications and refused to allow the documents into evidence. Medicus was therefore deprived of the opportunity to explain the importance of the documents to the jury and how the documents would support an inference of intent to deceive favorable to Medicus. Due to an error by the court staff, the three documents that were not admitted into evidence were sent to the jury room. Medicus established that the three documents were extensively discussed and were an integral part of the jury deliberations. Although the district court acknowledged that this was error, the court denied a motion for mistrial and a motion for new trial based on the jury s conduct in relying heavily on information not admitted into the evidence. The jury s consideration of outside influences deprived Medicus of a fair trial. 12
Medicus asks that the judgment of the trial court be reversed and judgment be rendered in favor of Medicus or, alternatively, that the judgment be reversed and the case be remanded for further proceedings. ARGUMENT 1. Standard of Review a. Denial of motion for directed verdict A directed verdict is proper when the evidence conclusively establishes the right of the movant to judgment. Kupchynsky v. Nardiello, 230 S.W.3d 685, 697 (Tex. App. - Dallas 2007, pet. denied), citing Prudential Ins. Co. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex.2000). In reviewing the denial of a directed verdict, a court must consider all the evidence in the light most favorable to the nonmovant, and disregard all evidence to the contrary. Collora v. Navarro, 574 S.W.2d 65, 68 (Tex.1978). Every reasonable inference is resolved in favor of the nonmovant. Id. If there is any conflicting evidence of probative value on any theory of recovery, the issue must go to the jury. White v. Southwestern Bell Tel. Co., 651 S.W.2d 260, 262 (Tex.1982). b. Submission of jury question A party is entitled to a jury question if the pleadings and evidence raise an issue on a claim or defense. Tex. R. Civ. P. 278. A trial court s decision to refuse a particular jury question is reviewed under an abuse of discretion standard. Shupe v. Lingafelter, 192 S.W.3d 577, 579 (Tex.2006); See La.-Pac. Corp. v. Knighten, 976 S.W.2d 674, 676 (Tex.1998). 13
c. Failure to submit jury instructions A trial court's decision to refuse a particular jury instruction is reviewed under an abuse of discretion standard. Shupe v. Lingafelter, 192 S.W.3d 577, 579 (Tex. 2006). When a trial court refuses to submit a requested instruction on an issue raised by the pleadings and evidence, the question on appeal is whether the request was reasonably necessary to enable the jury to render a proper verdict. Tex. Workers' Comp. Ins. Fund v. Mandlbauer, 34 S.W.3d 909, 912 (Tex. 2000). d. Denial of motion for mistrial and motion for new trial Both a trial court s ruling on a motion for mistrial and its ruling on a motion for new trial are reviewed for abuse of discretion. Champion Int'l Corp. v. Twelfth Court of Appeals, 762 S.W.2d 898, 899 (Tex.1988) (orig. proc.) (motion for new trial); Lopez v. La Madeleine of Tex., Inc., 200 S.W.3d 854, 860 (Tex. App. - Dallas 2006, no pet.) (mistrial); Till v. Thomas, 10 S.W.3d 730, 734 (Tex. App. - Houston [1st Dist.] 1999, no pet.) (mistrial). To warrant a new trial for jury misconduct, the movant must establish (1) that the misconduct occurred, (2) it was material, and (3) probably caused injury. Golden Eagle Archery, Inc. v. Jackson, 24 S.W.3d 362, 372 (Tex.2000). e. Abuse of discretion A trial court abuses its discretion if it acts in an arbitrary or unreasonable manner without reference to any guiding rules or principles. Walker v. Gutierrez, 111 S.W.3d 56, 62 (Tex.2003); Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex.1998); Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241 42 (Tex.1985). A trial court has no 14
discretion in determining what the law is or applying the law to the facts. Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992). Thus, a trial court abuses its discretion if it misapplies or misinterprets the law. Walker, 827 S.W.2d at 840. 2. The Trial Court Erred in Not Granting a Directed Verdict that the Policy Issued to Dr. Todd was Void under Tex. Ins. Code. 705.004 a. The Insurance Code creates a ground for voiding a policy based on misrepresentations in the application that does not exist at common law Medicus sought to void the policy issued to Dr. Todd on two separate grounds: the common law basis for voiding a policy and the statutory basis for voiding a policy provided by Tex. Ins. Code 705.003. CR 11-12, 76-77. Under the common law, there are five elements that must be pled and proved before the insurer may avoid a policy because of the misrepresentation of the insured: (1) the making of the representation; (2) the falsity of the representation; (3) reliance thereon by the insurer; (4) the intent to deceive on the part of the insured in making same; and (5) the materiality of the representation. Mayes v. Mass. Mut. Life Ins. Co., 608 S.W.2d 612, 616-17 (Tex. 1980); Republic Bankers Life Ins. Co. v. Hoffman, 483 S.W.2d 268, 269 (Tex. Civ. App. - Dallas 1972, no writ). policy: Section 705.004 of the Insurance Code provides an additional basis for voiding a 705.004. POLICY PROVISION: MISREPRESENTATION IN POLICY APPLICATION (a) An insurance policy provision that states that false statements made in the application for the policy or in the policy make the policy void or voidable: 15
(1) has no effect; and (2) is not a defense in a suit brought on the policy. (b) Subsection (a) does not apply if it is shown at trial that the matter misrepresented: (1) was material to the risk; or (2) contributed to the contingency or event on which the policy became due and payable. (c) It is a question of fact whether a misrepresentation made in the application for the policy or in the policy itself was material to the risk or contributed to the contingency or event on which the policy became due and payable. The statutory ground for invalidating an insurance policy under Chapter 705 differs from the common law basis in three respects. First, 705.004 requires that the policy contain a provision that allows for the invalidation of the policy based on a misrepresentation by the insured in the application. Second, the statute does not require that the insurer show that the insured had an intent to deceive in making the application. Third, Tex. Ins. Code 705.005 requires that the insurer give notice to the insured that it does not intend to be bound by the policy within ninety days after learning of the misrepresentation. Because each theory of voiding an insurance policy contains different elements than the other, the two theories supplement each other and provide alternative methods for voiding a policy based on misrepresentations in the application. b. Medicus established its right to have the policy voided under 705.004 16
By pleading both common law and 705.004, Medicus was entitled to have the policy issued to Todd voided if Medicus prevailed on either theory. The evidence at trial conclusively established each element required by 705.004 to void an insurance policy: Required Policy Language: 705.004 applies when an insurance policy contains a provision that states that false statements made in the application for the policy or in the policy make the policy void or voidable. Todd has never disputed that the Medicus Policy contains this language. Misrepresentation: The evidence is undisputed that Todd only disclosed four prior malpractice claims in his initial submission to Medicus and only disclosed five prior malpractice claims in his formal application. Pl. Ex. 3, 7, 13. It is similarly undisputed that Todd had experienced at least twelve additional malpractice claims and two licensing investigations that he did not disclose to Medicus. Pl. Ex. 17; 10, 20-31, 54. This evidence conclusively establishes that the application submitted by Todd contained misrepresentations. Materiality: Medicus focuses its business on physicians who present low risk of malpractice claims in order to provide insurance at a lower premium. RR 3: 15-16. Medicus has issued very few policies to doctors with more than five malpractice claims in the past and no policies to doctors with more than ten malpractice claims in the past. RR 3:20, 23-24, 54. Medicus would not have issued a policy to Todd if he had honestly disclosed his full malpractice history. RR 3:53. The evidence is conclusive on this point. 17
Contribution to the loss: There is a direct connection between the misrepresentations made by Todd the failure to disclose a substantial number of malpractice claims made against him and the loss suffered by Medicus the cost of defending and settling additional malpractice claims filed against Todd. Todd s unusually high propensity for being the subject of malpractice claims not only contributed to the loss; it is uncontroverted that it was the direct cause of the loss suffered by Medicus. Notice to the insured: Section 705.004 of the Texas Insurance Code requires that an insurer who seeks to void a policy based upon misrepresentations by the insured in the application must give notice to the insured that the insurer does not intend to be bound by the policy before the 91st day after the date the defendant discovered the falsity of the representation. Medicus learned that Todd had grossly misrepresented his malpractice history no earlier than October 18, 2008, RR 3:46, and Medicus gave notice to Todd that Medicus Insurance Company refuses to be bound by the policy on January 14, 2009. P. Ex. 18. That is a period of eighty-eight days, within the ninety-one days provided by the statute. Section 705.004 of the Texas Insurance Code provides a clear and straightforward method for voiding an insurance policy when the insured made misrepresentations in the application. The evidence at trial conclusively established each element set forth in the statute. Because Medicus pled 705.004 in its pleadings and conclusively established each element of 705.004, Medicus was entitled to a directed verdict on its statutory 18
claim. The trial court erred in denying the motion for directed verdict made by Medicus at the close of all of the evidence. 3. Alternatively, the Trial Court Erred in Not Submitting a Jury Question on 705.004 As discussed in the previous section, Medicus believes that the evidence before the trial court conclusively established each element for voiding an insurance policy under Tex. Ins. Code 705.004. Even if the evidence was not conclusive, however, there was sufficient evidence on each element that the trial court should have submitted the issue to the jury. The right to have the policy issued to Dr. Todd be declared void under 705.004 was pled by Medicus. CR 75-77. Medicus provided evidence in support of each element of 705.004. If Medicus did not conclusively establish its right to relief under 705.004, then Medicus was entitled to have the issue submitted to the jury. Medicus submitted a proposed jury question on 705.004 which was refused by the trial court. Pl. Ex. 57; RR 5:57-58. A party is entitled to a jury question, instruction, or definition that is raised by the pleadings and evidence. Tex. R. Civ. P. 278; Union Pac. R.R. Co. v. Williams, 85 S.W.3d 162, 166 (Tex.2002); Park N. Serv. Ctr., L.P. v. Applied Circuit Tech., Inc., 338 S.W.3d 719, 721 (Tex. App. - Dallas 2011, no pet.); Insurance Co. of State of Pennsylvania v. Muro, 295 S.W.3d 524, 530 (Tex. App Dallas 2009), rev d on other grounds, 347 S.W.3d 268 (Tex. 2011). A trial court may refuse to submit an issue only if no evidence exists to warrant its submission. Elbaor v. Smith, 845 S.W.2d 240, 243 (Tex.1992). The trial court s refusal to submit the 705.004 question submitted by Medicus was 19
clearly error. The application of 705.004 was raised by the pleadings, and there was substantial (if not conclusive) evidence on each element of the statute. Medicus was therefore entitled to the submission of its claim under 705.004. The refusal to submit a jury question is reversible error if the submission of the question was reasonably necessary to enable the jury to render a proper verdict. Texas Workers Comp. Ins. Fund v. Mandlbauer, 34 S.W.3d 909, 912 (Tex. 2000). Under the charge submitted by the trial court, the jury was deprived of any opportunity to rule on the question of whether Medicus had established, by a preponderance of the evidence, the necessary elements of 705.004. Instead, the only basis submitted to the jury which would entitle Medicus to the relief it sought was under the common law theory of misrepresentation, which requires proof of intent to deceive by the insured. Proof to deceive is not an element of 705.004. By failing to submit the statutory claim for voiding the policy, the trial court committed reversible error by denying Medicus the right to have its issues resolved by the jury. 4. The Trial Court Erred in Failing to Submit Jury Instructions that Would Have Provided Essential Guidance to the Jury on the issue of Intent to Deceive The jury in this case struggled with the charge. First, it requested a definition of intent which was used in the question on the common law standard for voiding a policy due to misrepresentations in the application. RR vol. X; App. 5. After the court declined to provide a definition of intent to the jury, the jury twice sent out notes indicating it was deadlocked, even indicating that the vote was deadlocked at 7-5. Id. It was only after the trial court submitted an Allen Charge that the jury returned a verdict. 20
The intent issue was complicated by the evidence offered by Todd on whether he had an intent to deceive. Not surprisingly, Todd did not directly admit that he had intended to deceive Medicus. Instead, his story was that he relied on Zimmer, his longtime agent who was acting in [Todd s] best interest whenever he is dealing with obtaining insurance coverage RR 4:102, to submit Todd s information, including his history of medical malpractice claims, to Medicus. RR 4:101-02. Todd s proffered explanation for failing to provide true and accurate information was that Zimmer did not realize that the application being submitted to Medicus asked for all prior malpractice claims against Todd, not just claims in the last five years. RR 4-28. Prior to the submission of the court s charge to the jury, Medicus had requested three jury instructions that would have gone a long way toward avoiding the jury s struggle with the question of intent to deceive. Requested Instruction Number 6 (Pl. Ex. 60) would have specifically instructed the jury that an intent to deceive did not have to be proven by direct evidence but could be proven through circumstantial evidence: PLAINTIFF S REQUESTED INSTRUCTION NUMBER 6 An intent to deceive may be proven by circumstantial evidence. Requested instruction Number 5 (Pl. Ex. 59) would have instructed the jury that knowingly making a false statement with the intent to cause another to act is proof of intent to deceive: PLAINTIFF S REQUESTED INSTRUCTION NUMBER 5 The utterance of a known false statement, made with intent to induce action, is equivalent to an intent to deceive. 21
Requested Instruction Number 3 (Pl. Ex. 58) would have specifically addressed the situation an insured s knowledge of misstatements in an application for insurance: REQUESTED INSTRUCTION NUMBER 3 You are instructed that where an application for insurance is attached to and made a part of the policy and is accepted and ratified by the insured, the insured is conclusively presumed to have knowledge of its contents and to have ratified any false statements therein. Each of the requested instructions is a correct statement of Texas law and was supported by precedent. See Pl. Ex. 58-60. Each of the requested instructions was supported by the evidence and was directly related to the evidence placed before the jury on whether Todd had intended to deceive Medicus. Each of the requested instructions would have assisted the jury, but the trial court refused each of the instructions. RR 5:57-61. When a trial court refuses to submit a requested instruction, the question on appeal is whether the request was reasonably necessary to enable the jury to render a proper verdict. Texas Workers Comp. Ins. Fund v. Mandlbauer, 34 S.W.3d 909, 912 (Tex. 2001). Given the specific facts of this case the concession by Todd and Zimmer that the application submitted to Medicus contained misrepresentations, Todd s attempt to place blame on Zimmer despite Todd s recognition that he was responsible for the accuracy of the information in the application, and Todd s extensive, yet largely undisclosed, history of malpractice claims - the instructions requested by Medicus were reasonably necessary to assist the jury in answering the court s charge. In the absence of 22
these instructions, the result was jury confusion about the definition of intent, a jury so uncertain that it twice told the court that the jury was deadlocked, and a verdict that was obtained only after the trial court submitted an Allen Charge to the jury. Medicus recognizes that a trial court has substantial discretion in submitting jury instructions. See, e.g. European Crossroads' Shopping Ctr., Ltd. v. Criswell, 910 S.W.2d 45, 54 (Tex. App. - Dallas 1995, writ denied). However, the discretion afforded during the submission of instructions is not absolute. See Tex.R. Civ. P. 277. According to rule 277, a trial court must submit instructions as shall be proper to enable the jury to render a verdict. Id. Bryan v. Watumull, 230 S.W.3d 503, 508 (Tex. App. - Dallas 2007, pet. denied). The facts of this case are unique. In crafting the jury charge, the court should have examined the facts to determine what was proper to enable the jury to render a verdict. The multiple notes sent by the jury during its deliberations leaves no doubt that the jury had difficulty with the absence of any definition or instructions that would assist the jury in answering Question No. 1, which included the issue of whether Todd had an intent to deceive Medicus. By failing to submit the requested instructions submitted by Medicus, which properly stated the law and which were relevant to the particular facts of this case, the trial court abused its discretion. The judgment should therefore be reversed. In a closely-contested case like the present one, where the jury expressed uncertainty over the definition of intent to deceive and twice expressed to the court that it was unable to return a verdict, the failure of the trial court to submit any one of these 23
requested instructions is sufficient to constitute reversible error. In the aggregate, the failure to submit these instructions demands a new trial. 5. The Trial Should Have Admitted Evidence Showing Dr. Todd s History of Failing to Disclose His True Malpractice Experience or The Court Should Have Granted a New Trial When the Jury Was Given Non-Admitted Evidence During its Deliberations During the trial of this case, which was hotly contested by both parties, one of the key evidentiary issues were repeated requests by Medicus to be allowed to put into evidence three applications for insurance Todd submitted (or were submitted on his behalf) to other malpractice insurers (Plaintiff s Exhibits 11A, 51, and 52). Like the applications submitted to Medicus, these additional applications also do not provide full and accurate information concerning Dr. Todd s prior malpractice claim history. If those documents had been admitted into evidence and put in proper context through crossexamination of Todd and Zimmer, that evidence would have provided compelling evidence that Todd was never honest about his malpractice history when seeking to obtain malpractice coverage. From that fact, the jury could reasonably infer that Todd had an intent to deceive Medicus in order to induce Medicus to issue a malpractice policy to Todd. Once the exhibits were in evidence, Medicus could cross-examine Todd and Zimmer on their long-time practice of failing to disclose relevant information to insurers, Medicus would have provided the jurors an additional basis from which they could have found the intent to deceive required by the Court s jury charge. Because the exhibits were excluded, Medicus was denied the opportunity to examine witnesses about what relevance and meaning the exhibits had. 24
After the judgment was signed by the trial court, Todd placed into the record affidavits from two jurors, Reginald Alexander and Meredith Camp. Other than personal information describing the affiants contained in the first paragraph, the remaining paragraphs of the affidavits are identical. Paragraphs 3 and 4 of each affidavit state: 3. Amongst the Exhibits submitted to us were applications for physician professional liability insurance from Advocate MD dated October 20, 2006 (Plaintiff s Exhibit 11A), American Physicians Insurance Exchange dated October 18, 2001 (Plaintiff s Exhibit 51), and American Physicians Insurance Exchange dated March 31, 2009 (Plaintiff s Exhibit 52).... 4. During our deliberations, we reviewed the above-mentioned applications and extensively discussed the information contained in said application in relation to the elements of misrepresentation and they were an integral part of the jury deliberations. By Todd s own admissions, therefore, documents that the trial court ruled were not relevant and not admissible were extensively discussed by the jury and were an integral part of the jury deliberations. This establishes beyond any doubt that the jury verdict is improper and cannot be used as the basis for any judgment. Medicus moved for a mistrial and subsequently for a new trial based on the jury s consideration of matters that were not admitted into evidence. 3 CR 188, 212. The trial court recognized that it was error for the jury to have and rely those documents during its deliberations. RR 7:30-31, 34.. Despite its discomfort with allowing the jury to rely on 3 Because Medicus initially raised the issue before the entry of judgment, it was originally brought in a motion for mistrial rather than a motion for new trial. See In re The Estate of Robinson, 140 S.W.3d 782, 789 (Tex. App. Corpus Christi-Edinburg 2004); Nash v. Fisher, 325 S.W.2d 187, 190 (Tex. Civ. App. Beaumont 1959, no writ); Cortimeglia v. Herron, 281 S.W. 305, 306 (Tex. Civ. App. Waco 1926, writ ref d). 25
documents that had been specifically excluded from evidence, the trial court overruled both motions filed by Medicus. RR 7:50; CR 223. A jury verdict should be set aside if it is the result of jury misconduct. Tex. R. Civ. P. 327. See Golden Eagle Archery, Inc. v. Jackson, 24 S.W.3d 362, 366 (Tex.2000). Jury misconduct occurs when the jury s deliberations are influenced by matters not originating with the jury, which is considered an outside influence. Golden Eagle, 24 S.W.3d at 369; Tex. R. Civ. P. 327(b). The improper consideration of Plaintiff s Exhibits 11A, 51, and 52 by the jury was not the result of any action by one or more jurors; instead, the court reporter inadvertently included those three excluded exhibits with the admitted exhibits when she provided the exhibits to the jury. 4 There is absolutely no dispute that Plaintiff s Exhibits 11A, 51, and 52 should not have been before the jury during its deliberations. There is similarly no dispute that the jury extensively discussed the documents and that those three excluded exhibits were an integral part of the jury deliberations. 5 Jury misconduct occurred, and the only issue (and the issue that the trial court wrongly decided) is whether the error was harmful. See Tex. R. App. P. 44(a). Any argument that the jury s consideration of Plaintiff s Exhibits 11A, 51, and 52 was harmless is false and misleading for two reasons. First, the Court excluded those 4 Medicus uses the term jury misconduct only because that is the term used in Rule 327. Medicus does not believe that there was any conscious wrongdoing by any juror or by any member of the court staff. The issue, of course, is not whether a juror intended to consider improper matters, but whether there were impermissible outside influences that impacted the jury s decision. 5 Neither party objected to the trial court s consideration under Tex. R. Evid. 606(b). 26
documents and they should have not been in the jury room during jury deliberations. Based on the two juror affidavits, the documents the Court held were not relevant and not admissible formed an integral part of the jury s deliberations. The improper submission of those exhibits to the jury for its deliberations is not cured by an argument that any error in the exclusion of the documents is harmless. Second, the jury was presented with those documents without any testimony or argument to put the documents in proper context and explain their significance. In he abstract, the documents were subject to at least two interpretations: that repeated applications for insurance that omitted the vast majority of Dr. Todd s prior malpractice history only showed that Dr. Todd was sloppy but not dishonest or that those same applications showed a pattern of omission by Dr. Todd that would support an inference of Dr. Todd s intent to deceive Medicus (and other insurers). It is also possible that the jury, without any explanation of the documents through testimony and cross-examination, could have improperly concluded that since the other applications also failed to disclose Todd s full malpractice history, there was nothing irregular or improper in the misrepresentations in the application Todd submitted to Medicus. As is often the case with documentary evidence, the real import of Plaintiff s Exhibits 11A, 51, and 52 comes not from the face of the documents, but from the purposes behind the documents and the inferences that can be drawn from them. In order for the jury to reach fair conclusions about the documents, the documents must be given context, which includes examining the person or persons who prepared the documents as 27
well as the person or persons who signed the documents, so that the jury can test the truthfulness and reliability of what the documents say. Without having testimony from witnesses, the documents may present a false or misleading set of circumstances to the jury, or allow the jury to draw inferences from the documents that would not be supportable if the facts surrounding the documents were known to the jurors. Because of the abstract nature of these documents in the absence of testimony about them, and because the documents were clearly susceptible to more than one interpretation, allowing the documents to be extensively discussed by the jury raises a rather strong suggestion that Medicus was prejudiced at least as much, and perhaps more, by the jury s protracted consideration of the documents than Medicus would have been from the exclusion of the documents itself. If the documents were such an integral part of the jury s deliberations that the documents had to be extensively discussed by the jury, then it is clear that the documents meant something important to the jury, something that was far beyond establishing a date or proving a number. The jurors were forced with trying to understand why those documents were before them and what they meant, without any explanatory testimony from any source. The issue of whether Todd intended to deceive Medicus by failing to disclose his full history of medical malpractice claims in his application submitted to Medicus was vigorously contested and, based upon the charge actually given to the jury, was the key fact issue for the jury to resolve. The jury was uncertain on the definition of intent, and the trial court declined to assist the jury by providing a definition. In a closely contested 28
case, in which the jury expressed its confusion and twice told the court the jury was unable to reach a verdict, the jury s consideration of three unexplained exhibits cannot be sloughed off as harmless error. Based upon the record of this case, the jury s misconduct in relying upon three documents that were not admitted into evidence but were extensively discussed by the jury and that formed an integral part of the jury deliberations is reversible error. CONCLUSION AND PRAYER For the reasons set forth above, Appellant Medicus Insurance Company requests that: (1) The trial court s judgment be reversed and judgment rendered that the insurance policy issued by Medicus to Dr. Todd is void under Tex. Ins. Code 705.004; or, alternatively (2) The judgment be reversed and the case remanded for further proceedings; and (3) Medicus be granted such other relief to which it is entitled. Respectfully submitted, /s/ Kevin R. Risley Kevin F. Risley State Bar No. 16941200 Brian S. Martin State Bar No.13055350 Jamie Carsey State Bar No. 24045620 THOMPSON, COE, COUSINS & IRONS, L.L.P. One Riverway, Suite 1600 Houston, Texas 77056 29
Telephone: 713.403.8295 Facsimile: 713.403.8299 COUNSEL FOR APPELLANT CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of this Appellant s Brief was sent to Michael Scott Thomas and Michael J. Todd, counsel for Appellee Dr. Frederick Todd, by first class mail, return receipt requested, on February 9, 2012. /s/ Kevin R. Risley Kevin F. Risley 30
INDEX OF APPENDICES First Amended Final Judgment signed July 18, 2011 (CR 232) Excerpts from the applications submitted by Todd to Medicus (P1. Exo 7, 13) Plaintiff s Requested Jury Question No. 1 (Exo 57) Plaintiff s Requested Jury Instructions 3, 5, and 6 (P1. Ex. 58, 59, 60) o o Questions asked by jury during deliberations and court answers (RR vol. Ix) Excerpts from Plo Ex. 11A, 51, and 52 o Tex. Ins. Code 705.004 and 705.005
APPENDIX 1
N0o09O0~9~3 D /B I A ARLI~IGTO~ NEUROLOGICAL 8= SPINE Defendant:. 134TH JUDICIAL DISTRICT F~ERST. AMENDED FZNAL JUDGMENT At the trial on this cause, all parties appeared through their attorneys of record and announced that they were ready for trial. A jury was duly accepted, impaneled and sworn. The jury returned its verdict after hearing the evidence, argument, and the Court s instructions, and after receiving any special instructions and issues. Based on the jury s verdict, it is ORDERED, ADJUDGED and DECREED that on the claim of misrepresentation, the jury finds in favor of FREDERICK TODD, II, M.D. D/B/A ARLINGTON NEUROLOGICAL & SPINE ASSOCIATION, Defendant, and against MEDICUS INSURANCE COMPANY, Plaintiff, and that MEDICUS INSURANCE COMPANY take nothing against FREDERICK TODD1 If, M.D. D/B/A ARLINGTON NEUROLOGICAL & SPINE ASSOCIATION; IT IS FURTHER ORDERED, ADJUDGED and DECREED that, FREDERICK TODD, II, M.D. D/B/A ARLINGTON NEUROLOGICAL & SPINE ASSOCIATION, Defendant, recover from MED[CUS INSURANCE COMPANY, Plaintiff, attomey s fees and expenses in the sum of Eighty-Six Thousand Four Hundred Forty-Six and 84/100 Dollars ($86,,s~,6.84), to bear interest at the rate of 5% per annum from the date of this judgment until paid; IT IS FURTHER ORDERED, ADJUDGED and DECREED that FREDERICK TODD, II, M.D. D/BiA ARLINGTON NEUROLOGICAL & SPINE ASSOCIATION, Defendant, recover from MEDICUS INSURANCE COMPANY, Plaintiff, additional attorney s fees in the sum of Thirty Thousand and NO/100 Dollars ($30,000.00) in the event that MEDICUS INSURANCE COMPANY, 232
Plaint~ff, appeals the Final Judgment to a court of appeals, and the court of appeals affirms the judgment in favor of FREDERICK TODD, If, M.D. D/B/A ARLINGTON NEUROLOGICAL & SPINE ASSOCIATION, Defendant ; IS FURTHER ORDERED, ADJUDGED and DECREED that FREDERICK TODD, II, MoDo D/B/A ARLINGTON NEUROLOGICAL & SPINE ASSOCIAT]ON, Defendant, recover from MEDICUS INSURANCE COMPANY, Plaintiff, additional attorney s fees in the sum of Seven Thousand Five Hundred and NO/100 Dollars ($7500.00) in the event that either MEDICUS INSURANCE COMPANY, Plaintiff, or FREDERICK TODD, II, M.Do D/B/A ARLINGTON NEUROLOGICAL & SPINE ASSOCIATION, Defendant, file a petition for review with the Supreme Court of Texas, and the Final Judgment in favor of FREDERICK TODD, II, M.D. D/B/A ARLINGTON NEUROLOGICAL & SPINE ASSOCIATION~ Defendant, is affirmed, either by a judgment of the Supreme Court affirming the trial court s judgment, or by the Supreme Court refusing to hear a petition for review of a court of appeals judgment affirming the trial court s judgment; 1" IS FURTHER ORDERED, ADJUDGED and DECREED that Defendant shall have all writs of execution and other process necessary to enforce this judgment. All costs are hereby taxed against MEDICUS INSURANCE COMPANY, Plaintiff. All relief not expressly granted herein is denied. This judgment finally disposes of all parties and all claims and is appealable SIGNED on the--~_~day of ~/Z~_--~~" / 2011. -2-233
APPROVED AS TO FORM: ~ICHAEL $(~OTT THOMAS State Bar No. 19861200 2626 S. Loop West, Suite 561 Houston, Texas 77054 713) 665-8558 713) 665-S562-Facsimile ATTORNEY FOR DEFEHDAHT FREDERICK TODD~ II~ I~oD. D/B/A ARLINGTON NEUROLOGICAL & SPINE ASSOCIATION -3-234
.Zi,rn.m,.er Frederick 9 Todd 1958 ~ O Other Office Address:,TX 76015 Office Phon.e: 8, (-465:.77,6.4, Office Manager: Tr l~e.oobb Phone: 817-466-7764 or 817-875-8903 ( Backline~ Home Address: 1385 Ceoile Clrole Oedar Hill Home Phone: Dallas g7p--291-9796 75~e4 Ema~! Address: Office@ a.r][nglonne uro-co.m Webs~te: Preferred Nailit)g Add,~os: ~ Home E] Office [3 PO Box N/A NIA O Cheek here it ~ou would like to receive polloy or olhbr limely Informatlo~ ~rom Medlous TE>~,~ APPLtOATION 6090V.6 OOPYFII.GHT ~.OO6 MEDIOUS 8500 8heal O~sek BIw!., Building ~, Sull~ 209 Austin, TX 78757 U~A T 51~L4672800 W I US NS GeM F 877,686,0558 CONFIDENTIAL Medicusfrodd 00154
Zimmer Atlach ~rr~i letter(s) from ~rlor ca[d~f(s), vedfying claims reposed du~tng th~ la~ ten (10) yea~, (In addilion, co~l~te SectiOn XIIL CIBt~ InformB~lon) Have you ever been w}thouq ~ Yes ~ No To your ~owle~ge have yo~ ewe been Insured ~ Yes ~ No Has any ctatm or suit 53r alleged malpractice ever been brought against you, or are you awa~e of circumstances Ihat might reasonably }ea~ Io such a ~ Yes. Q No I1 "Yes," complete a cl~i@ supplement for each claim. Total Number of Clalms; 5 Ol3en f Resen!ed: 0,.. Closed; 5 Brief explanation el 1, Application of.rnethatr~:[a.le qaused ther..m, al.inju_ry.& permqt..dmg: Settle 6,./01 $450,000. 2. U. r~ne ce ssary reed,rr~qed..u.re, s.: 8. Bra.in,dam_age.: Se, ttlf.6/,~3 ~,20.0.,00.0,.. ". " 4, Nerve drag & severe~.a.in. 8/,04..G.iosed NE~..., 5. Tennessee Hgn~, ind,. C.]a.]l n # 00~P_Q..N..o.n-S.u.lLe~] 8./03. $3.,,~13.. C~taim~ Ex.pen~.e..Patd.. T~XAS APPLICATION 6090V.6 MEDIOUS 8,~60 Shoa~ Creek Blvd., B~l~ng 8, Sul s :800 COPYRIGHT ~006 Austin, TX.78757 U~A F 877,686,0558 CONFIDENTIAL MedicusFFodd 00167
WARRANTY These warranties are m4terial ~o ~he ecoeplance of coverage by the Insurer, and are made a pa~ of insurance policy. Furlher, I acknowledge/and agree that any claims resulting from acls committed pdor }o the effective date of coverage, and of which Itwas aware, or should have been aware, are speolflcally excluded from coverage under this policy and any appffcabl~, oolicy written to provide coverage excess of this po~icy. Any binder of coverage~ issued by Medious Insurance Company {Company) as a result o~ this application is contingent upon compliance with applicable Federal/Stale Regulations, Company Underwriting Criteria and Risk Management Inspection Regula~Io ns. J further acknowledge thai, as a condition precedeni~ to my acceptance, a detailed inquiry and investigation of my background, competenceland qualifications may be conducted by the Company, In consideration ot the foregoing, I hereby expressly consent to any such inquiry and Investigation through the use of any means legally available to the aforesaid antilles, and 1 expressly release and dissharge the aforesa[,d entities, their agents, employees_pnd/or representatives trc~m any and all liability which mtght otherwise be Incurred as a result of acts performed i~ connection with any inquiry or investigation as well as in the evaluation el information so received from whatever s~urceo I further expressly authorize all indlvidua~s and entities f,o whom legal inquiry Is made by the above-named entities or their duly authorized eml~leyees, agents, and/or representatives to provide the same with a!l Information and!or documentation within thelr possession or under their control wh;ch peda ns to my background, competence and qualtfleationso Signing this application d~es not bind the Company to complele the insurance. All information requested in this applicalion is oonsiderad ~malerlat and Important. tf the Company agrees to be bound under the terms of this application, your policy ls,~oid il you wtthheld any inf-ormation, mlslead, or a~,tempt to defraud or lie about any matter contained in ~hls ~pp!loet sr!. TEXAS APPUOATION 6090Vo6 -COPYRIGW 20O6 MEDIOUS 8500 Shoal Ot eek Bl ~d,, building,3, Sutle 200 Austin, TX 78757 USA T 5 12 487 2no0 ~WWW.MEDICUSIN,~,OOI4 F BT-/,686.0,~58 t8 CONFIDENTIAL Medicus/To~ld 00170
Zirnmer FRAUD WARNINGS~ General Fr~qq st~lemootl(n~t appiieabte In Ool0rado, Hawaii, Nebraal~a, Ohio. Ok shores, Oregon, Ulah and Vermont) ~y person who ~owingly~and wilh inlenl Io d~[mud any insurance compan~ or ahoiher pe~son ~il~ an appl]callon [or i~u~nce. commlls a [mudulent insu~nc~ acl, wht~ Is a cdme and subjects the person 1o criminal and (NY; subslan~al} civil p~naliies. In lhe Dlstdc[ of Go,umbra, Loulsi~na, Maine, Tennesse~ and VlrgTn]a, Insumn~ bene~ls may also be denied. knowingly pr~ide false, In~mplele, or misreading facts or information to an Insu~nce ~mpany for Ihe purpose or del~uding or altemp~ng Io d~fraud the c~any. Penalties may include ~pdsonmenl, lines, denis] of lnsuran~, and clol de.ages. Any lnsu~nce policyholder or claimant for ~he purpose o[ def~udlng or attesting to def~ud the poh~holder ot ~atmant w~th regard to a ~ettlemen~ or award p~yabl~ from ]~ura~e proceeds shall be ~e~ded to ~e ~torado Division o[ torrance wtlhin the D~parlment ol Regul~lo~ Agencies. N~~]ee lo Hawaii Appllcan}S: For your proteollon, Hawa~ law requires you to b~ info~d ~1 pre~en~mg a fraudulent cl~lm rot p~ymenl less or ~bmlls an app~i~llon or IiI~= a claim containing a false or deceptive slatemenl is gujlly of In~nce [mud, Notice ~o 0~: WARNING; Any person who knowing~ and wilh intent to loj Jre, dekaud or d~e~e any insurer, makes Not[~to U~h Appltcaql~For y~ur prole~lion, Ul~h law requires Ihe [ollo~ng [o be included ~n this application: "A~y pemon who gultly o{ a cdm~ and may be~ub]ecl Io ~nes and ~nfinem~t ~ slate prison," i T he applicant declares Imm~dlele y no~ffy the, aulho~za~ion O~ agreemen " This applicat~on Is not vat TEXAS AF F LICATJON 6090V,6 MEDIC US WWW,~O~CUSlNS.CO~ GOPYRIGFiT AUStin~ TX 76757 USA F a77.6~.0558 CONFIDENTIAL MedicusfTodd 00171
APPU 3AT!ON FOR PHYSIOIA.N / SURGEON MEDICAl PROFESSIONAL LIABILITY [NSURAN(~E
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T 512,,~87,~,00
Y CompanY.,ro~s]y a~!lf~odzo all I ~p#llcb~on,~ ~ho~ ~ny informa~o~, mislead, of ~mpl lu da~raud or )l~ about any mailer
I
APPENDIX 3
gequested QUESTS ON NUMBER Were there one or more misrepresentations in the application submitted by Dr. Todd to Medicus in 2007 that (t) were material to the risk of insaring Dr. Todd and (2) contributed to the issuance of the Medicus Policy-ander which Dr. Todd later sought coverage? Answer Yes or No: GIVEN: REFUSED: MODIFIED: DATE JUDGE PRESIDING SOURCE: Tex. Ins. Code 705.004(b) -6-
APPENDIX 4
REQUESTED INSTRUCTION NLrlV~ER 3 You are instructed that where an applicatior~ for insurance is attached to and made a part of the poticy and is accepted and ratified by the insured, the insured is conclusively presumed to have knowledge of its contents and to have ratified any false statements therein. GIVEN: REFUSED: MODIFIED: DATE JUDGE PRESIDING SOURCE: Washington v. Reliable Life Ins. Co., 581 S.W.2d 153, 160 (Tex. 1979); Odom v. Insurance Co. of Penn., 455 S.W.2d 195, 199 (Tex. 1970). -5-
PLAINTIFF~S REQUESTED. INSTRUCTION NUNIBER 5 The utterance of a known false statement, made with intent to induce action, is equivalent to an intent to deceive. GIVEN: REFUSED: MODIFIED: DATE JUDGE PRESIDING SOURCE: Union Bankers Insurance Company v. Shelton, 889 S.W. 2d 278,282, n.7 (Tex. 1994); Allen v. American NationalInsurance Co., 380 S.W. 2d 604, 608 (Tex. 1964).
PLAINTIFF S. REQUESTED. instruction NUMBER 6 An intent to deceive may be proven by circumstantial evidence. GBZEN: REFUSED: MODIFIED: DATE JUDGE PRESIDING SOURCE: Sharp v. Lincoln American Life Insurance Company, 752 S.W. 2d 673, 676, (Tex. App. - Corpus Christi 1988, writ denied).
APPENDIX 5
CAUSE NEDICUS INSURANCE COMPAN~I Plaintiff(s)~ VSo FREDERICK Do TODD~ Defendant(s). DC-09-01913-G IN THE DISTRICT COURT 134th JUDICIAL DISTRICT DALLAS COUNTY~ TEXAS JURY QUESTION NO.I MEMBERS OF THE JURY: You have asked the following question: Can we have the legal definition of the word intent? RESPONSE: You have all the law and the evidence, Please continue with your deliberations!34 TM CIVIL DISTRICT DALLAS COUNTY, TEXAS
MEDiCUS INSURANCE Plaintlff(s)~ VSo FREDERICK Do TODD~ Defendant(S)o CAUSE DC-Og=OIgI3-G IN THE DISTRICT COURT 13~th JUDICIAL DISTRICT DALLAS COUNTY~ TEXAS JURY QUESTION NO.2 MEMBERS OF THE JURY: You have asked the following question: Can we have a copy of Amy Majdalani s deposition? RESPONSE: With Reference to your request for a copy of the deposition of Amy Majdalani, you are instructed that the law does not permit a general rereading of the testimony of any witness You are instructed that if the jurors disagree as to the statement of any witness, they may, upon applying to the court, have read to them from the court reporter s notes that part of the witness s testimony on the particular point in dispute and no other, Therefore, if you have disagreed upon any point in the testimony, and you will so state to the Court in writing, and point out in writing the point upon which you have disagreed, then the court will have the court reporter read back to you only the testimony on the point in dispute The court reporter will need sufficient time to examine the notes to locate a!l the testimony on the point concerning your inquiry; therefore, the court will request that you be patient and allow sufficient time for this to be done. You have all the law and the evidence. your deliberations. Please continue with 134 TM CIVIL DISTRICT DALLAS COUNTY, TEXAS
CAUSE Dc-og=oIgI3=G VSo Plaintiff(s)g FREDERICK Do TODDf Defendant(s)o IN T~E DISTRICT COURT i3~th JUDICIAL DISTRICT DALLAS COUNTM~ TEXAS JURM QUESTION NOo3 MEMBERS OF THE JURY: You have asked the following question: Your Honor; We have been deliberating since 12:30pom.-4:30pom. on 3-31-!i, Our vote on Question #i is 7-5 and remains at 7-5 on 4-1-11 at 10:05aom, We can not get pass a required verdict in either direction on Question #io We are deadlocked. RESPONSE: Thank you for your update You have a.ll the law and the evidence Please continue with our deliber~ 134 TM CIVIL DISTRICT DALLAS COUNTY, TEXAS
DC-09-01913-G ¾EDICUS INSURANCE COMPANY~ Plaintiff(s)~ FREDERICE Do TODD~ Defendant(S)o IN THE DISTRICT COURT 134th ~JDICIAL DISTRICT DALLAS COUNTY~ TEXAS JURY QUESTION MEMBERS OF THE JURY: You have asked the fol!owing question: Can you instruct us on the procedure providing we are unable to reach a verdict? RESPONSE: I have your note that you are deadlocked In the interest of justice, if you could end this litigation by your verdict, you should do so. I do not mean to say that any individual juror should yield his or her own conscience and positive conviction, but I do mean that when you are in the jury room, you should discuss this matter carefully, listen to each other, and try, if you can, to reach a conclusion on the questions It is your duty as a juror to keep your mind open and free to every reasonable argument that may be presented by your fellow jurors so that this jury may arrive at a verdict that justly answers the consciences of the individuals making up this jury. You should not have any pride of opinion and should avoid hastily forming or expressing an opinion At the same time, you should not surrender any conscientious views founded on the evidence unless convinced of your error by your fellow jurors. If you fail to reach a verdict, this case may have to be tried before another jury. Then all of our time will have been wasted. Accordingly, I return you to yourl~_~l~r.y,~/~o~~_ 7delp~ons~~ 134 TH CIVIL DISTRICT COURT/ DALLAS COUNTY, TEXAS
APPENDIX 6
APPLICATION FOR PHYSiCiAN MEDICAL PROFESSIONAL L~AB~UTY insurance 2700 Via Fortune, Suite 425 Austin, TX 78746 512.275.1830 (l~ain) 512,275.1240 (Fax) sales@advocatemd.com INSTRUCTIONS: Please complete all sections and sign If a section does not apply, please indicate by answering "N/A" as appropriate. Attach additional sheets as needed. AH answers must be on t_his IF APPROVED, THIS APPLICATION BE~ OMES PART OF YOUR POLICY... L PERSONAL INFORI~ATION Full Name: Home Address: City: County: State: Home Telephone:... Celtu]ar Telephone:. ]! Primary Office Address: ~ dtd> ~.~, ~~1~, ~/~ ~e~ Prima~ O~ce Telepho~: Prima~ d~ce Fax: Tax IO Number: EmailAddrsss: ~ Social Securi~ No, Date of Birth. /... Prefe~ed~mailing address ~ O~ce ~ Home ~ O~er!I. ADDIT~ONAL OFFICE LOCATIONS LIST ALL PRESENT AFFILIATIONS BELOW. A I-I ACH SEPARATE SHEET IF NECESSARY. NAM,E, ~.OCATION, CITY, STATE COUNTY % OF PRACTICE [ l L HOSPITAL PRIVILEGES... Hospital at which you have staff membership or privileges:.,, City Nature of Privileges (aceve, Have your hospital privileges been expanded during the last 12 monks to include procedur~ for which you completed additional t~ining required by ~e State Ucensing Boa~ and/or yourboard SpecialS? ~Yes ~No If"Yes~ explain: [ ~V. COVERAGE REQUESTED Requested Re,oacti~e~ D~ate: - [] $1.00,000 per occurrence / $300,000 aggregate (~200,000 per occurrence / $600,000 aggregate [] $300,000 per occurrence / $900,000 aggregate Have you purchased or will you be purchasing a [] Reporting Endorsement -Tail (from Current Carder) [] $500,000 per occurrence 1 $1,000,000 aggregate [] $1,000,000 per occurrence / $3,000,000 aggregate Pdor Acts Coverage [] Other please explain ~% (from Advocate, MD) to purchase extended reporting coverage from your current carrier until you are specifically notified in w~ your request for Prior Acts Coverage has been approved. 0206 Zimmer 338 Page
2700 Via Fortuna, Suite 425 Austin, TX 78746 5t2.275.1830 (Main) 5t2.275.1240 (Fax) sal,es@advocatemd,com MEDICAL SPECIALTY: /~/~/~ ~ ~~t:~ SUB-SPECIALTY:... Average weekly patient load: ~ % of Practice outside of office location: Nursing Home A. Number of years at current office location: / J % OF PRACTICE: ~ % OF PRACTICE: Number of weekly practice hours: (7/-d).~.; Rehab _; Other (explain B. Have there been any signi~1_ca, nt changes in your practice during the past 5 years, i.e. changes in specialty, changes in location, addition or deletion of procedures, etc. [] Yes,~No.If %es,"please explain: C. TYPE OF PRACTICE: 1. "~Ves [] No SoloPA Ifyes, do you des[re coverage? es [] No Name ~-" 2. LJ Yes [] No Employee of 3. [] Yes [] No Padner or Shareholder of ~ =z If yes, please check one: [] Partnership~ Professional Association [] Limited Liability Partnership El Other 4. [] Yes [] No LocumTenens IVIII. MEDICAL OFFICE STAFF A. Indicate the number employed or supervised by you of the following: Intern: Optometrist: Resident: Podiatrist: Fellow: Physical. Therapist: Nurse Practitioner: Psychologist: Physician Assistant: Chiropractor:. Certified Nurse Midwife: ~ertified.. Registered Nurse Anesthetist: Dentist ~X:ray I Lab Tecl~i Social Worker. Do any of the above have their own individua! coverage? [] No (Explain coverage arrangements) [] Yes (Please provide CeRificates of Insurance) Are you seeking coverage for any of the above? [] No [] Yes (Please have each complete a non-physician appticatjon) STATE: LICENSE NO.: EXPIRATION DATE: i I x. CERTIFICATION (Please Check at Least One) ~.~oard Certified by whom and wt~at date? mo/yr 2. [] Board Qualified? (completed required training) [] Board Eligible until when? Date of Exam? [] Neither Board Cer dfied nor Board Qualified Total number of times previously attempted exam? Xl. CLAIMS INFORMATION Claims include intent to sue, written demand from patient or lawyer, incidents, withdrawn, settled, etc. Has any claim or suit fdr alleged malpractice ever been brought against you or are you aware of circumstances [hat might reasonably lead to such a claim or suit? [] Yes [] No If yes, complete a ciaimlincident report for each claim. Total Num6er of Claims ~ " #~f--0pen / Reserved / ~ # of Cln~~d_ ~, _ -- 1 Have you reported atl claims and drcumstances that m}ght reasonably lead to a claim or suit to your current carrier? ~ Yes [] No 0206 Page 3 Z~mmer 339.. :
2700 Via Fortuna, Suite 425 Austin, TX 78746 512.275.i 830 (Main) 5i2.275ot240 (Fax) sales@advocatemd.com I hereby certify that as of the date of this application, all known claims or suits for incidents which occurred from [he retroactive date as stated on Page 1 of [his application to (present date) have been repo~ted to my current Insurance carrier. I also warrant that any and all acts, incidents and/or circumstances, of which I am aware, and which might reasonably be expected to result in a ctaim under the pdor acts coverage afforded by any policy issued were disclosed to/he Company pdor to the effective date of such coverage and are listed previously or by supplemental form attached below. WARRANTY These warranties are matedal to the acceptance of coverage by the insurer, and are made a part of the insurance policy. Further, I acknowledge and agree that any claims resulting from acts committed prior to the effective date of coverage, and of which I was aware, are specifically excluded from coverage under this policy and any appticable policy wdtten to provide coverage excess of this policy. "7: Any binder of coverage issued by the Company as a result of [his application is contingent upon compliance with applicable Federal/State Regulations, Company Underwriting Criteda and Risk Management Inspection Regulations. I further acknowledge/hat, as a condition precedent to my acceptance, a dela[ted inquiry and investigation of my background, competence and qualifications may be conducted by the Company. In consideration of the foregoing, I hereby expressly consent to any such inquiry and investigation through the use of any means legally available to the aforesaid entities, and I expressly release and discharge the aforesaid entil~es, [heir agents, employees and/or representatives from any and all liability which might otherwise be incurred as a result of acts performed in connection with any inquiry or investigation as well as in the evaluation of information so received from whatever source. I further expressly authorize all individuals and entities to whom legal inquiry is made by [he above-named entities or [heir duly authorized employees, agents, and/or representatives to provide the same with all information and/or documentation within their possession or under their control which pertains to my background, competence and qual~ficatioes. APPLICANT (Signature Required) D~~e; Signing this application does not bind any carriers to complete the insurance. All information requested in this application is considered material and important. If any carrier agrees [o be bound under the terms of this application, your policy is void if you withhold any information from us mislead us, or attempt to defraud or lie to us about any matter contained in this application. FRAUD WARNINGS GENERAL FRAUD STATEMENT (not applicable in Colorado, Hawaii, Nebraska. Ohio, Oklahoma, Oregon, Utah and Vermon0 Any person who knowingly and with intent to defraud any insurance company or another person files an application for insurance containing any materially false information, or conceals for the purpose of misleading information concerning any fact matedn thereto, commits a fraudulent insurance act, v~hich is a crime and subjects the person to criminal and (N~Y: substantial) civil penalties. In the Distdct of Columbia, Louisiana, Maine, Tennessee and Virginia, insurance benefits may also be denied. THE APPLICANT DECLARES THAT THE STATEMENTS SET FORTH HEREIN ARE TRUE. THE APPLICANT AGREES THAT IF THE INFORMATION SUPPLIED ON THE APPLICATION BY THE APPLICANT CHANGES BETWEEN THE DATE OF THE APPLICATION AND THE EFFECTIVE DATE OF INSURANCE, APPLICANT WILL IMMEDIATELY NOTIFY THE COMPANY OF SUCH CHANGES AND THE COMPANY MAY WITHDRAW OR MODIFY ANY OUTSTANDING QUOTATIONS ANDIOR AUTHORIZATION OR AGREEMENTTO BIND THE INSURANCE. F~-~ysk "Phys~man s S~gnature" in Futl.~/.~~~... Date ~/~4~/O ~, ~ i~li~g title - Please Print ~t THiS A~ OI~IPLETE~StGNATURE, DATE, TITLE AND.PRLN_T.ED NAMF AROMF_. 0206 Zimraer 344 Page 7
P.Q2 364-
1/24/01 Z~mmer 368