Insurer had authority to settle malpractice case over doctor's wishes

Jessica M. Karmasek Apr. 22, 2011, 11:46am

PROVIDENCE, R.I. (Legal Newsline) - The Rhode Island Supreme Court says an insurance company "fully performed its duties" by defending, and settling quickly, a medical malpractice lawsuit against its insured doctor.

The Court, in its opinion filed Monday, affirmed the Providence County Superior Court's ruling of summary judgment in favor of defendant insurer Medical Malpractice Joint Underwriting Association of Rhode Island.

At issue is the following language: "The (insurance) company may make such investigation and settlement of any claim or suit as it deems expedient."

The plaintiff, Dr. Mohan Papudesu, contends that the superior court erred in ruling that the just-quoted "as it deems expedient" language constituted legally appropriate authority for the insurer to settle a malpractice claim against him in disregard of his wishes, and in granting summary judgment on that ground.

Papudesu was one of several named defendants in a wrongful-death case. A woman delivered a stillborn baby eight months into her pregnancy, and there was a disagreement as to whether Papudesu was on call during the time leading up to the delivery and whether he had received a call from an answering service about the woman's medical needs.

Following a jury trial, the doctor's insurer settled the case against Papudesu for $500,000. Papudesu objected to the settlement, saying he was confident he would prevail in litigation and that the settlement would adversely affect his professional reputation and would cause the cost of his malpractice insurance to rise. He then filed a lawsuit against his insurer in superior court.

The court granted summary judgment to the insurer, and Papudesu appealed to the state's high court.

Justice William P. Robinson wrote the Court's nine-page opinion.

In it, the Court explained that an insurance policy is contractual in nature, and that the contract at issue was unambiguous. "It vests full discretion in the insurer with respect to the issue of settlement," it wrote.

"The insurer fully performed its duties in accordance with the unambiguous language of the contract by defending the suit against Dr. Papudesu and by exercising its discretion in investigating and settling that suit in a manner which it deemed expedient and within the policy limits," the Court wrote.

The justices said they looked at the "as it deems expedient" language at issue and considered it to be "straightforward" and "readily understandable."

"The plaintiff protests that the defendant's authority to exercise its discretion under the 'as it deems expedient' clause was limited by its duty to act in good faith such that the insurer was obligated to conduct a more vigorous investigation into the possible harm that settlement could cause to his interests. In accordance with settled law, however, 'we decline to read nonexistent terms or limitations into a contract,'" the Court concluded.

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