Doctor can sue insurance co. for malicious prosecution

By Eric T. Berkman
http://www.masslaw.com

A neurologist could bring a malicious prosecution suit against an insurer who had unsuccessfully sued him for medical malpractice, the Supreme Judicial Court has ruled.

A Superior Court judge had dismissed the plaintiff physician’s suit, finding that the defendant insurer had probable cause to sue him based on statements from a lawyer who had allegedly consulted with an unidentified “expert.”

Additionally, the judge had found that because the insurer brought the suit in order to recoup money lost in a settlement, there was no basis to find that the insurer acted with malice.

But the SJC reversed, abandoning Massachusetts’ traditional requirement that a plaintiff demonstrate actual “malice” in malicious prosecution cases and adopting the standard laid out in the Restatement (Second) of Torts that the plaintiff show that the defendant had an “improper purpose” for suing him.

“The materials before the judge raise jury issues on the purpose element,” Justice John M. Greaney wrote on behalf of the court, quoting a comment to Section 676 of the Restatement. “A jury should consider whether the defendant was motivated [not] to assert legitimate legal rights, but rather was motivated by an improper purpose because it ‘institut[ed] a civil proceeding when [it did] not believe [its] claim to be meritorious’ or did so to ‘forc[e] a settlement that has no relation to the merits of the claim.'”

The SJC did, however, affirm the dismissal of the plaintiff’s Chapter 93A claim against the defendant on grounds that there had never been any business transactions between the two parties to give rise to such a claim.

The 25-page decision is Chervin v. The Travelers Insurance Company, et al., Lawyers Weekly No. 10-191-06. Click here to read the full text of this opinion.

‘Incremental’ change

Plaintiff’s counsel Stanley W. Wheatley of Duxbury described the SJC’s adoption of the Restatement position as a “very incremental change.”

In most cases, “evidence that would establish improper purpose would be enough to establish legal malice anyway.”

But though Wheatley said he was gratified that the SJC agreed there should be a jury trial on the issue of whether the insurance company had acted with an improper purpose, he was disappointed that the court did not pay more attention to his client’s Chapter 93A claim.

“In my opinion, this idea that under Section 11 [of Chapter 93A] the parties must not only be individually engaged in trade or commerce, but also be engaged in trade or commerce with each other, has no support in the statutory language,” Wheatley said. “Rhetorically, why should Section 11 application to intentional business torts turn on whether the parties were or weren’t strangers? I think you may see some legislative action here to clarify what I think was the Legislature’s true intent.”

Thomas F. Maffei of Boston, who represented the defendant, said the decision is important because it clears up a great deal of uncertainty in malicious prosecution cases.

“The court equated malice with ‘improper purpose’ and listed some examples of what improper purpose can be,” he said. “I think this is the first time the court has actually spelled out what the term ‘malice’ means in a malicious prosecution action. The law on malicious prosecution is old, cases go back 100 years. So it was clearly an area that needed to be clarified.”

Maffei added that he was pleased with the court’s ruling on the Chapter 93A issue.

“It’s an interesting case because it involves the legal process itself and notions of chilling litigants and causing them to be concerned about retaliatory actions when someone brings a suit,” he said. “To at least remove the notion that this could be subject to a Chapter 93A claim was potent.”

Disputed claims

On July 9, 1996, Edward Mosher was involved in a single-car accident that rendered him quadriplegic.

About a year before the accident, Mosher, who allegedly had a history of severe alcohol abuse, had suffered a seizure. Mosher’s primary-care physician, Dr. Howard Richter, referred him to a neurologist, plaintiff Paul N. Chervin, for evaluation and treatment.

The plaintiff saw Mosher on several occasions, concluding with an appointment in February 1996, several months before the accident.

Both physicians had allegedly instructed Mosher to take anti-seizure medication and not to consume alcoholic beverages. Apparently Mosher did not comply with these instructions. In fact, Mosher’s accident occurred on his first day back from work after alleged heavy alcohol use while on vacation.

Following the accident, Mosher filed a claim with the defendant, Travelers Insurance Co., which was the workers’ compensation insurer for Mosher’s employer.

The defendant denied Mosher’s claim. Mosher subsequently commenced a proceeding at the Department of Industrial Accidents. He was represented by attorney Martin Schneider and the defendant was represented by Terrence Reilly.

At the DIA, the defendant argued that Mosher’s injuries were the result of his own misconduct in failing to follow his doctors’ instructions. The defendant also presented testimony from an expert neurologist maintaining that the accident was most likely not work related. The neurologist speculated that the accident was likely due to a pre-existing seizure disorder for which Mosher was not following medical advice.

In April 1999, as the two parties were in settlement negotiations, Schneider raised the possibility of a third-party med-mal action against Richter and the plaintiff.

On April 22, Reilly sent a memo to Dennis Dunn, the defendant’s workers’ comp case manager, stating that five med-mal attorneys had rejected the case, adding that “I d not think that the third party claim is viable in the first place.”

In May 1999, the defendant settled Mosher’s claim for $775,000.

The next month, Schneider told Reilly that he had finally found an attorney, Linda Abrahams, willing to take the med-mal claim, but that Mosher didn’t want to pursue it.

The defendant transferred the file to Teresa Pacheco, a claims rep in the subrogation unit. She reviewed the records and told Schneider that if the defendant went forward with the action, it would need Mosher’s involvement. Schneider told Pacheco that he felt he would be able to talk Mosher into cooperating in the future.

Pacheco then spoke with Abrahams, who told her that she had discussed the claim with an “expert” on a “preliminary” basis and had been told that “certain protocols” should have been taken, such as detox, license revocation and family involvement, and that none of this had been done. Abrahams never identified the expert, stated the expert’s qualifications or identified the information that the expert had relied on. Nonetheless, Abrahams apparently stated that the defendant had a slightly better than 50 percent chance of succeeding on a med-mal claim.

On July 6, 1999, as the statute of limitations was about to run out, the defendant decided to go ahead with the suit. Relevant personnel anticipated that Abrahams would work with one of the defendant’s subrogation panel lawyers, Richard J. Sullivan, in a co-counsel arrangement. Abrahams indicated that her practice, when the statute was about to run out, was to draft and file the complaint but to withhold service until she obtained an expert opinion.

On July 8, 1999, the defendant filed a complaint in Mosher’s name against the plaintiff in Superior Court. Abrahams drafted the complaint and Sullivan signed and filed it. Abrahams declined the co-counsel arrangement and the defendant never obtained an expert willing to support the claim. The defendant nonetheless served the complaint.

Once the suit was filed, the defendant assigned the case to a more experienced subrogation claim rep. She indicated problems with the case, namely that the theory of liability was shaky and that Mosher was not on board.

On Feb. 2, 2001, the defendant’s major case unit recommended closing the case because recovery was “iffy at best.”

That month, a Superior Court judge entered a judgment for the plaintiff, Chervin, with costs.

In the meantime, the plaintiff had been required to disclose the pending med-mal suit to state licensing authorities, hospitals where he had privileges, professional associations and health insurers who covered his patients. He also apparently lost referrals and failed to secure a teaching position at the University of Vermont because the pendency of the suit caused delays in him obtaining a Vermont medical license.

On Aug. 27, 2001, the plaintiff sued the defendant in Superior Court alleging malicious prosecution and Chapter 93A violations. Judge Patrick J. Brady granted summary judgment for the defendant. The Appeals Court affirmed Brady’s ruling.

Valid claim

On appeal, the SJC laid out the existing standard for malicious prosecution.

“To prevail on a claim for malicious prosecution, a plaintiff must establish that he was damaged because the defendant commenced the original action without probable cause and with malice, and that the original action terminated in his favor,” said Greaney.

Turning to the issue of malice, the SJC looked to the Restatement position that the allegedly malicious action needs to have been brought for an improper purpose, but not necessarily because of “malice” in the literal sense of the term: hostility and ill will.

“We have not [to this point] formally substituted the ‘improper’ purpose element appearing in Sect. 676 of the Restatement … for the element of malice in malicious prosecution,” said Greaney. “We conclude that now doing so would be consistent with our expressions of what constitutes such malice. We, therefore, adopt the ‘improper purpose’ formulation in Sect. 676, in place of the element of ‘malice.'”

Looking at the record from this case, the justice noted, among other things, that the defendant had spent two years defending the original workers’ comp claim on grounds that the accident was Mosher’s own fault; that several attorneys who evaluated the case concluded that there were no grounds for a med-mal suit; that the defendant never asserted that the plaintiff was at fault until after it settled Mosher’s claim; and that Abrahams’ opinion was based only on a “preliminary” discussion with an unidentified expert of unknown qualifications.

“The defendant argues that different inferences should be drawn from some of this evidence,” said Greaney. “This, of course, may be true, but that task involves weighing and crediting evidence, and it is one appropriately left for a jury.”

The SJC, did, however, affirm Brady’s dismissal of the Chapter 93A claim.

Eric T. Berkman, formerly a reporter for Massachusetts Lawyers Weekly, is a freelance writer.

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CASE: Chervin v. The Travelers Insurance Company, et al., Lawyers Weekly No. 10-191-06

COURT: Supreme Judicial Court

ISSUE: Can a neurologist bring a malicious prosecution claim against an insurance company that had unsuccessfully sued him for medical malpractice after settling a workers comp claim with a man who was injured when he failed to follow the neurologist’s advice?

DECISION: Yes, because the med-mal suit was brought for an improper purpose? as set out in the Restatement (Second) of Torts
M.L.