No, the insurance policy does not cover this situation. The court explained that malpractice insurance is for when a doctor fails to provide the standard level of care that any reasonable doctor would. It is not for breaking a special, personal promise to guarantee a perfect outcome. Dr. McGee made an extra promise that went beyond his normal medical duties, so his insurance didn't have to cover the cost when he couldn't keep that promise. The court also said the insurance company was allowed to stop defending him on that specific claim because it wasn't a covered 'mistake'.

No, Dr. McGee's mistake insurance doesn't have to pay for the problems from his special promise because the insurance is only for normal mistakes, not special promises to make something perfect. The court said the insurance company didn't trick Dr. McGee, so they don't owe him any money. This decision shows that mistake insurance for doctors doesn't cover special promises that guarantee a specific result.

<?xml version="1.0" encoding="utf-8"?> <opinion data-order="7" data-type="opinion" id="x999-1" type="majority"> <author id="b977-25"> ANDERSON, Circuit Judge. </author> In this suit to recover under a liability insurance policy, jury was waived; on findings of fact and rulings of law, judgment was entered for the defendant. The plaintiff was, in 1925 and 1926, a practicing physician and surgeon in Berlin, N. H. He had then outstanding from the defendant an insurance policy of $15,000, the provisions of whieh now material are as follows : “(1) To indemnify the person named in statement No. 1 of the schedule of warranties and herein called the assured, against loss from the liability imposed by law upon the assured for damages on account of bodily injuries or death suffered by any person or persons in consequence of any malpractice, error, or mistake—(2) of the assured in the practice of his profession during the term of this policy; * * * (2) To defend in the name and on behalf of the assured any suit, brought against the assured to enforce a claim, whether ground *954 less or not, for damages on. account of bodily injury or death suffered, or alleged to have been suffered by any person or persons in consequence of any malpractice, error or mistake — (2) of the assured in the practice of his profession during the term of this policy; * * * subject to the following conditions: (Fourteen conditions are recited of which the 7th and 12th are as follows:) “ ‘7. The assured shall not voluntarily assume any liability, nor, without the written consent of the company previously given, incur any expense; nor, except at its own cost, settle any claims; nor interfere in any negotiations or legal proceedings conducted by the company on account of any claim. “ ‘12. No action shall be brought against the company under or by reason of this policy unless it shall be brought by the assured for a loss sustained by reason of a suit against the assured for damages in which final judgment has been rendered, and within ninety days from the date of such judgment.’ ” In October, 1925, George Hawkins brought a suit against the appellant in the superior court of Coos county, N. H. The declaration in his writ contains two counts, as follows:' “In a plea of assumpsit, for the defendant at Berlin on the 21st day of January 1922, in consideration that the plaintiff at his request, employed him, being then and there a physician and surgeon, to operate, graft skin upon, cure and heal, the plaintiff’s right hand, which before that time had been burnt, and a sear tissue had formed; promised the plaintiff to use due care and skill in the treatment of said hand, to operate and remove said.sear tissue, and to graft in place thereof, new skin tissue, cure and heal the wound in a skillful and proper manner; and thereupon entered upon the treatment of said hand on January 21,1922, at said Berlin. “Yet the defendant, though requested, did not use due skill and care in the treatment of said hand, to operate to remove the sear tissues therein, to graft new skin tissue, to cure and heal said new tissue in a skillful and proper manner, but so unskillfully and negligently operated and treated the same that by his unskillfulness and negligence, the new tissue grafted upon said hand became matted, unsightly, and so healed and attached to said hand as to practically fill the hand with an unsightly growth, restricting the motion of the plaintiff’s hand so that said hand has become useless to the plaintiff wherein, previous to said operation by the said defendant, it was a practical, useful hand, all through the negligence and unskillful treatment of said defendant and to the damage of the plaintiff as he claims in the sum of $10,000.” “And in a further plea of assumpsit, for that the defendant, in Berlin, on the 2-lst day of January, 1922, promised the plaintiff that he was possessed of the skill necessary to properly operate upon his right hand aforesaid, and that the defendant would not be obliged to remain in the hospital for a longer period than six days, and that the sear to be left upon that part of the body wherein said defendant stated he would graft said new skin, would be a small sear, and would hardly be noticeable after -healing, and that the plaintiff further avers that relying upon said promises as aforesaid, he consented to be treated by the said defendant as aforesaid, and the plaintiff says further that the defendant did not possess the skill that he held himself out to possess, but that he experimented upon said plaintiff, and that by reason of said operation, the plaintiff was laid up in said hospital for a long time, to wit, three months, that the sear left upon the chest of the plaintiff is a long, large, unsightly scar, and that the hand of said plaintiff has been made useless, 'and that the results are not as promised him by the said defendant, and that if the plaintiff had not relied on the several promises of the defendant, he would not have submitted to said operation. All to the damage of the plaintiff, as he says, in the sum of $10,000.” The defense of this suit was undertaken and conducted by the appellee, until December, 1926. At the first trial, the jury disagreed. In December, 1926, the ease came on for another trial, before Judge Seammon and a jury. At the close of the plaintiff’s evidence, on defendant’s motion, the court directed a verdict for defendant on the first count, but denied the motion as to the second count. Pending the court’s order on this motion, the Guaranty Company served, on December 17, 1926, a notice on Dr. McGee, as follows: “This is to notify you that in the event that a nonsuit is ordered on the count in negligence in the suit of George Hawkins v. Dr. E. R. B. McGee, the United States Fidelity &amp; Guaranty' Company, the insurer of Dr. McGee, disclaims any liability to reimburse the said Dr. McGee for any damages or costs awarded to the said George Hawkins based on a finding of the juxy that Dr. McGee guaranteed the result of the operation *955 on said George Hawkins, claiming that its policy does not cover eases where the Doctor makes a contract to perfect a euro or guarantees the result of his treatment, and you are notified that the Company is not waiving any of its rights under said policy or any of its rights in law or equity by reason of the fact that Irving A. Hinkley counsel for the said Insurance Company continúes to participate in the trial after the issue of negligence has been taken from the jury.” The trial proceeded on the second count, counsel for the Guaranty Company, continuing to assist counsel for Dr. McGee, so that the jury would not be prejudiced by his withdrawal. The result of the trial on the second count wa,s a verdict for Hawkins for $3,000. Dr. McGee saved numerous exceptions. On motion before Judge Scammon, the Hawkins verdict was set aside, on the ground that the damage was excessive. But this ruling was, on Hawkins’ exceptions, reversed by the New Hampshire court, Hawkins v. McGee, 84 N. H. 114, 146 A. 641. On December 22, 1926, appellant’s attorney addressed to the Guaranty Company’s agent a letter of protest against the attitude of the Guaranty Company, sufficiently asserting the appellant’s present contention of the Guaranty Company’s full liability under tile policy. Just prior to a third trial, McGee notified the Guaranty Company’s agent that the claim against him could be adjusted for $1,-400; that the company might proceed at its own risk with the trial and defense of the suit; that, if it refused so to do, McGee proposed to purchase his peace by paying this $1,400, and would look to the Guaranty Company for payment of said sum and his expenses. The company refused; McGee settled the Hawkins suit for $1,400; and brought this suit to recover the $1,400 and his expenses, mostly attorney’s fees. The court found that, if entitled to recover, he is entitled to judgment for $4,248.48. The finding of controlling importance is as follows: “In the Hawkins Case Dr. McGee’s liability resulted not from the implied contract applicable to every physician in the treatment of his patient but because of the special contract to give his patient ‘a perfect hand one hundred per cent good.’ (Plff’s Ex. 36, p. 27.) “In the submission of the Hawkins Case to the jury the only question submitted by Judge Scammon was whether or not Dr. McGee made a special contract and if so did he fail in its performance and what were the damages. This is made clear from a perusal of Judge Scammon’s charge. “The jury found that such a special contract was made and that the Doctor failed to perform. These findings have not been controverted in this action. It follows that the expenses herein sought to be recovered resulted from the findings of a jury that there was a special contract between Dr. McGee and his patient and not because of ‘malpractice, error or mistake’ in treatment.” The court ruled that the policy in question did not extend to such special contract, and therefore entered judgment for the do fendant. Plaintiff’s main contention is that, by assuming the defense of the Hawkins suit, the appellee is now estopped to claim non-liability under the policy. This contention was not made before the District Court. It is at least doubtful whether it is open on this appeal. Harding v. Federal Nat. Bank (C. C. A.) 31 F.(2d) 914; Candal De Lopez v. Socieded Espanola (C. C. A.) 45 F.(2d) 331. We resolve serious doubt in appellant’s favor and deal with the case broadly. The findings of the District Court negative the facts essential for an estoppel. The appellant was not prejudiced by the original assumption by the defendant of the defense of the Hawkins suit, nor by the time and manner of its subsequent disclaimer. See 2 May on Insurance, § 507; Reynolds v. Addon, 136 U. S. 348, 10 S. Ct. 843, 34 L. Ed. 360; Burton v. Berthold (C. C. A. 2) 166 F. 416; Agency of Canadian Car &amp; Foundry Co. v. Pennsylvania Iron Works Co. (C. C. A. 3) 256 F. 339; Feick v. Stephens (C. C. A. 6) 250 F. 185; Grouf v. State Nat. Bank (C. C. A. 8) 40 F.(2d) 2, 7. The appellant had his own counsel in court at both trials, and defendant’s counsel remained in, and active at, the trial under the count construed by the New Hampshire courts as setting up a special contract. There was at that time no prejudice, either by act or word, to the appellant’s rights. Compare Lunt v. Life Insurance Co., 253 Mass. 610, 149 N. E. 660; Sturm v. Boker, 150 U. S. 312, 335, 14 S. Ct. 99, 37 L. Ed. 1093; Meyers v. Continental Casualty Co. (C. C. A.) 12 F.(2d) 52, and eases cited on page 56. *956 The Hawkins declaration plainly called upon the appellee to take charge of the defense. This it did, until the trial court gave such construction to count 2 of the declaration as to put Dr. McGee’s liability thereunder outside the scope of his insurance policy. Then it rightfully gave notice of disclaimer, but refrained from any act possibly prejudicial to the insured’s liability under this special contract. There was no estoppel. On the facts in this record, we cannot accept the contention of appellant’s learned counsel — that the insurance company’s original assumption of the defense of the Hawkins suit was such construction of the policy by contemporaneous acts as to estop it from, subsequently denying liability under the special contract found to have been made by the appellant. The court below was plainly right in ruling that defendant’s policy did not cover Dr. McGee’s liability under a special contract so to cure Hawkins “that he should have a perfect hand, one hundred per cent good.” The judgment of the District Court is affirmed, with costs. </opinion>

—holding that Dr. McGee's malpractice insurance did not cover the "special contract" he entered into to give Hawkins a "perfect hand, one hundred percent good

—compared with the 2 year period for malpractice actions), and (4) the physician's medical malpractice policy has been held not to apply to liability resulting from an agreement guaranteeing the results of a treatment

—a case involving a physician who was employed to perform a skin graft with success, the jury found that a special contract had been made and that the doctor had failed to perform his contractual obligation.

Merchants cites three malpractice cases construing language similar to that found in its policy for the proposition that the words "negligent act, error or omission" are intended to exclude coverage for damages arising from breach of contract

—distinguishes that case from both the present action and also McGee from United States Fidelity & Guaranty Co.

McGee sued his malpractice carrier for refusing to cover the damages he was ordered to pay in the original Hawkins lawsuit.).

—case would be applied to a dentist who guaranteed to save a tooth or to accomplish certain results in an orthodontic case and failed to do so, even though he was not negligent.

The court concluded that liability for an express promise to produce a specific result was not covered by these policy provisions.

R Edwards, Counsel, Aetna Life and Casualty Co., to Gary L. Birnbaum, Aug. 19, 1974 (on file with the INDIANA LAW JOURNAL).

No. A professional liability policy covering 'malpractice, error, or mistake' does not cover liability for the breach of a special contract guaranteeing a particular outcome. The court reasoned that the policy covers liability 'imposed by law' for breaches of the professional standard of care (i.e., malpractice), not for voluntary undertakings or special agreements to achieve a specific result. Dr. McGee's liability in the underlying suit stemmed from his failure to perform a special contract to deliver a 'perfect hand,' which is a distinct and uncovered risk. Furthermore, the Guaranty Company was not estopped from denying coverage because it defended the suit while a potentially covered malpractice claim was active and properly disclaimed liability for the non-covered contract claim once the malpractice claim was dismissed. The company's actions did not prejudice Dr. McGee, who had his own counsel present throughout the proceedings.

No, Dr. McGee's liability insurance policy does not cover his liability under the special contract with Hawkins because the policy specifically covers damages suffered due to malpractice, error, or mistake, and the jury found that Dr. McGee's liability arose from his failure to perform the special contract guaranteeing 'a perfect hand, one hundred per cent good.' The insurance company's initial assumption of the defense and subsequent disclaimer does not constitute an estoppel, as there was no prejudice to Dr. McGee's rights. The court affirms the judgment for the defendant insurance company, establishing that insurance policies are intended to exclude coverage for damages arising from breach of contract, especially when the contract guarantees a specific result.

McGee v. United States Fidelity & Guaranty Co.

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