Recently, the Dallas Court of Appeals held that a professional liability insurer had a duty to defend its insured in lawsuit alleging the insured participated in a gang rape.  In AIX Specialty Ins. Co. v. Raj Shiwach, MD, No. 05-18-01050-CV, 2019 WL 6888515 (Tex. App.—Dallas, December 18, 2019, mem. op.), a patient under Shiwach's psychiatric care at Hickory Trail LP (“HT”) sued Shiwach and HT in connection with the patient’s alleged gang rape. Shiwach was sued in his individual capacity as well as his capacity as a medical professional and employee or manager of HT.  The patient’s petition specified that Shiwach participated in the gang rape. The petition also specified that HT failed to take action to correct the problems with rape, suicide, and over drugging of patients at its facility. 

Shiwach was insured under a professional liability policy from AIX, which required AIX to defend and indemnify Shiwach against a claim for damages only if “the injury is caused by a ‘medical incident’ and . . . the injury arises out of the individual insured's profession as a physician . . . .”  The policy defined a “medical incident” as “any act or omission arising out of the providing of or failure to provide professional medical services . . . .” Shiwach demanded that AIX defend and indemnify him, but AIX refused, contending the patient’s petition did not assert any covered allegation.  Shiwach paid for his own defense and prevailed. Subsequently, he sued AIX asserting claims for breach of contract and violations of chapter 542 of the Insurance Code.  The trial court granted summary judgment in favor of Shiwach, and AIX appealed. 

On appeal, AIX contended that the patient’s injuries from an alleged gang rape were not “medical incidents” that triggered its duty to defend, and that the sexual, criminal, and willful acts exclusion precluded any defense obligation. 

Relying on the eight-corners rule –which requires the court to look to the four corners of the petition for allegations potentially within the scope of coverage in the four corners of the insurance policy– the court held that Shiwach carried his burden in demonstrating potentially covered claims. Although the only specific claim against Shiwach was his alleged participation in the gang rape (an act for which AIX would have no duty to defend), the court concluded it was reasonably inferred that when the patient alleged that “HT” failed to take action to correct the problems with rape, suicide, and over drugging of patients at their facilities (acts for which AIX would have a duty to defend), she also meant Shiwach. To that end, the court noted that “the eight-corners rule does not require courts to ignore logical inferences that flow from the facts alleged in the petition.” 

The court further held that the sexual, criminal, and willful acts exclusion did not excuse AIX's duty to defend. The court reasoned that Shiwach's potential liability could have rested on the rape allegation or the reasonably-inferred covered allegations and, thus, the petition alleged conduct that could have caused the patient’s injuries separate and independent from any conduct that would qualify as sexual, criminal, or willful.  

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