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Fair American Insurance and Reinsurance Co. v. Stewart

United States District Court, N.D. Oklahoma

March 31, 2017

FAIR AMERICAN INSURANCE AND REINSURANCE COMPANY, Plaintiff,
v.
KYLE LESLIE STEWART, M.D., AMY K. NORDHUES, and TERRY L. WINK, Defendants.

          OPINION AND ORDER

          TERENCE KERN United States District Judge

         Before the Court are the Motion to Dismiss filed by Defendants Amy K. Nordhues and Terry L. Wink (Doc. 13)[1] and Plaintiff Fair American Insuranc e and Reinsurance Company's (“FAIRCO”) Motion for Summary Judgment (Doc. 58).

         I. Factual Background[2]

         On April 24, 2013, Amy K. Nordhues (“Nordhues”) entered into a psychiatrist/patient relationship with Dr. Kyle Leslie Stewart (“Stewart”), who was a deacon at her church. Nordhues testified that, during the last few months of their relationship, she began feeling like Stewart “was crossing boundaries physically and emotionally.” (Nordhues Dep. 93:1-2.) During their last four sessions, Nordhues and Stewart were unclothed, Stewart fondled her, and Nordhues performed oral sex on Stewart. The doctor/patient relationship ended on or around July of 2014.

         On November 6, 2014, Stewart filed a Voluntary Surrender of License in Lieu of Prosecution (“Surrender”). Therein, Stewart admitted to having an inappropriate relationship with a client identified as A.N.L. and being guilty of: (1) engaging in predatory sexual behavior; (2) engaging in dishonorable or immoral conduct likely to deceive or harm; (3) engaging in sexual physical conduct with a patient; (4) committing an act of sexual abuse, misconduct, or exploitation; and (5) abusing his position of trust by coercion, manipulation, or fraudulent misrepresentation. (Compl., Ex. F.)

         On December 9, 2014, counsel for Nordhues, Mark Edwards (“Edwards”), sent a demand letter to Stewart asserting numerous types of medical malpractice that occurred throughout their doctor/patient relationship. Edwards stated that “you [Stewart] used her weaknesses and vulnerabilities, you mishandled the transference counter-transference phenomenon for your own purposes, you immediately misdiagnosed Mrs. Nordhues with multiple personalities and you actually named those parts after your mother, your father and your middle name, just to name a few, in therapy.” (Resp. to Mot. for Summ. J., Ex. 1.) The demand letter does not describe in detail the sexual contact between Nordhues and Stewart but does state that Stewart manipulated her by telling her he loved her, rubbing her feet, and having “physical contact” with her during sessions.

         On December 26, 2014, Nordhues filed a Petition in the District Court of Tulsa County, Oklahoma, alleging claims for medical malpractice, breach of fiduciary duty, and punitive damages against Stewart (“Nordhues Action”). The petition in the Nordhues Action does not use the phrases sexual misconduct or sexual exploitation. The petition alleges that Stewart:

a. . . . negligently and carelessly manipulated the emotions of plaintiff in order to gain control over plaintiff and mishandled the transference and counter-transference phenomena which arose out of their professional relationship.
b. . . . negligently and carelessly failed to treat, or improperly treated, plaintiff, an individual who was suffering from material psychological problems.
c. . . . negligently and carelessly entered into improper and unprofessional dual relationships with the plaintiff during the period of treatment.
d. . . . negligently conducted or handled the termination of the professional therapeutic relationship with plaintiff, ultimately terminated that relationship improperly, and/or failed to assist her in the obtainment of other professional treatment in accordance with accepted therapeutic procedure or practice.
e. . . . negligently undertook to treat plaintiff, a patient who, under these circumstances, had psychological problems which were beyond defendant's competency to treat.
f. . . . negligently failed to refer plaintiff to another more competent professional person for proper treatment.
g. . . . negligently maintained or negligently failed to maintain appropriate professional boundaries in the parties' professional relationship.
h. . . . failed to divulge in a reasonable manner to plaintiff sufficient information to enable plaintiff, his patient, to give or withhold said plaintiff's consent to the course of treatment in fact followed by defendant. i. . . . negligently failed to report or self-report his status as an impaired physician and/or to seek appropriate treatment for his condition from, colleagues, other physicians or health care providers, and/or the Board of Registration in Medicine. In connection with his professional relationship with plaintiff, defendant did not possess the requisite emotional, mental, or physical faculties to care, treat, and/or provide appropriate psychiatric services to the plaintiff.

(Resp. to Mot. For Summ. J., Ex. C.) As required by Oklahoma law in medical negligence cases, Nordhues attached an affidavit from an expert certifying that Stewart's treatment fell below the relevant standard of care. The affidavit does not mention a sexual relationship.

         In June of 2015, Stewart filed Chapter 7 Bankruptcy in the Western District of Oklahoma. On November 23, 2015, Nordhues and another past patient of Stewart, Terry Wink (“Wink”), received Orders for Modification of Automatic Stay permitting them to litigate their claims against Stewart in state court. In one bankruptcy filing, an attorney other than Edwards described Wink's claim as one for “sexual exploitation.” Wink was not aware this was filed on her behalf or that her claim was described in that manner. Stewart received a Chapter 7 discharge.

         On December 28, 2015, Edwards sent a demand letter on behalf of Wink. The letter states that Stewart treated Wink from 1996 until Stewart's “unexpected retirement” in 2014. The letter makes similar allegations to those in the previous letter sent by Edwards on behalf of Nordhues, including that “you [Stewart] used her weaknesses and vulnerabilities, you mishandled the transference counter-transference phenomenon for your own purposes, you misdiagnosed Mrs. Wink with multiple personalities and you actually named those parts in therapy.” (Pls.' Resp. To Def.'s Mot. For Summ. J., Ex. 4.) Again, the demand letter does not describe in detail the sexual relationship between Wink and Stewart but does state that Stewart manipulated her by telling her he loved her, rubbing her shoulders and feet, and having physical contact with her during sessions.

         In a deposition given in this case, Wink testified in greater detail about the sexual nature of the relationship. Beginning in February of 2000, Wink began having sexual intercourse with Stewart on at least a monthly basis for the next fourteen years. He lengthened her appointments to two hours. If she missed an appointment, Stewart came to her house and knocked on the door. On the one occasion she let him in, he took her clothes off and they had sex. Although she did not let him in again, she testified that he came to her house 30 or 40 times when she missed appointments. Her last appointment was the last week before “the medical board came.” (Wink Dep. 57:11.) Wink described her sexual encounters with Stewart as non-consensual.

         On February 1, 2016 (after Wink sent her demand letter but before Wink filed suit in state court), FAIRCO filed the Complaint for Declaratory Judgment before this Court (Doc. 2) against Nordhues, Wink, and Stewart pursuant to the Declaratory Judgment Act (“DJA”), 28 U.S.C. § 2201. The Complaint asserts that the Court has diversity subject matter jurisdiction pursuant to 28 U.S.C. § 1332(a) and that “the matter is ripe for adjudication because an actual and justiciable controversy exists among the parties.” (Compl. ¶ 8.)

         In its Complaint, FAIRCO alleges that it issued Claims-Made Psychiatrists' Professional and Business Liability Policy No. IN-FCO01-033311137 (“Policy”) to Stewart for the policy period January 1, 2014 to January 1, 2015. The Policy contains a “Retroactive Date” of January 1, 2007, and “Retroactive Date” is defined as the first day on which coverage applies. The liability limits in the Policy are $500, 000 per claim and $1, 500, 000 in the aggregate, subject to a $25, 000 sublimit for sexual misconduct (“SMS”), which provides:

C. In the event Sexual Misconduct is alleged against an Insured at any time, either in a complaint, during discovery, at trial, or otherwise, any and all causes of action alleged or arising out of the same or related courses of Psychiatric Services shall be subject to the Insurer's sublimit of liability of $25, 000 as set forth in Item 4(d) of the DECLARATIONS. The total limit of the Insurer's liability under this policy for all Damages arising out of such Claim shall not exceed the foregoing sublimit and the Insurer shall have no obligation to undertake the defense of, nor continue to defend, any Suit or Claim after such limit has been exhausted.

(Compl., Ex. A.) “Sexual Misconduct” is defined in the Policy as follows:

FF. Sexual Misconduct means any type of actual, alleged, attempted or proposed physical touching, contact, or activity or attempt threat, suggestion or proposal thereof by an Insured or any other person for whom an Insured may be legally liable which could be considered sexual in nature ...

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