Can This Pig Fly? How A Dentist Assaulted A Patient And Made A Million Dollars: Part Two of a Two-Part Series

In yesterday's column, Part One in this two-part series, I discussed the facts of a remarkable insurance law case. A dentist, Dr. Woo, took advantage of the fact that his patient and former assistant, Ms. Alberts, was under sedation for a procedure to play an ugly practical joke on her.

More specifically, Woo gave Alberts temporary implants crafted specially to resemble boar's teeth, and photographed her while she was unconscious and had her mouth open to display the implants.

When his insurer failed to defend the case on the ground that Woo's tort was not covered, Woo and his attorney quickly settled with Alberts - then sued his insurer, Fireman's, for failing to defend him.

In this column, I'll explain why and how he won that case.

We Thought He Was Kidding

Fireman's had agreed to defend Dr. Woo against claims arising from the practice of dentistry. Washington law defines "dentistry" very broadly, covering almost every conceivable variation of dental care. Because the claim arose from Woo's implantation of temporary teeth - albeit teeth shaped like boar tusks - Woo argued that the policy applied.

This sounds like a stretch, but Fireman's misstep resulted in Woo getting the maximum benefit of the doubt. Insurers have systematic advantages over policyholders, and courts have accordingly tilted the playing field against insurers. Thus, an insurer must defend its policyholder if there is any possible basis for coverage. An insurer must defend even if the claim is fraudulent or groundless. The duty extends to cases involving interrelated claims that will certainly not be covered (such as a premeditated murder). Accordingly, plaintiffs' lawyers are careful to sprinkle throughout their complaints rather abstract allegations that are sure to look like covered claims. As I teach my Insurance Law students, every complaint has at least two counts. Count One says, "The defendant intentionally shot me." Count Two says, "The defendant negligently shot me." And Alberts's complaint dutifully recited a number of claims that facially fell within coverage, such as medical malpractice, and her lack of informed consent to his "joke."

Insurers often must defend claims for which, in a perfect legal system where I personally decided every coverage question, they would not actually have to pay. This is called the "Four Corners", or "Eight Corners," rule. After comparing the complaint with the insurance policy, if any part of the complaint potentially falls within any of the policy provisions (we're up to eight corners now), the insurer must defend, even if a full picture would show that the claim isn't really covered.

It's easy to criticize this rule when we understand all the facts. But typically, neither the insurer nor the policyholder knows all the facts when a complaint is filed. The policyholder can't wait for a full investigation before beginning his defense; the litigation process is the investigation. Insurers often believe that when the facts emerge, they will favor a no-coverage position. But insurers have an obvious incentive to err on the side of their own interests. The Four Corners rule requires them to err on the side of coverage.

The Woo court added a gloss to this rule. Unsurprisingly, caselaw on coverage for inserting boar tusks into anesthetized patients is rather thin. Fireman's pointed to a line of cases denying coverage where physicians had sexually assaulted drugged patients. Those decisions held that such assaults had no conceivable relationship to medical treatment, and therefore, did not trigger a "professional services" liability policy. The court of appeals thought this disposed of Woo's case, but the Washington Supreme Court held that an insurer must also give the benefit of any legal uncertainty to the policyholder.

Thus, insurers must construe both the factual allegations of an underlying complaint (e.g., whether the conduct was negligent or intentional) and the existing law of insurance coverage (e.g., whether practical jokes are akin to sexual assault) in the policyholder's favor. Abstractly, this is probably the correct answer, given the legal system's comprehensive allocation of uncertainties against insurers, but it puts insurers in an awkward position.

No Controlling Legal Authority

Fireman's had obtained an attorney's "opinion letter" advising that it had no duty to defend. Opinion letters are generally worthless, and this was no exception. The letter carefully noted the unsettled reach of the "sexual assault exception," but concluded there was no duty here. The Washington Supreme Court found that Fireman's had thus given itself, rather than its policyholder, the benefit of the doubt.

This explicit extension of the Four Corners rule to legal uncertainty is very interesting, and I'm going to label it the "Four Corners and the Magic Eight Ball Rule": The insurer must defend whenever the body of insurance law does not unequivocally establish noncoverage. If, upon peering into Ball, an insurer's $300/hour oracles report the situation "hazy" or "outlook not so good," it must defend.

This rule is appealing, but it has real costs. An insurer faithfully applying it will end up defending cases where the likelihood of coverage is remote, but detectable. Very few legal issues permit slam-dunk, no-judge-in-his-right-mind-could-hold-otherwise answers. Moreover, it is often impractical for insurers to defend a case the policyholder is certain to lose (a sadistic dentist, for example), while still avoiding payment because they think the claim isn't covered. Smart plaintiffs' lawyers invariably put settlement offers on the table. These force insurers to weigh the risks of walking away, thus inviting a large settlement by the policyholder (who is free to act once the insurer has left the room), or taking a losing case to trial, thus inviting a catastrophic award from an angry jury. Either scenario creates an opportunity for a bad faith claim. Thus, an insurer that refuses to defend or settle a claim risks far more than the value of the policy unless its lawyer can guarantee victory on the question of coverage.

Ultimately, while policyholders who are being sued may benefit from the Washington Supreme Court's rule, other policyholders will bear the cost - passed on by their insurers -- of the incorrect payouts that inevitably arise from the imperfect machinery of litigation. That tradeoff may be worthwhile, but I am not so sure.

Smile! Thanks, Now I'm Covered

Unfortunately, the court went further than it needed to, and determined that Dr. Woo's perversions constituted the practice of dentistry, and thus were actually covered, rather than potentially covered. According to the 5-4 ruling, the stunt "did not interrupt the dental surgery procedure." Rather, "Woo's insertion of the boar tusk flippers was intertwined with and inseparable from the real treatment he performed on Alberts[.]"

A quick search for the precise legal term that describes these conclusions reveals that "stupid" falls most readily to hand. According to the uncontested account accepted by the court, Woo did indeed interrupt the scheduled procedure. The majority opinion offers nothing to explain how boar tusks, pried eyelids, and amateur photography contributed to the treatment of Alberts. As a vigorous dissent noted, the majority's approach leaves a doctor covered for any misconduct "as long as the victim is anesthetized and sitting in a dentist's chair."

In partial defense of the result, such cases do present a genuine dilemma. It is precisely because Dr. Woo was using his medical training and skills that his violation of trust was so grave. Had he taped a pair of tusks to Alberts's mouth while she was passed out after an office cocktail party, most people would have a somewhat different reaction; it would not obviously impugn him as a physician, though it might be in poor taste.

The court should have considered a more functional approach to distinguishing between medical treatment that merely goes seriously awry, and the misuse of medical skill to achieve unlawful ends. Imagine that two gynecologist brothers are insane. They decide that the best way to help pregnant women would be to kidnap and operate on them using special obstetrical tools they have designed. Undoubtedly, such bloody efforts would fall within the definition of the practice of medicine. But it is odd to think that the very instrument of wrongdoing - their medical training - would insulate them from the liability consequences of that instrument's misuse.

On the other hand, assigning to professional liability insurers responsibility for all harms related to one's professional station might be the most effective way to combat misbehavior. In abuse cases of all kinds, we frequently question why the relevant licensing authority or employer didn't act more quickly when warning signs first appeared. It is interesting to note that Woo is still practicing dentistry. If he were deemed uninsurable because of his extracurricular hobbies, that might be a more effective deterrent to abuse than the unpredictable lightning strike of crushing tort liability.

Finally, the court examined the question of intent. Readers with a background in torts and some familiarity with insurance may wonder why Woo's coverage wasn't denied under the standard exclusion for "expected or intended injury." The short answer is that many courts require that the resulting harm be intended in order for this exclusion to operate.

The term "accident," which is the touchstone of insurance coverage, has historically had a number of somewhat confused definitions. Believe me, one could write a book-length treatment of this deceptively simple word. Indeed, in several well-known cases, policyholders committed arson and were convicted of murder. But they retained liability coverage because they intended only to destroy property or collect insurance money, and thought nothing of the victims who perished! Because Woo likely did not intend harm, but merely acted without regard to Alberts's dignity, the court found her injuries "accidental," and the exclusion did not apply.

Those Aren't Cavities, They're Zeroes

The rest is destined that place in legal history reserved for hot coffee lawsuits and false advertising claims against the makers of The Neverending Story. Because his insurer should have defended him, Dr. Woo recovered the $250,000 he had paid Alberts. But he also claimed emotional distress due to his insurer's abandonment. Despite "the absence of any medical, psychiatric or expert testimony" attesting these injuries, a jury awarded him $750,000, which suggests the rather even quality of justice throughout the judicial system of Washington State. And naturally, Fireman's had to pay for Dr. Woo's legal costs.

Woo will surely become an insurance casebook classic. I have only been able to touch on a few of the important issues it raises. Is Woo all wrong? I wish it were. There is not a single page of the majority opinion - including the facts, the supremely unpersuasive leaps of reasoning, and the payoff at the end - that does not infuriate. I suspect that Fireman's counted on that very reaction; it must have been stunned to see Woo emerging throughout as a sympathetic victim of a well-intended practical joke gone awry! Students of legal rhetoric would do well to study this case; one merely has to contrast the tone of the majority opinion with that of the dissent (and the lower appellate opinion, now reversed) to see the impact of framing an issue. Perhaps if the judges had seen an "assault," rather than a "practical joke," they might have hesitated before bending the supple law of insurance coverage in Woo's favor.

My judgment is that Woo is a profoundly distasteful application of a seemingly worthy rule. I have to believe that insurance law is capable of doing better in unusual cases like this. But if it isn't, then we ought to rethink how comfortable we are with the costs of its presently creaky administration, and what practical alternatives exist. Most of the time, I think the legal system is correct to allocate doubts against insurers, but this is the rare case in which the result is plainly unjust. Perhaps the court didn't mean everything it said; some later passages equivocate on the issue of "conceivable vs. actual" coverage.

I'm reminded of the one argument I find convincing in favor of the "exclusionary rule," which frees the guilty criminal in order to vindicate the rights of the innocent. In law school, my Criminal Law professor observed that the usual alternative - punishing rights-violating police officers - wouldn't actually result in more convictions. The police would simply avoid the bad behavior thought necessary to catch the criminals. The only difference between that system and the current one is that now, we have to watch the crook smirking as he walks out of court a free man. Perhaps that is how one should feel about the Woo case.

Dr. Woo's attorney describes his client as a "kindhearted, fun-loving man." Perhaps if he had it to do all over again, he would instead present Alberts with a birthday cake while singing "Spider Pig". But then, he wouldn't be a rich man today. Woo's attorney also believes that the decision will send a message to insurers that they should think twice before abandoning their policyholders. He is probably correct. But I wonder whether the residents of Washington will get that message. Most people don't particularly like going to the dentist, and this perverse outcome is unlikely to help. Perhaps that's the real legacy of Dr. Woo: the next time a patient squirms in the dentist's chair and wonders, "Is it safe?", the answer will be no.