Owatonna Clinic-Mayo Health System v. Medical Protective Co., 639 F.3d 806

Background

Owatonna Clinic-Mayo Health System sued its insurer Medical Protective for breach of defense and indemnification after a malpractice judgment.
Medical Protective denied coverage due to Clinic's allegedly deficient notice of a potential claim.
The district court held the Clinic's notice sufficient and that the policy required only that the Clinic reasonably believe allegations may result; trial proceeded on whether the belief was objective.
The jury found the Clinic did actually believe allegations of liability may result, and the district court entered judgment for the policy limits plus prejudgment interest.
On appeal, Medical Protective challenged the notice sufficiency, the reasonableness of the Clinic’s belief, and prejudgment interest; the Eighth Circuit affirmed.
The appeal involved whether the district court properly interpreted a claims-made policy and whether prejudgment interest could exceed policy limits.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the notice complied with the policy’s deeming requirements	Clinic: notice provided sufficient information to trigger coverage.	Medical Protective: notice failed to meet strict statutory form and timing.	Notice was adequate; insurer must investigate and cover if within policy scope.
Whether the Clinic's belief that allegations may result was objectively reasonable	Clinic: belief satisfies the policy's low bar for reasonable belief.	Medical Protective: belief must be based on objective risk or probability.	Belief was objectively reasonable as a matter of law.
Whether prejudgment interest is available beyond the policy limits	Clinic: 60A.0811 allows prejudgment interest on amounts due, including policy limits.	Medical Protective: prejudgment interest cannot push beyond policy limits or be excessive.	Prejudgment interest awarded in addition to the policy limits; statute unambiguous.
Whether the policy language restricting indemnity to limits trumps prejudgment interest	Policy limits apply to principal indemnity, not prejudgment interest.	Policy language constrains insurer’s obligation to indemnity within limits.	Policy language construed against insurer; interest supplements the amount due.

Key Cases Cited

Metropolitan Life Ins. Co. v. Golden Triangle, 121 F.3d 351 (8th Cir.1997) (appealability of legal-question rulings after final judgment discussed)
White Consol. Indus., Inc. v. McGill Mfg. Co., 165 F.3d 1185 (8th Cir.1999) (permissible appealability of purely legal rulings after final judgment)
Estate of Blume v. Marian Health Ctr., 516 F.3d 705 (8th Cir.2008) (treatise on preserving legal errors for appeal after trial)
Hertz v. Woodbury County, Iowa, 566 F.3d 775 (8th Cir.2009) (discusses preservation and review of legal questions on appeal)
Studnicka v. Pinheiro, 618 F.3d 799 (8th Cir.2010) (Rule 50 not required where issues were not fully tried; consent-like issue example)
St. Paul Fire & Marine Ins. Co. v. Metropolitan Urology, 537 N.W.2d 297 (Minn. Ct. App.1995) (notice adequacy under claims-made policies bolsters insurer's duty to investigate)
Burdette v. Federal Savings & Loan Ins. Corp., 718 F.Supp. 649 (E.D.Tenn.1989) (notice adequate where letters described events; insurer may limit coverage to mentioned events)
Lessard v. Milwaukee Ins. Co., 514 N.W.2d 556 (Minn.1994) (prejudgment interest exceptions when combined with damages exceeding policy limits (scene pre-60A.0811))
Nathe Bros., Inc. v. American Nat'l Fire Ins. Co., 615 N.W.2d 341 (Minn.2000) (Minnesota recognizes broader notice adequacy principles)
Reliance Ins. Co. v. St. Paul Ins. Cos., 307 Minn. 338, 239 N.W.2d 922 (Minn.1976) (notice and coverage interpretations inform insurer duties)
Metropolitan Urology, 537 N.W.2d 297 (Minn. Ct. App.1995) (agency-wide interpretation of notices under claims-made policies)