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Vol. 7, Iss. 6
July 18, 2018


When Sexual Misconduct Could Be A “Professional Service”

As a general rule, an individual seeking coverage, for liability on account of sexual misconduct, has an uphill battle -- and often-times a steep one at that. When the issue arises under a liability policy, often homeowner’s, challenges to coverage can be the lack of an occurrence (accident), exclusions for expected or intended injury or criminal acts and coverage prohibitions for reasons of public policy.

Claims for sexual misconduct can also arise under Professional Liability policies, such as those issued to medical professionals. Here too there can be high hurdles to coverage – although usually involving some different ones than under a liability policy. One issue that often arises, under a Professional Liability policy, is whether the alleged sexual misconduct was caused while the insured was performing a “professional service.” The question whether a loss was caused by an insured performing a “professional service,” whatever that may be, is a common one in many professional liability claims.

On one hand, that seems to be a question with an easy answer, as an Ohio Appeals Court recently noted in Beattie v. McCoy, No. C-170197 (Ohio Ct. App. June 29, 2018): “Under the natural and commonly accepted meaning of the policy terms, a physician, like McCoy, does not provide a ‘professional service’ by engaging in sexual conduct with a patient. Sexual conduct is not specifically identified as a professional service in the policy. It is so dissimilar from the professional services enumerated in the policy, that no construction of the policy language would support coverage for sexual conduct as a ‘professional service.’”

On the other hand, the issue could be less clear-cut than it seems, as it was the fact that the perpetrator was a physician that afforded him or her access to the patient-victim, not to mention with physical proximity perhaps being inherent part of the relationship. Therefore, arguments are sometimes made – on this basis and others tied to the nature of the physician-patient relationship -- that coverage is available to a physician, under a Professional Liability policy, for alleged sexual misconduct.

One such argument was made in Beattie. And despite the court’s strong pronouncement – “no construction of the policy language would support coverage for sexual conduct as a ‘professional service’” – it nonetheless described one manner in which coverage for sexual misconduct could be afforded.

Terrance McCoy had been Dolly Beattie’s internist since 1996. In October 2010, she informed him that she was suffering from depression. McCoy referred Beattie to a clinical therapist. In 2011, Beattie visited McCoy complaining of pain in her hands and body aches. McCoy examined Beattie’s back and shoulders. This led to a consensual romantic encounter. From there, Beattie and McCoy, both married, began, what the court described as a “tumultuous” sexual relationship.

The relationship soured. Beattie filed a complaint with the state medical board, which undertook an independent investigation. McCoy was forced to surrender his medical license in 2012 with no opportunity for reinstatement.

Beattie also filed suit against McCoy. She alleged that McCoy’s sexual behavior constituted medical malpractice. The trial court ruled in her favor and awarded over $850,000. Among other things, at issue before the Ohio appeals court – I’m eliminating some aspects not relevant -- was the availability of coverage under McCoy’s professional-liability policy. The question being whether McCoy injured Beattie “while performing a professional service?” The insurer defended McCoy under a “strict reservation of rights,” but declined any duty to indemnify him.

Of note, a significant issue in the underlying medical malpractice action was Beattie’s ability to offer the testimony of an expert – Stuart Bassman, Ed.D., a clinical psychologist. Bassman’s testimony became important in the coverage case. According to Bassman, “Beattie had sustained aggravation of her post-traumatic stress disorder (‘PTSD’), because of the affair with McCoy. Beattie already suffered from PTSD and other issues, including depression and anxiety, because of prior sexual violence inflicted on her in her youth. In Dr. Bassman’s opinion, McCoy should have known that Beattie was vulnerable because of her history, and with that knowledge, he exploited and ‘revictimized’ Beattie by having a sexual relationship with her.” Bassman also maintained that “Beattie exhibited transference phenomenon: when a patient unconsciously projects on an authority figure, like a treating psychologist in a psychotherapeutic relationship, feelings and behaviors associated with significant persons in the patient’s life.”

Turning to the availability of coverage, as noted above, the court seemed predisposed against it: “[N]o construction of the policy language would support coverage for sexual conduct as a ‘professional service.’” However, despite this, the court seemed open to the possibility that coverage, for sexual misconduct, could be owed on the basis that it qualifies as a “professional service.”

Specifically, the policy at issue provided coverage when an “insured becomes legally obligated to pay because of professional services * * * which should have been provided.” Beattie, arguing for coverage under McCoy’s policy, maintained that “refraining from sexual conduct with Beattie or rebuking her sexual advances was a part of the professional services that McCoy should have rendered. Beattie offered Dr. Bassman’s transference opinion to establish that McCoy, as a treating physician, was required as part of his professional services to avoid sexual misconduct with a patient exhibiting positive transference.”

In support of this argument, Beattie relied on a 1990 Minnesota Supreme Court opinion – St. Paul v. Love – where the court held that “sexual misconduct that is inextricably related to a therapeutic relationship between a psychologist and his patient, being treated for marital problems and childhood sexual abuse, could fall within the coverage of a therapist’s professional-liability insurance policy. The sexual conduct in Love, while ‘aberrant and unacceptable,’ was ‘so related to the treatment contemplated’ that it came within the scope of the insurance coverage for professional services provided or withheld.”

But the Beattie court was not persuaded: “Even under Love, Beattie cannot demonstrate as a matter of law that McCoy’s sexual conduct was inextricably related to the professional services that he provided or withheld.” The court noted that McCoy’s therapeutic relationship with Beattie was a limited one: “Since 1996, McCoy had been treating Beattie for a variety of minor medical ailments. When, in October 2010, Beattie informed McCoy that her depression was worsening and asked him for help, McCoy did not enter into an involved ‘therapeutic alliance’ with her. Rather he referred Beattie to Dr. Janet Stedman, a clinical therapist, for treatment of depression and anxiety. Her first appointment with Dr. Stedman was on October 21, 2010, almost exactly one year before McCoy’s sexual conduct began. While McCoy continued to prescribe medicine for these conditions, there is nothing in the record to indicate that McCoy engaged in the type of intimate psychological therapy contemplated in Love or in the Ohio cases cited above. McCoy’s deposition testimony revealed that he was not aware of traumas in Beattie’s childhood or young adult life. And Beattie, rather than being in thrall ‘to the authority of her trusted physician,’ threatened throughout the turbulent affair to report McCoy to the state medical board and to reveal their sexual relationship to his wife, and ultimately did so. Thus McCoy’s sexual conduct was not inextricably related to the medical or mental professional treatment that Beattie received. Beattie has not established that McCoy’s sexual conduct was a consequence of his treatment of her depression and anxiety, and thus his failure to avoid that conduct was a professional service which he should have provided.”

While Beattie/McCoy were handed the same result as many seeking coverage for injuries caused by sexual misconduct, the decision certainly leaves open the possibility of coverage, for a physician, if the sexual conduct was inextricably related to the medical or mental professional treatment that the patient received.

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