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NCRIC, Inc. v. Columbia Hospital For Women Medical Center

October 2, 2008

NCRIC, INC., APPELLANT,
v.
COLUMBIA HOSPITAL FOR WOMEN MEDICAL CENTER, INC., APPELLEE.



Appeal from the Superior Court of the District of Columbia (CAB-7308-00) (Hon. Anna Blackburne-Rigsby, Trial Judge).

The opinion of the court was delivered by: Glickman, Associate Judge

Argued October 5, 2006

Before REID and GLICKMAN, Associate Judges, and KING, Senior Judge.

In October 2000, NCRIC, Inc. ("NCRIC," formerly the National Capital Reciprocal Insurance Company), a provider of medical malpractice insurance to District of Columbia physicians, sued the Columbia Hospital for Women Medical Center, Inc. ("Columbia") in Superior Court for breach of their insurance contract. Columbia counterclaimed, alleging, inter alia, that NCRIC breached the contract and also tortiously interfered with Columbia's business relations with its physicians. After a two-week trial, a jury rejected NCRIC's claim and found in favor of Columbia on its counterclaims. The jury awarded Columbia damages of $220,002 on its breach of contract claim and $18 million on its tortious interference claim.

NCRIC asks us to reverse the verdict and remand for a new trial. Its appeal focuses on Columbia's tortious interference claim. Columbia charged that NCRIC induced over thirty of its attending physicians to leave the hospital in the summer and fall of 2000 in retaliation for Columbia's resistance to NCRIC's improper demands for insurance payments to which it was not contractually entitled. According to Columbia, this NCRIC-induced "exodus" of almost half its medical staff ultimately forced it to cease operations in May 2002. NCRIC denied that it induced Columbia's physicians to leave or that it was responsible for Columbia's demise. NCRIC claimed the physicians bailed out because they realized Columbia was dying, and it did what was appropriate in the circumstances to preserve its existing contractual relationships with them.

Although NCRIC disagrees with the verdict, it does not challenge the sufficiency of the evidence to permit the jury's finding of tortious interference. Its appeal presents three other issues. The first issue concerns the trial court's instruction on the elements of the tort. NCRIC asserts the court erred by failing to tell the jury it had to find some wrongful conduct on NCRIC's part in order to impose liability for its intentional interference with Columbia's business relations. We conclude the court did not err in rejecting NCRIC's request for such an instruction. Wrongful conduct is not an element of a prima facie case of tortious interference under District of Columbia law. Rather, the burden was on NCRIC to establish that its intentional interference was legally justified or privileged. NCRIC might have been entitled to an affirmative defense instruction to that effect, but it never requested one. The trial court was under no duty to craft such an instruction for NCRIC sua sponte.

The second issue NCRIC raises is whether Columbia presented sufficient evidence to support the jury's award of $18 million for the tortious disruption of its business relations. NCRIC contends that Columbia's evidence of its damages was speculative or flawed in various respects. We reject NCRIC's challenges to the award, mainly because NCRIC did not preserve them at trial.

Lastly, NCRIC contends the trial court should have granted its request for a remittitur in light of evidence that a Columbia witness overstated one component of the hospital's damages by a million dollars. Because it is speculative whether the million dollar error actually affected the amount of the jury's award, we conclude the court did not abuse its discretion in denying NCRIC's request.

I. Summary of the Facts

Founded in 1866, Columbia was a federally chartered hospital specializing in the provision of health care to women and infants in the District of Columbia. NCRIC, a company created by local physicians in 1980, is the leading provider of medical malpractice insurance in the District. In 1993, Columbia and NCRIC entered into a malpractice insurance program known as the "Retrospective Rating Plan" or "Retro Plan." The Retro Plan was designed to lower the premiums paid by Columbia's attending physicians by having Columbia and NCRIC share the malpractice risk. Under the Plan, Columbia and NCRIC agreed to adjust the initially discounted premiums retrospectively on the basis of actual loss experience. If losses for a given plan year proved to be higher than anticipated, Columbia was to pay NCRIC an additional premium. If the losses were lower than expected, NCRIC was to give Columbia a refund.

By September 1996, when the original Retro Plan expired, the parties had determined that NCRIC owed Columbia a refund for the first year of the program, 1993-1994. In November 1996, however, NCRIC proposed that no money be exchanged until all claims for all the plan years were resolved. Columbia accepted that proposal. NCRIC agreed to pay interest on amounts it owed Columbia.*fn1

Without formally renewing the Retro Plan, Columbia and NCRIC continued after 1996 to operate in accordance with its terms. NCRIC did not send out termination notices and Columbia's physicians still received premium discounts. Meanwhile, however, Columbia's claims record and financial condition were sources of growing concern. In late 1997, NCRIC informed Columbia that it would terminate the Retro Plan because of the hospital's "precarious financial condition" unless Columbia paid NCRIC $1.7 million. This was the amount NCRIC believed Columbia owed in additional premium payments in light of claims experience to that point. NCRIC later reduced the sum it required as a condition of renewal to $1 million. Columbia objected but acceded to NCRIC's demand in order to prevent the abrupt cancellation of its physicians' malpractice insurance coverage. Columbia understood the million dollar payment as equivalent to an escrow of funds or "security deposit" that would "stay on Columbia's books" and earn interest, pending the resolution of all covered malpractice claims and the final determination of the parties' liabilities.

In February 1998, Columbia filed for bankruptcy. The filing was precipitated by the decision of Columbia's main lending institution to foreclose on a $22 million line of credit. Columbia's witnesses at trial identified NCRIC's demand for $1 million as a substantial contributing cause of its bankruptcy. NCRIC presented expert witness testimony that Columbia was failing because, as a maternity hospital offering a limited range of obstetric and gynecological services, it occupied a vulnerable niche position in a highly competitive health care market with substantial excess capacity.

While Columbia was in bankruptcy, it received a proposal for malpractice insurance from Medical Inter-Insurance Exchange ("MIIX"), a national insurance company. The MIIX proposal appeared to be considerably less expensive than NCRIC's Retro Plan. Upon learning of the competitive offer, NCRIC sent Columbia a letter stating that its "insureds are obviously concerned with the hospital's attempt to replace NCRIC with a 'foreign' company," and that Columbia "should understand that NCRIC intends to continue providing its much needed insurance protection to the physicians in this program with or without the support of [Columbia]." NCRIC representatives directly urged Columbia's physicians to move to other hospital programs where they could maintain their NCRIC insurance coverage if Columbia discontinued its participation in the Retro Plan. Reportedly, NCRIC's officers told the physicians that NCRIC's lawyers would not represent them in malpractice suits if Columbia obtained coverage from MIIX, and falsely stated that members of Columbia's Board of Directors stood to gain personally from selecting MIIX as their insurer.

Columbia's Board ultimately decided to renew its Retro Plan with NCRIC

Columbia emerged from bankruptcy with a court-approved plan of reorganization in February 1999. Among other things, Columbia renegotiated its contracts with HMOs and vendors; added a new wing of luxury suites and expanded its range of medical services beyond obstetrics and gynecology; recruited surgeons; and cut its operating deficit in half. The efficacy of these turnaround efforts was disputed at trial. There was evidence that the hospital's admissions and market share increased, and that it stopped losing money in May 2000. Its chief executive officer testified that the hospital would have made a profit in fiscal year 2000 if patient referrals had remained stable. NCRIC presented evidence, however, that Columbia was able to offset its operating losses only by selling assets to raise cash -- a short-term stopgap rather than a viable business strategy. There was testimony linking Columbia's on-going financial difficulties to serious operational and patient safety problems, including supply shortages and loss of nursing staff.

In the spring of 2000, Columbia and NCRIC began negotiating renewal of the Retro Plan, which was set to expire in September of that year. Columbia's Board was interested in reducing the hospital's risk exposure, while NCRIC was concerned Columbia would be unable to carry its share of the potential liabilities in malpractice cases. Columbia also sought to recover its $1 million "deposit," and claimed that NCRIC had miscalculated its minimum premium payments under the old Retro Plan and owed Columbia approximately $400,000 in addition to the refunds due for two plan years. NCRIC, however, claimed that Columbia still owed premiums for prior years.

NCRIC initially requested that Columbia pay $944,000 as a condition of renewing the Retro Plan. Columbia refused, and NCRIC reduced its demand to $750,000. In June 2000, NCRIC's CEO, Mr. Pate, told Columbia's CEO, Mr. Wilson, that "there was going to be a train wreck" if Columbia rejected NCRIC's demand, and that Columbia's doctors would "leave and go to Sibley [Hospital]." Wilson took this statement as a "threat."

On June 27, 2000, the Columbia Board rejected NCRIC's terms and directed Wilson to continue negotiating with NCRIC. The following day, after being informed of Columbia's decision, NCRIC issued a formal notice that the Retro Plan would terminate on September 1, 2000. Wilson testified he did not expect to receive the notice of termination because NCRIC had never "done anything like this in prior years of negotiation."

Two days later, NCRIC cancelled a separate malpractice insurance policy it had issued six months earlier to cover Columbia's community health clinic. This was a bolt from the blue for Columbia, as the clinic was current on its premium payments. Atypically, NCRIC's letter announcing the termination did not explain the reason for its action. At trial, NCRIC witnesses testified that the clinic policy was cancelled because Columbia's self-insurance trust was underfunded -- a fact NCRIC knew when it issued the policy. Columbia's Board viewed the termination of the Retro Plan and the clinic policy as "retaliation by NCRIC because [the Board] refused to acquiesce to their money demand."

On July 10, 2000, NCRIC issued bills to Columbia's physicians that did not include the Retro Plan discount, charging tens of thousands of dollars more in premiums than the physicians had expected. NCRIC had never issued undiscounted bills during previous renegotiations of the Retro Plan, even when the parties operated for over a year without any insurance contract in place. As one Columbia doctor testified, upon receiving the July bills, "physicians panicked and . . . had to make a decision immediately as to what they wanted to do. Did they want to pay the full amount or are they going to get a discounted amount at the place where [NCRIC] will tell them to go[?]" At about the same time, NCRIC's Board Chairman met with leading members of Columbia's medical staff and advised them that "if Columbia does not have a Retro Plan with NCRIC, . . . the doctors should pack and leave because the hospital is going to close." A "Plan of Action" adopted by NCRIC's Board of Directors on July 11, 2000, envisioned that NCRIC would help "our [Columbia] physicians" transfer to NCRIC-insured programs at other District of Columbia hospitals.

NCRIC and Columbia continued to negotiate a renewal of the Retro Plan. A tentative agreement reached on August 15 was disavowed by NCRIC's CEO, Mr. Pate. With the Retro Plan due to expire on September 1, Columbia secured alternative coverage from another malpractice insurance carrier. However, Columbia's CEO, Mr. Wilson, testified that this was "too little, too late" to prevent physicians from leaving the hospital.

On October 1, 2000, NCRIC issued an unusual endorsement to all its individual malpractice insurance policies. The endorsement excluded coverage for any medical care its insured physicians might render at Columbia's community health clinic after November 15, 2000. The letter from NCRIC's Director of Underwriting announcing the new exclusion stated that "NCRIC no longer considers it a prudent underwriting risk to insure any activities at the Clinic." ...


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