Bradley DeWall, M.D.; Wound Management Consultants, P.C. v. Medical Protective Company

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 22-1952
___________________________
Bradley DeWall, M.D.; Wound Management Consultants, P.C.
lllllllllllllllllllllPlaintiffs - Appellants
v.
Medical Protective Company
lllllllllllllllllllllDefendant - Appellee
____________
Appeal from United States District Court
for the Southern District of Iowa - Eastern
____________
Submitted: October 19, 2022
Filed: February 7, 2023
____________
Before LOKEN, GRUENDER, and GRASZ, Circuit Judges.
____________
LOKEN, Circuit Judge.
Medical Protective Company (“MedPro”) issued Professional Liability policies
to Dr. Bradley DeWall and Wound Management Consultants, P.C. (collectively,
“WMC”). Coverage Paragraph A insured WMC against “claim[s] for damages . . .
based on professional services rendered or which should have been rendered . . . by
the insured . . . in the practice of the insured’s profession.” In this coverage action,

-- 1 of 11 --

the parties dispute whether Paragraph A covers a third party’s claim to recover
Medicare reimbursements it had to repay because of deficiencies in WMC’s
documentation of the professional services it provided. Applying Iowa law, the
district court1 ruled, consistent with other courts that have considered the issue, that
the third party’s “Medicare recoupment” claim is not “based upon professional
services” and therefore coverage is limited to the $50,000 of defense costs provided
in the policies’ separate Medicare Endorsement.2 See DeWall v. Med. Protective Co.,
1The Honorable Robert W. Pratt, United States District Judge for the Southern
District of Iowa.
2As relevant here, coverage Paragraph A in Dr. DeWall’s policy provides that
MedPro:
hereby agrees to defend and pay damages . . .
A. In any claim first made, or potential claim first brought to the
Insured’s attention, during the term of this policy based upon
professional services rendered, or which should have been rendered,
after the retroactive date by the Insured, or any other person for whose
acts or omissions the Insured is legally responsible, in the practice of the
Insured’s profession as hereinafter limited and defined.
“Professional services” is defined as “the rendering of medical . . . services to a
patient and the provision of medical examinations, opinions, or consultations
regarding a person’s medical condition within the Insured’s practice as a licensed
health care provider.”
The Medicare Endorsement in each policy, titled “Medicare/Medicaid Billing
Actions Limited Defense Coverage,” provides in relevant part:
It is hereby understood and agreed the Company’s obligation to
defend the Insured under the terms of the policy is broadened to include
the defense of an Insured in an investigation, civil suit and/or
administrative proceeding which is brought by a state or federal agency
which alleges improper submission of claims for reimbursement under
the Medicare or Medicaid program. However, the . . . proceeding must
-2-

-- 2 of 11 --

No. 3:21-cv-00010, 2022 WL 1447720 (S.D. Iowa Apr. 6, 2022). WMC appeals this
summary judgment ruling, raising numerous issues. Reviewing the grant of summary
judgment and the district court’s interpretation of the policies de novo, we affirm.
See Great W. Cas. Co. v. Nat’l Cas. Co., 807 F.3d 952, 956 (8th Cir. 2015).
I. Background
In a 2013 Management Services Agreement (“MSA”) with Genesis Health
System, WMC agreed to be the exclusive manager of care centers operated by
Genesis in Illinois and Iowa (the “Clinic”) specializing in wound care and hyperbaric
therapy services. In a Physician Medical Direct Services Agreement (“PMDSA”), Dr.
DeWall agreed to serve as Medical Director of the Clinic, including “participat[ion]
in Medicare, Medicaid, and any other federal or state funded health care programs.”
After an audit by the Inspector General of the Centers for Medicare and
Medicaid Services (“CMS”), a CMS contractor notified Genesis that non-complying
reimbursements had been found and directed Genesis to conduct an internal audit and
return any overpayments. After an internal audit in which WMC Clinic staff located
and identified documentation, and a repayment demand by the CMS contractor,
Genesis repaid CMS $773,779 in Medicare overpayments. In January 2020, Genesis
initiated an arbitration against WMC seeking to recoup the repayments, alleging
breach of contract for failure to properly perform work under the two agreements.
WMC timely notified MedPro of the arbitration action in January 2020.
MedPro promptly reviewed what it considered an “unusual Medicare billing issue”
arise from bills or requests for reimbursement for professional services
rendered or which should have been rendered by the Insured . . . .
5. The Company will not pay more than $25,000 in defense costs
for any single “incident” covered by this endorsement.
-3-

-- 3 of 11 --

and advised Dr. DeWall that the Medicare Endorsement in his policy “is triggered by
the Genesis arbitration.”3 In February, March, and April, MedPro repeatedly
communicated to Dr. DeWall and separately to WMC’s outside counsel that coverage
under the two policies was limited to the Medicare Endorsement’s limit of $25,000
in legal expenses per policy and that “[o]nce the $50K threshold is met, you will be
responsible for any amount over that.” In July 2020, MedPro informed DeWall and
WMC counsel that the defense coverage had been exhausted and that all future bills
should be sent to WMC.
On August 19, 2020, counsel for WMC wrote MedPro’s claims specialist,
asserting for the first time that the policies’ professional services coverage Paragraph
A applied to the Genesis arbitration claim and therefore MedPro’s duty to defend
required it to pay all costs of defense, not just $50,000. Counsel for MedPro and
WMC then exchanged lengthy letters debating this issue. In February 2021, WMC
commenced this federal diversity action. WMC’s Amended Complaint seeks a
declaratory judgment that MedPro has a duty to defend and indemnify under
Paragraph A, reimbursement of defense expenses already incurred -- $284,188.90 in
attorney’s fees and $43,375 in expert witness expenses -- and additional claims for
breach of contract, promissory estoppel, and bad faith.4
3Paragraph 75 of WMC’s Amended Complaint falsely alleged that MedPro
acknowledged “that [the Policies are] triggered by the Genesis Arbitration,” a rather
clear violation of Rule 11(b)(3) and counsel’s duty of candor to the court. MedPro’s
letter to Dr. DeWall stated: “We have completed our review of the Medicare
Endorsement included in your policy and concur that it is triggered by the Genesis
arbitration.” As the district court put it, while “Plaintiffs’ attorney’s repeated
assertions including this integral omission may be viewed by some as acceptable
practice, they may be viewed by others as crossing the line into dishonesty.”
4Counsel for WMC did not include the Amended Complaint in the Sealed Joint
Appendix, meaning they do not consider it a relevant pleading. See Fed. R. App. P.
30(a). Our decision to affirm takes that into account.
-4-

-- 4 of 11 --

In March 2021, WMC sued Genesis in Iowa state court, alleging Genesis
improperly terminated the MSA and PMDSA and seeking over $2 million in
compensatory and punitive damages. Genesis counterclaimed, again asserting its
Medicare recoupment claim. The arbitration action and this action were pending
when the district judge ruled on the parties’ cross motions for summary judgment.
WMC’s motion for partial summary judgment argued that Genesis’s arbitration
claims fall within coverage Paragraph A, because they are “based upon” a doctor’s
orders and diagnoses which are within the policy definition of “professional services”
and therefore triggered MedPro’s unlimited duty to defend. Under the MSA and
PMDSA agreements, Genesis had sole billing responsibilities; WMC and DeWall
were responsible only for patient treatment and documentation. Moreover, WMC
argued, the Medicare Endorsement did not apply “on its face” because the Genesis
arbitration is not the defense of a proceeding “brought by a state or federal agency.”
MedPro argued that the Genesis claims fall squarely within the Medicare
Endorsement, limiting MedPro’s duty to defend under each policy to $25,000 per
incident, a duty extinguished by its payment of $50,000.
II. Paragraph A Coverage Issues
Neither party challenges the district court’s determination that Iowa law
governs these issues. Under Iowa law, an insurer’s “duty to defend arises whenever
there is potential or possible liability to indemnify the insured based on the facts
appearing at the outset of the case.” Employers Mut. Cas. Co. v. Cedar Rapids TV
Co., 552 N.W.2d 639, 641 (Iowa 1996) (emphasis in original; quotation omitted).
The duty to defend “rests solely on whether the petition in the action against the
insured contains any allegations that arguably or potentially bring the action within
the policy coverage.” Id. (emphasis in original; quotation omitted). “In deciding
whether an insurer has a duty to defend, the first query is into [the third party]
plaintiff’s pleadings to see if the pleadings state facts which bring the claim within
-5-

-- 5 of 11 --

the liability covered by the policy.” Id. at 642 (emphasis in original; quotation
omitted).
Reviewing de novo, we look to the facts alleged in Genesis’s arbitration action.
Regarding Medicare reimbursement, Genesis alleged:
31. WMC agreed to “assure compliance with all requirements
from third party payors or other reimbursement programs, including, but
no limited to, Medicare and Medicaid.”
32. In the [MSA], Genesis agreed to ‘retain responsibility for . . .
the billing of the technical function for the operation of the Clinic . . . .
36. . . . Genesis employed case managers (RNs) who performed
administrative billing functions in connection with the Clinic under the
direction and supervision of WMC and Dr. DeWall.
37. The case managers . . . relied on Dr. DeWall and WMC’s
policies, procedures and protocols regarding HBO-specific
reimbursement guidance for hospital coding, finance and claims filing
to gain an understanding of Medicare requirements and reimbursement
rules for HBO therapy services.
38. The case managers . . . relied on WMC physicians to
appropriately document the medical records to support HBO therapy
services provided at the Clinic.
78. In an email dated January 7, 2019, Hal Wagher, Genesis’
Chief Compliance & Enterprise Risk Officer, informed Dr. DeWall that
the [CMS contractor] audit revealed a documentation error rate of 76%
and, as a result, Genesis “refunded over $770,000 to [the contractor] for
the 6 year period.”
79. Hal Wagher noted that the “main issues” found over the
course of [the CMS contractor’s] audit “were missing orders, unsigned
-6-

-- 6 of 11 --

orders, non-covered diagnoses, overuse of copy/paste leading to errors
. . . .”
82. In a letter dated January 18, 2019, [the CMS contractor]
notified [WMC’s Clinic Director] of the results of [the contractor’s]
review process for hyperbaric services provided in the Clinic . . . .
84. Notwithstanding WMC and/or Dr. DeWall’s involvement
with [the contractor’s] review process, [the contractor] found a “Claim
Error Rate of 100.00% . . . .”
85. The issues identified in [the contractor’s] January 18, 2019
letter . . . relate exclusively to treatment authorization and
documentation.
86. Genesis was required to reimburse CMS $773,779.00 because
WMC and Dr. DeWall failed to ensure clinical documents was accurate
and/or adequate for claim submission to [the contractor] (CMS).
(Emphasis added.) The Genesis complaint does not allege or identify one instance
where CMS required reimbursement by Genesis “based on [WMC’s] professional
[hyperbaric therapy] services rendered or which should have been rendered” to
Genesis or patients at the Clinic.
After ignoring or misstating the above-quoted allegations in the Genesis
arbitration complaint, in the district court and again on appeal, WMC argues that
Iowa courts “routinely recognize that patient documentation and assessment are
professional services,” citing opinions in medical malpractice actions against
physicians. But those cases do not address the insurance coverage issue in this case.
Given the prevalence and importance of Medicare reimbursement to health care in
this country, it is not surprising that the question whether Professional Liability
policies cover claims for Medicare reimbursement has arisen in other contexts. The
answer is, with perhaps surprising uniformity, “no.”
-7-

-- 7 of 11 --

We addressed the issue twenty years ago in Jenkins v. St. Paul Fire & Marine
Insurance Co., 8 Fed. App’x 573 (2001) (per curiam). Jenkins was a False Claims
Act qui tam action in which the physician insured was accused of knowingly
submitting false reimbursement claims. We affirmed the district court’s conclusion
that the professional liability insurer owed no duty to defend this claim because “any
award in that action would not have resulted from the ‘providing or withholding of
professional services.’” Id. Accord Zurich Am. Ins. Co. v. O’Hara Reg’l Ctr. for
Rehab., 529 F.3d 916, 921-22 (10th Cir. 2008); Horizon W., Inc. v. St. Paul Fire &
Marine Ins. Co. 45 Fed. App’x 752, 754 (9th Cir. 2002).5
The district court in a thorough opinion concluded that Genesis’s claims are not
covered under the policies’ Paragraph A:
Genesis does not allege a claim “based upon” Plaintiffs’ “rendering of
medical . . . services to a patient and the provision of medical
examinations, opinions, or consultations regarding a person’s medical
condition . . . .” In fact, Genesis specifically told Plaintiffs that the
dispute was not about “the quality of care provided or clinical expertise”
but was solely “about billing documentation.” In its Arbitration
Statement, Genesis expressly stated the “[Plaintiffs] should reimburse
Genesis for [the payments it made to the CMS contractor], which were
required because of [Plaintiffs’] deficient record keeping.”
5WMC relies on a seemingly contrary Fourth Circuit decision, in which a
divided panel held that “failure to render” services is a covered “medical incident”
giving rise to potential coverage of a qui tam false billing claim because, under North
Carolina law, the policy term “arising out of a medical incident” requires only a
causal connection to the third party claim. Affinity Living Group v. Starstone
Specialty Ins. Co., 959 F.3d 634, 641-43 (4th Cir. 2020). But in this case, the
operative term in Paragraph A is “based upon,” which in context must be interpreted
in conjunction with the Medicare Endorsement. See Boelman v. Grinnell Mut.
Reinsur. Co., 826 N.W.2d 494, 501-02 (Iowa 2013). In addition, Genesis does not
claim a “failure to render services,” unlike the plaintiff in Affinity.
-8-

-- 8 of 11 --

DeWall, 2022 WL 1447720, at *9. We agree. Read as a whole, as Iowa law requires,
Paragraph A covers claims “based on professional services,” and the Medicare
Endorsement “broadened” MedPro’s duty to defend to include $25,000 of expenses
incurred in defending allegations of “improper submission of claims for
reimbursement under the Medicare or Medicaid program” when the allegations “arise
from bills or requests for reimbursement for professional services.” The court
declined WMC’s invitation to read Paragraph A as covering this Medicare billing
dispute because that would render the Medicare Endorsement superfluous. See, e.g.,
Boelman, 826 N.W.2d at 502.
Plaintiffs argue, as they did in the district court, that Genesis’s claims are not
covered by the Medicare Endorsement because they are not “brought by a state or
federal agency.” The district court rejected this “misguided argument that the
endorsement does not apply when the alternative is that Plaintiffs have no coverage
for the underlying actions at all. The inapplicability of the Medicare Endorsement
does not ensure Paragraph A will apply.” DeWall, 2022 WL 1447720, at *10. Again,
we agree. While the underlying claim against WMC was brought by Genesis, not by
a state or federal agency, MedPro determined that the claim was covered by the
Medicare Endorsement because “the ultimate claimant is a governmental agency.”
That was a sound interpretation of the Endorsement in this unusual context.
For these reasons, and for the reasons explained by the district court in
rejecting WMC’s “other unavailing arguments,” we conclude MedPro had no duty to
defend WMC from Genesis’s Medicare recoupment claim under the policies’
Paragraph A coverage. We also agree with the district court that there is no duty to
defend the other claims Genesis asserted in its arbitration complaint because those
claims are not “based upon professional services rendered . . . in the practice of
[WMC’s] profession.”
-9-

-- 9 of 11 --

The district court also granted summary judgment dismissing WMC’s duty-to-
indemnify claim because “if there is no duty to defend, there is no duty to indemnify,”
accurately quoting a broad statement in Stine Seed Farm, Inc. v. Farm Bureau Mut.
Ins. Co., 591 N.W.2d 17, 18 (Iowa 1999). On appeal, without discussing this issue,
WMC argues the court erred in concluding MedPro had no duty to defend under
Paragraph A and therefore it erred in dismissing WMC’s indemnity claim because
Genesis’s underlying claim and the state court action remain pending. “The rule
allowing a coverage action to proceed prior to the resolution of the related liability
action where the issues in each case are separable is well accepted.” Greenbriar
Group, L.L.C. v. Haines, 854 N.W.2d 46, 52 (Iowa App. 2014), citing Kelly v. Iowa
Mut. Inc. Co., 620 N.W.2d 637, 643 (Iowa 2000). Here, the district court’s coverage
determination means there is no duty to defend under Paragraph A, making the broad
statement in Stine Seed applicable. The principle was not discussed in Stine Seed and
may not apply if “a ruling on the merits of the parties’ indemnity coverage dispute
hinges on resolution of the underlying [claim].” Certain Underwriters at Lloyd’s,
London v. C&S Properties, LLC, No. 4:21-cv-422-AGF, 2022 WL 103303, at *4
(E.D. Mo. 2022). But Stine Seed is the general rule, and WMC does not challenge
its application in this case.
III. Other Issues
A. Promissory Estoppel. WMC argues that, under the equitable doctrine of
promissory estoppel, MedPro is estopped to deny its duty to defend because it made
representations to Dr. DeWall that its defense obligations were triggered by the
Genesis arbitration claims. To support this contention, WMC cites internal emails
between MedPro employees discussing coverage issues. Internal communications not
conveyed to the promissee cannot support a prima facie case of promissory estoppel,
which requires a “clear and definite promise” on which the promissee relied to his
substantial detriment. See, e.g., Kunde v. Estate of Bowman, 920 N.W.2d 803, 810
(Iowa 2018). WMC also relies on its dishonest modification of a statement in
-10-

-- 10 of 11 --

MedPro’s letter to Dr. DeWall (“MedPro conveyed to Appellants that it ‘concur[red]
that [the Policies were] triggered by the Genesis Arbitration.’”) See supra note 3.
Finally, WMC frivolously argues that MedPro’s payment of $50,000 under the
Medicare Endorsement was an admission that Genesis’s claims “arise from . . .
professional services rendered.” To read the policy this way would be to make the
Medicare Endorsement superfluous and its $25,000 cap nonsensical. The district
court properly granted MedPro summary judgment dismissing WMC’s promissory
estoppel claim.
B. Bad Faith. To succeed on a bad faith claim under Iowa law, the insured
must demonstrate that “the insurer had no reasonable basis for denying benefits under
the policy.” United Fire & Cas. Co. v. Shelly Funeral Home, Inc., 642 N.W.2d 648,
657 (Iowa 2002). In the district court, WMC centered its bad faith argument on the
assertion that the Medicare Endorsement does not apply. In rejecting WMC’s
argument, the district court noted that MedPro did not deny benefits. Rather, it
determined the Medicare Endorsement applies and provided those benefits. The court
granted MedPro summary judgment on this claim, concluding its interpretation of the
coverage provisions was consistent with the plain, unambiguous language in the
policies, and therefore MedPro’s “denial of policy benefits under Paragraph A was
objectively reasonable and there is no bad faith.” DeWall, 2022 WL 1447720, at *13.
We agree. The statement of issues in WMC’s brief urges us to remand this ruling,
but its argument section does not explain its contention so the issue is waived. See
Fed. R. App. P. 28(a)(8).
IV. Conclusion
The judgment of the district court is affirmed.
______________________________
-11-

-- 11 of 11 --