People often ask why I teach insurance law. Most, including fellow law professors, know little of the intrigue - no, the romance - of insurance, and think it sounds boring. I reply that over a trillion dollars cycles through the system of private insurance in the United States each year. And nothing involving a trillion dollars is boring. I rather like that response, but now I've found a new one: I'm going to talk about Woo vs. Fireman's Fund Insurance Company.

The Facts

Robert C. Woo is a Seattle-area dentist. An online guide praises his "first-class service" and "painless procedures." It is likely that Tina Alberts, his former assistant, disagrees.

Alberts cared for pot-bellied pigs, a frequent topic for office banter. Dr. Woo enjoyed taunting her with accounts of his boar-hunting trips, and a picture of a skinned pig hanging from a hook. He predicted a similar fate for Walter, her beloved pet pig. Dr. Woo informs us that this was all part of a "friendly working environment."

When Alberts required surgery to replace two teeth, Dr. Woo saw an opportunity to cement this self-impression of bonhomie. Once she was completely sedated, he halted the agreed procedure, and began a new one. Replacing her teeth required the temporary installation of standard false teeth. Dr. Woo had secretly ordered a second set of temporary teeth, shaped like boar tusks. Removing her oxygen mask, he inserted the tusks and - we must assume this was part of the friendly working environment - took photographs of her with her eyes and mouth pried open. Returning at last to his professional duties, he removed the tusks and inserted the correct temporary teeth.

A month later, Dr. Woo's staff presented Alberts with the pictures at her birthday party. The fun-loving Woo described them as a "trophy" to take home. Home she went, never to return. Instead, she sued Dr. Woo for battery, invasion of privacy, medical malpractice, and a host of related claims.

Is this one of those wacky torts stories with a ridiculous ending? Take a second look at the headline: this is a wacky insurance law story with a ridiculous ending.

An Insurer's Gamble

Fireman's had issued several liability insurance policies potentially covering Dr. Woo against lawsuits related to his dental practice. Fireman's response, when Woo asked for coverage, is best summarized as "Drop dead."

Liability insurance does two things. Obviously, it pays for judgments (within policy limits and coverage) against the policyholder. Less obviously, it imposes upon the insurer a duty to hire a lawyer to defend the policyholder. There are several reasons for this: Most people could not afford a good defense lawyer. Moreover, insurers are keen to control litigation to ensure that policyholders don't quickly surrender to meritless claims, knowing that only the insurer's money, not their own, is at stake.

When Dr. Woo told Fireman's he was being sued, it didn't simply refuse to pay Alberts on his behalf; it also refused to defend him in court.

I wonder what would have happened if Dr. Woo hadn't been a relatively wealthy policyholder. Refusals to defend are not uncommon (though as we shall see, they are often unwise). When an insurer refuses to defend a suit, the tort plaintiff (and her contingent-fee lawyer) must decide if the case is worth pursuing, given the risk that there is no coverage. Tort cases almost never involve individual defendants mortgaging their homes to pay successful plaintiffs; rather, the mission of the typical plaintiffs' lawyer is to find insurance coverage. Nearly all tort cases are thinly-disguised disputes against - and sometimes among - insurance companies.

But Dr. Woo was relatively wealthy. This created two problems that Fireman's didn't anticipate: First, it ensured that Alberts' lawyer would still pursue her case, because the next best thing to an insured defendant is a wealthy defendant. But the crucial oversight was that Woo could afford his own lawyer to defend him, and his interests. There was thus a high likelihood that Alberts would go forward, even without insurance, and that Woo would have the resources and motivation to take revenge on his insurance company for abandoning him. Very few individual policyholders can afford to do this, and Fireman's should have thought harder before it turned Woo down cold.

Indeed, Dr. Woo settled with Alberts for $250,000, an excellent deal for him. In an era where clergy sex abuse is front-page news around the country, Woo's lawyer could not have looked forward to defending a physician who amused himself upon the defenseless figure of his anesthetized patient. Physicians hold a sacred position of trust - an obligation to use their unique skills to cure people and guard their dignity. Prying a patient's eyes open and sticking toys in her mouth is a shameful abuse of that trust.

Dr. Woo thus got off easy - but decided he could do even better. Thanks to Washington State's Supreme Court, he did. In the next column in this series, appearing tomorrow on this site, I'll explain exactly how and why.