Hospital indemnity claim against doctors subject to med-mal act, COA rules

Indemnity claims brought by one health care provider against another are subject to the Indiana Medical Malpractice Act, the Indiana Court of Appeals ruled Tuesday, finding the language of the MMA is not limited to claims brought by patients or their representatives. The court issued its ruling in a case involving a dispute between a hospital and independent radiologists.

In April 2011, Joseph Shaughnessy received two CT scans at a Franciscan Alliance hospital, which were interpreted by Lake Imaging LLC. Franciscan did not notify Shaughnessy that radiology services would be provided by an independent contractor.

Shaughnessy died on April 25, 2011, and two years later his sons filed a medical malpractice act against Franciscan and other medical providers. Lake Imaging was not named in the complaint, but Franciscan sought indemnification under a contract with Lake Imaging after it was alleged that radiologists failed to report a hematoma that allegedly caused Shaughnessy’s death.

A medical review panel found that Franciscan had met the applicable standard of care, and the parties later agreed to the entry of summary judgment for Franciscan on all claims except “potential vicarious liability for unnamed radiologists who interpreted [Joseph’s] head CT scans.” That claim was later settled for $187,001.

Franciscan demanded indemnification from Lake Imaging for the settlement amount, but the radiology group refused. Franciscan then filed a breach claim, and Lake Imaging moved for summary judgment, arguing Franciscan had failed to bring its claim within the two-year statute of limitations for medical malpractice.

The Johnson Superior Court agreed with Lake Imaging’s argument that Franciscan’s claim was one for medical malpractice but did not reach the timeliness issue. Instead, the trial court dismissed the case without prejudice for lack of subject-matter jurisdiction because Franciscan failed to present its claim to the Indiana Department of Insurance and obtain an opinion from a medical review panel before filing suit.

Lake Imaging appealed and Franciscan cross-appealed, but the Indiana Court of Appeals affirmed in full in Lake Imaging, LLC v. Franciscan Alliance, Inc. f/d/b/a Saint Margaret Mercy Health Centers, and ProAssurance Indemnity Company, Inc., 20A-CT-1490.

Franciscan’s cross-appeal challenged the finding that its claim was one for medical malpractice, rather than a “straightforward indemnification action that did not accrue until 2018, when Lake Imaging refused to indemnify it for the Shaughnessy settlement.” It argued the Medical Malpractice Act only applied to claims brought by injured patients or their representatives.

The appellate panel, however, pointed to Indiana Code § 34-18-7-1, which provides that, “A claim, whether in contract or tort, may not be brought against a health care provider based upon professional services or health care that was provided or that should have been provided unless the claim is filed within two (2) years … .”

“Franciscan’s claim falls neatly under this statute: it is (1) ‘in contract,’ (2) ‘against a health care provider,’ and (3) ‘based upon professional services or health care that was provided or that should have been provided,’” Judge Nancy Vaidik wrote Tuesday. She also pointed to provisions of the MMA referring to a “claimant,” not just a patient.

“These provisions leave us convinced the legislature did not intend to limit the MMA’s coverage to the ‘typical’ medical-malpractice action — one brought by an injured patient or the representative of an injured patient,” Vaidik wrote. “Rather, the language of these statutes is broad enough to include an indemnification claim by one healthcare provider against another healthcare provider, if the claim is based on the alleged medical negligence of the latter.

“… Of course, our holding means that healthcare providers with a right to indemnification in situations like this will often have to sue before they have actually suffered a loss, in order to satisfy the medical-malpractice statute of limitation,” the panel continued. “… However, given the important purposes underlying the MMA and its statute of limitation, this departure from the normal sequence of events is justified.”

Applying its holding to the instant case, the COA noted Franciscan only had two weeks to bring Lake Imaging into the case after the Shaughnessys filed a claim with the DOI in April 2013, “because on that date only about two weeks remained in the medical-malpractice limitation period.” The hospital could have avoided that situation by informing Shaughnessy that radiology services would be provided by an independent contractor, thus creating a defense for itself under Sword v. NKC Hospitals, Inc., 714 N.E.2d 142 (Ind. 1999), Vaidik wrote.

“By failing to give the notice, Franciscan gave up the benefit of the Sword defense and put itself in the position in which it found itself: facing vicarious liability for negligence by Lake Imaging but with only two weeks to bring Lake Imaging into the case. If that was not enough time for Franciscan to ‘scour’ the records of Joseph’s treatment, it has only itself to blame.”

Further, even though Franciscan’s claim was barred by the MMA statute of limitations, the trial court properly dismissed for lack of subject-matter jurisdiction, the panel ruled. That’s because, aside from certain exceptions not applicable here, “a court does not have subject-matter jurisdiction over a claim of medical malpractice until a proposed complaint has been presented to the DOI and a medical-review panel has rendered an opinion.”

“That said, the statute of limitation would be fatal to any claim Franciscan were to now file with the DOI,” Vaidik concluded. “… Therefore, while the dismissal without prejudice technically leaves Franciscan free to file such a claim, we do not expect it to do so.”