Justices uphold distinction between active, passive fraud, find in favor of clinic after missed diagnosis

The Indiana Supreme Court has reinstated judgment in favor of a now-defunct clinic that missed a woman’s hepatitis C diagnosis, finding that the patient’s medical malpractice claim was untimely. In reaching that decision, the high court declined to eliminate the distinction between passive and active fraud.

Justice Christopher Goff wrote for the unanimous court Tuesday in Teresa Blackford v. Welborn Clinic, 21S-CT-85.

The case involves Teresa Blackford and Welborn Clinic, an Evansville facility that dissolved in 2009. In 2003, the clinic told Blackford that she was hepatitis-negative, but she learned from another doctor in 2014 that she was actually positive for hepatitis C.

A medical review panel found Welborn had committed medical malpractice, but the Vanderburgh Circuit Court granted the clinic’s motion for summary judgment, finding Blackford’s claim was time-barred under the Indiana Business Trust Act. Because the clinic dissolved in 2009, the five-year statute of limitations expired on June 30, 2014. Blackford did not file her action until March 2015.

But in July 2020,  a split Indiana Court of Appeals reversed in Blackford’s favor, finding the clinic “fraudulently concealed — at the least, passively; at the worst, actively — material medical information from Blackford.” Thus, according to the COA majority, the clinic’s passive fraudulent concealment tolled the five-year limitations period under the IBTA.

Judge Elaine Brown dissented.

The Supreme Court heard oral arguments in the case in April, then reinstated judgment for the clinic in a Tuesday opinion.

In that opinion, Goff first held that the IBTA is not a non-claim statute because it “expressly recognizes the enduring application of the state’s common law of business trusts for determining the scope of an entity’s ‘power and authority’ to conduct business. I.C. § 23-5-1-8. And this power and authority, which a trust may surrender ‘at any time’ when dissolving its business, includes, among other things, ‘the right to sue and be sued.’ I.C. § § 23-5-1-8, -11(a).”

Turning then to the question of whether the law is a general statute of limitation or a statute of repose, the court determined it is the latter, precluding equitable rules of tolling.

“While the IBTA created no new right of action (i.e., a right of action unknown to the common law), the Act clearly defines the timeframe in which that right of action may arise, marking the ‘outer boundaries’ of a claimant’s ‘substantive legal rights,’” Goff wrote, citing Gill v. Evansville Sheet Metal Works, Inc., 970 N.E.2d 633 (Ind. 2012). “From that view, the IBTA fulfills the purpose of a statute of repose.

“Indeed, rather than creating a deadline for filing suit based on the occurrence of a tort, as a statute of limitations does, the IBTA bars a legal claim ‘after a specific period of time has run from the occurrence of some event other than the injury which gave rise to the claim,’” the justice continued, citing Kissel v. Rosenbaum, 579 N.E.2d 1322 (Ind. Ct. App. 1991). “That event, of course, is the trust’s surrendering of authority to conduct business in the state.”

But even if the IBTA were subject to tolling, Blackford would still not succeed because the clinic’s constructive fraud precludes equitable relief, the court continued.

“Based on our long-standing distinction between active and passive fraud, which we re-affirm yet again today, we hold that, even if the IBTA’s statute of repose were the rare one subject to tolling, that tolling would have ended — and Blackford’s claim accrued — at the latest, upon termination of the doctor-patient relationship on June 30, 2009 (when the Clinic surrendered its authority to conduct business.) And because Blackford filed suit more than five years later — on March 13, 2015 — we consider her claim untimely,” the justices concluded.

“While we sympathize with Blackford’s unfortunate circumstances,” Goff wrote for the court, “we reject her invitation, which, in effect, amounts to nothing more than a request for us to abolish the distinction between active and passive fraud as it applies to her.”

The case attracted two amici: the Defense Trial Counsel of Indiana for the clinic and the Indiana Trial Lawyers Association. Also, the state intervened.