Indiana Court of Appeals: Medical-Malpractice Plaintiff Not Required to Settle with Healthcare Provider for Cap

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by: Colin E. Flora

     As we’ve discussed, There was a time in federal litigation that an offer equivalent to what a successful plaintiff could receive at trial would act to render a lawsuit moot. At that time, the argument would often turn to the question of whether a defendant has actually offered something tantamount to “complete relief.” But that approach to forced resolution of cases began to fall apart following a dissenting opinion from Justice Elena Kagan in 2013. Acknowledging that a court does not have the inherent authority to force an unwanted settlement upon a putative class rep, the dissent set the groundwork for circuit courts across the nation to shift and to the ultimate adoption of that opinion as controlling in Campbell-Ewald v. Co. v. Gomez, three years later.

     But those cases were targeted at attempts to pick off would-be class/collective-action representatives. Even Justice Kagan’s dissent recognized that things work differently when it is an individual action: “To be sure, a court has discretion to halt a lawsuit by entering judgment for the plaintiff when the defendant unconditionally surrenders and only the plaintiff’s obstinacy or madness prevents her from accepting total victory. But the court may not take that tack when the supposed capitulation in fact fails to give the plaintiff all the law authorizes and she has sought.” To avoid a forced end to an individual claim, it is still often required to show that the relief sought is incomplete. That may be shown where the offer includes conditions, such as imposition of confidentiality or results in a judgment against only one defendant. There is also a school of thought that relief is incomplete if does not come with an admission of a judgment, and even then if the judgment is only against one defendant.

     Now the question comes: when would this concept ever arise in the context of personal injury? Despite the attempts by some insurance adjusters to use multipliers, there is simply no formula for calculating damages for personal injuries. How then could full relief be provided when the damages cannot be readily calculated? That answer is simple, provided that there is an upper bound on recovery. Overly aggressive tort reform efforts have provided precisely such a cap in several areas of Indiana law. One such area is under the Indiana Medical Malpractice Act. As we’ve explained, under the Medical Malpractice Act, the negligent healthcare provider is only liable for a portion of the full amount recoverable under the Act. For almost twenty years, the provider was on the hook for no more than $250k. That amount has gone up for claims arising after July 1, 2017. But $250k was the limit applicable to the case we discuss, today.

     This week, the Court of Appeals of Indiana handed down its decision in Wallen v. Hossler, which addressed a trial court erred by ordering a medical-malpractice plaintiff to accept a $250,000 settlement offer by the healthcare providers. The unanimous court concluded that the plaintiff did not have to accept the settlement offer.

     At the core of the appeal was the meaning of Indiana Code § 34-18-15-3(1):

If a health care provider or its insurer has agreed to settle its liability on a claim by payment of its policy limits established in IC 34-18-14-3(b) and IC 34-18-14-3(d), and the claimant is demanding an amount in excess of that amount, the following procedure must be followed:

(1) A petition shall be filed by the claimant in the court named in the proposed complaint, or in the circuit or superior court of Marion County, at the claimant's election, seeking:

(A) approval of an agreed settlement, if any; or

(B) demanding payment of damages from the patient’s compensation fund.

The healthcare providers argued that “agreed to settle” was satisfied by the offer for payment of the cap, thereby triggering the plaintiff’s obligation to pursue a claim against the Patients Compensation Fund. The court held “that the statute unambiguously sets out a procedure whereby a plaintiff, who has in fact settled with a defendant health care provider, may pursue excess damages from the Fund.” The court refused to equate “agreed to settle” with “offered to settle” as the healthcare providers needed in order to force the plaintiff to accept the offer. As the court correctly observed, “An offer is not an agreement. A settlement agreement requires at least two parties.”

     So, there you have it, the healthcare provider cannot avoid trial simply by offering full payment. Why you may wonder, would a plaintiff refuse to accept the full amount? I think the answer lies in the way damages are determined under the Indiana Medical Malpractice Act. If no settlement is reached with the healthcare provider, then the matter progresses to trial as any other civil remedy at law (as opposed to some equitable remedies that do not allow trial by jury). By not settling, the plaintiff could have his day in court in front of a jury and the jury would decide damages. Then, armed with the jury’s verdict, the plaintiff can proceed to recover any amount over the healthcare-provider cap from the Fund. The alternative would be to accept the settlement and then proceed to a bench trial without the input from a jury and ask the trial judge to assess damages. Clearly, this plaintiff preferred to have a jury’s involvement and, barring transfer to the Indiana Supreme Court, he will get that chance.

     Join us again next time for further discussion of developments in the law.

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*Disclaimer: The author is licensed to practice in the state of Indiana. The information contained above is provided for informational purposes only and should not be construed as legal advice on any subject matter. Laws vary by state and region. Furthermore, the law is constantly changing. Thus, the information above may no longer be accurate at this time. No reader of this content, clients or otherwise, should act or refrain from acting on the basis of any content included herein without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue.