Can a payout under a medical malpractice liability policy be avoided by proof that the health provider was not negligent or there was no coverage for the physician’s actions related to an unnecessary cardiac procedure? And, what is a potential strategy for the insurer to employ?
The insurer should investigate the circumstances of the allegedly unnecessary cardiac procedure and examine the policy coverage provisions. The insurer also should investigate whether another insurer may have an obligation for the claim.
A professional malpractice insurer that receives notice of a claim related to an unnecessary cardiac procedure should investigate the circumstances of the injury and determine whether the injury was caused by the action of the insured health care provider. If so, the insurer should determine whether the insured provider could be found liable for negligence. See generally: Defense of Medical Malpractice Cases, 16 Am. Jur. Trials 471; Proof of Unnecessary Cardiac Procedures, 129 Am. Jur. Proof of Facts 3d 1; Cardiological Malpractice Litigation, 68 Am. Jur. Trials 151. See also the discussion of medical malpractice and negligence related to unnecessary cardiac procedures, as well as the discussion of defenses that can be raised against malpractice claims, in the Introduction to this Report.
Health care providers, including hospitals and nursing homes, often obtain different coverages under a number of professional and general liability insurance policies, which may raise questions as to the responsibility of each insurer. Different types of policies a provider may obtain include professional liability policies, comprehensive general liability insurance policies, policies covering the officers and directors of a hospital or other institutional provider, workers compensation insurance policies, and excess liability coverage when a claim exceeds the limits of the primary insurance policy. See generally: Am. Jur. 2d Insurance § 694 to 696, Professional and Occupational Liability Insurance; Malpractice Coverage; Am. Jur. 2d Insurance §§ 660 to 696, Risks and Coverage Under Liability Insurance Policies.
Disputes may arise between primary and excess insurers on a number of issues affecting a claim against the insured provider, including coverage issues or strategic issues related to defenses of a claim, which may include a decision on whether to settle a claim. When this type of dispute arises, a question also may arise as to the duty the primary insurer may owe to the excess insurer, such as the duty to settle a claim. Jurisdictions do not agree on either the duty owed by a primary insurer to an excess insurer or the duty owed by an excess insurer to other insurers. See generally: Couch on Insurance § 198:20, Duty between primary and excess insurers; 2 Insurance Claims and Disputes § 6:45, Duty to Indemnify, Excess insurer's duty to indemnify; 2 Insurance Claims and Disputes § 7:8, Rights and Duties as Between Insurers, Duty to settle owed to excess insurer; Proof of Excess Insurer's Cause of Action Against Primary Insurer, 28 Am. Jur. Proof of Facts 3d 507.
A self-insured hospital and its excess insurer brought claims against a physician’s insurer after they settled a malpractice claim arising out of an allegedly unnecessary cardiac biopsy performed by the physician. The physician’s insurer had refused to participate in the settlement of the patient’s action against the physician and the hospital. It relied on a no-action clause in the physician's insurance policy when it refused to contribute its policy limit toward a settlement agreement that the hospital and its excess insurer entered in the lawsuit. The trial court found that the no-action clause in the physician's insurance policy was enforceable and barred recovery under the policy by the hospital and its excess insurer. They argued on appeal that the physician’s insurer breached its good faith duty to settle the medical malpractice lawsuit and could not rely on the no-action provision in its policy.
The appellate court noted that the no-action provision barred claims against the physician’s insurer until the insured's liability had been fixed by judgment or agreement with the insurer. It stated that the “purpose of a no-action provision is to protect the insurer from collusive or overly generous or unnecessary settlement by the insured at the expense of the insurance carrier.” It also noted, however, that it was “unfair to the insured to enforce the clause against him when the insurer has erroneously refused to perform the insurance contract.” The court went on to note that an insurer “has a duty to act in good faith in responding to settlement offer,” and that, if the insurer breaches this duty, it may be liable for the entire judgment against its insured, including any amount in excess of policy limits. The hospital and its excess insurer were assignees of the physician’s rights under his insurance policy with regard to this claim.
The appellate court found that the insurer could not rely on the no-action provision if it had breached its good faith duty to settle. It concluded that triable issues existed as to whether the physician’s insurer had breached its duty to settle, and thus the trial court erred in granting the insurer summary judgment based on the no-action provision. See: SwedishAmerican Hosp. Ass'n of Rockford v. Illinois State Medical Inter-Ins. Exchange, 395 Ill.App.3d 80, 916 N.E.2d 80, 334 Ill.Dec. 47 (Ill.App. 2 Dist., Sep. 18, 2009), appeal denied, 235 Ill.2d 606 (Ill., Jan. 27, 2010).
For the insurer to be successful in litigation involving an unnecessary cardiac procedure, and avoid or limit medical malpractice coverage, proof must be presented that:
- There was no medical malpractice or negligence by the insured physician or other health care provide
- The terms of the policy precluded coverage for the provider’s medical malpractice or negligence, or
- Another insurer’s obligation reduced the amount of the insurer’s liability
See: Practice the Techniques - Checklists providing an example fact checklist that can be used to determine liability for an injury related to an unnecessary cardiac procedure