California Abandons Rule That Settling With One Tortfeasor Releases All From Liability; Adopts Setoff-With-Contribution Approach to Medical Liability Apportionment

A newborn suffered from jaundice at birth. After he was discharged from the hospital, his condition worsened. His mother contacted his pediatrician’s office and was told his condition was normal. When the newborn became lethargic and nonresponsive, the mother contacted the pediatrician again and was told to take him to the emergency room. By the time his parents took him to the emergency room, the newborn’s bilirubin level had become toxic, a condition known as kernicterus, causing irreversible brain damage.


The child, through a guardian ad litem, sued the pediatrician, his corporation, and hospital. The child entered into a settlement with the pediatrician and his corporation for $1 million dollars, the maximum amount covered by the pediatrician’s insurance. Pursuant to California law, the settlement was submitted to a judge. The judge determined that the settlement was not made in good faith because it paid the plaintiff significantly less than an ordinary reasonable plaintiff would accept under the same circumstances. Despite the judge’s finding the plaintiff, pediatrician, and his corporation accepted the settlement anyway.


Regarding the hospital, a jury found the hospital and pediatrician negligent, and on the jury verdict against the hospital awarded the plaintiff $250,000 in noneconomic damages; $78,375.55 for past medical costs; $82,782,000 (with a present value of $14 million) for future medical costs; and $13.3 million (with a present value of $1,154,000) for loss of future earnings. The jury found that the pediatrician was 55% responsible, the hospital 40%, and each of the child’s parents 2.5%. The judgment explained that the hospital was jointly and severally liable for 95 percent of all economic damages awarded to the plaintiff. The judgment said that $1 million, representing the amount of settlement with the pediatrician, would be deducted from the hospital’s judgment. The hospital appealed and the plaintiff filed a cross-appeal.


The Court of Appeal applied the common law release rule to this case. The common law release rule provides that a plaintiff's settlement with, and release from liability of, one joint tortfeasor also releases from liability all other joint tortfeasors. The court affirmed the trial court’s decision in part and reversed the portion of the trial court's judgment awarding the plaintiff economic damages against the hospital. The patient petitioned for review.


The Supreme Court of California reversed the Court of Appeals and overruled the common law release rule. Therefore, the defendant hospital remained jointly and severally liable for the plaintiff's economic damages. The Court adopted the setoff-with-contribution approach to liability apportionment. This means that, when a settlement with a tortfeasor has judicially been determined not to have been made in good faith, nonsettling joint tortfeasors remain jointly and severally liable, and the money paid by the settling tortfeasor is credited against any damages assessed against the nonsettling tortfeasors, who are allowed to seek contribution from the settling tortfeasor for damages they have paid in excess of their equitable shares of liability.



See: Aidan Ming-Ho Leung v. Verdugo Hills Hosp., 12 Cal. Daily Op. Serv. 9646, 2012 WL 3601616 (Cal., August 23, 2012).