LISA KINNEY-LINDSTROM AS PARENT AND NATURAL GUARDIAN OF SAMANTHA LINDSTROM, A MINOR, AND ALEC LINDSTROM, A MINOR, AND AS THE ASSIGNEE OF DR. S., Appellant/Cross-Appellee
MEDICAL CARE AVAILABILITY AND REDUCTION OF ERROR FUND, SUCCESSOR IN INTEREST TO THE MEDICAL PROFESSIONAL LIABILITY CATASTROPHE LOSS FUND, Appellee/Cross-Appellant
ARGUED: November 27, 2012
Appeals from the Order of the Commonwealth Court entered May 6, 2011 at No. 18 MD 2007, which entered judgment in favor of the Medical Care Availability & Reduction Error Fund, et al
CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, ORIE MELVIN, JJ.
MR. JUSTICE BAER
These appeals involve a declaratory judgment action filed by Lisa Kinney-Lindstrom ("Mother") against the Medical Care Availability and Reduction of Error Fund ("MCARE Fund"). Mother seeks a ruling as to the number of "occurrences" for which the MCARE Fund is liable based on allegations that her physician failed to diagnose in a timely manner discrete in utero infections suffered by her twins, which caused severe injuries to both children. The Commonwealth Court granted summary judgment in favor of the MCARE Fund, holding that the physician's failure to diagnose Mother's infection constituted the single cause of the children's injuries, and, therefore, there was a single occurrence, limiting MCARE coverage to the statutory limit of one payment of $1 million. We reverse, and hold that the Commonwealth Court erred by granting summary judgment because there is a genuine issue of material fact as to whether the children's injuries arose from the physician's failure to diagnose a single infection, or whether the children's injuries resulted from the physician's failure to diagnose multiple infections from different organisms that infected each child in utero at different times. Accordingly, we reverse, and remand for trial on this issue.
These appeals further seek a declaration as to whether the MCARE Fund is liable to a health care provider on a claim for indemnification for delay damages and post-judgment interest based on an underlying medical malpractice jury verdict that exceeded the MCARE Fund's $1 million coverage limit. For the reasons set forth below, we affirm the Commonwealth Court's ruling that the MCARE Fund may be liable to a health care provider on a claim for indemnification of delay damages and post-judgment interest on an amount that exceeds its $1 million coverage limit, but that it is not liable under the facts presented herein because the MCARE Fund's refusal to make an offer of settlement was reasonable.
The record establishes that on May 2, 2003, Mother filed a medical malpractice action against Dr. S. in the United States District Court for the Eastern District of Pennsylvania. Therein, she alleged that Dr. S. failed to diagnose that her twins, Alec and Samantha, suffered from separate chorioamnionitis infections arising at different times prior to their births on November 4, 1995, which caused each of them to suffer permanent serious injuries. Because the case involved "extended claims" as defined in 40 P.S. § 1303.715(a),  the MCARE Fund defended Dr. S., and also provided coverage of $1 million per occurrence. As explained infra, the parties discussed settlement, but the matter ultimately proceeded to trial.
Following trial, the jury made separate awards of damages for each child: $6.25 million for Alec's injuries and $6.9 million for Samantha's injuries, for a total verdict of $13.15 million. Mother filed a motion to mold the verdict to include delay damages, and Dr. S. filed post-trial motions. Thereafter, on August 23, 2006, Mother, Dr. S., and the MCARE Fund entered into a "Settlement Agreement, Assignment of Certain Rights and Provisional Full and Final Release" ("Agreement"), which provided as follows: (1) the MCARE Fund would make a single $1 million payment to Mother for the benefit of Alec and Samantha, plus a corresponding amount for delay damages and post-judgment interest; (2) Dr. S. would withdraw his post-trial motions following approval of the agreement; (3) Dr. S. would assign to Mother his right to litigate whether the MCARE Fund is required to pay a second $1 million for two occurrences of medical malpractice, and whether it is required to pay delay damages and post-judgment interest on the remaining $12.15 million of the $13.15 million verdict; (4) Mother would bring a declaratory judgment action in Commonwealth Court to decide these issues; and (5) the MCARE Fund would waive any requirement that Mother exhaust her administrative remedies before filing the declaratory judgment action.
The federal court approved the Agreement and the MCARE Fund made one payment of $1 million to Mother, plus delay damages and post-judgment interest on that amount. Mother subsequently filed an original jurisdiction petition for review in the Commonwealth Court seeking a declaratory judgment on the two enumerated issues. First, she maintained that the MCARE Fund was liable for two "occurrences" and, thus, had to make two payments of $1 million under Section 715(b) of the Medical Care Availability and Reduction of Error Act, Act of March 20, 2002, P.L. 154, 40 P.S. § 1303.715(b) ("MCARE Act"). She contended that each of her fraternal twins became infected in utero by different organisms at different times, and that the MCARE Act could not deny each minor's substantive right to receive a separate $1 million payment. Petition for Review at 3, 5. Second, Mother, again standing in the shoes of Dr. S. by virtue of her assigned claim, argued that the MCARE Fund was liable for delay damages and post-judgment interest on the entire $13.15 million verdict because it was the MCARE Fund's breach of duty to conduct fair and reasonable settlement negotiations that made Dr. S. responsible for paying a verdict far in excess of the available $1 million in MCARE coverage. Mother thereafter sought summary judgment. The Commonwealth Court issued an unpublished memorandum and order dated December 8, 2008, denying Mother summary judgment. Kinney-Lindstrom v. MCARE Fund, (Pa. Cmwlth., No. 18 M.D. 2007, filed December 8, 2008) ("Kinney-Lindstrom I"). First, relying on Donegal Mutual Insurance Company v. Baumhammers, 938 A.2d 286 (Pa. 2007), which is discussed at length infra, the Commonwealth Court held that the liability of Dr. S. in the underlying medical malpractice action in the federal district court arose from a single "occurrence, " thus entitling Mother to payment by the MCARE Fund of a single limit of liability of $1 million. It reasoned that even though two children had been injured, it was Dr. S.'s failure to diagnose and treat Mother's infection that constituted the single cause of the injuries to the children and, thus, there was one occurrence.
Second, citing this Court's decisions in Willet v. Pennsylvania Medical Professional Liability Catastrophe Loss Fund, 702 A.2d 850 (Pa. 1997), and Walsh v. Pennsylvania Medical Professional Liability Catastrophe Loss Fund, 838 A.2d 692 (Pa. 2003), the court held that the MCARE Fund could be liable for delay damages and post-judgment interest on the entire $13.15 million judgment if it exercised exclusive control over settlement negotiations and was negligent in failing to exercise its authority to settle. Kinney-Lindstrom I, Slip Op. dated December 8, 2008, at 6. However, because the court had some doubt as to whether the MCARE Fund, in fact, had exclusive control over the settlement negotiations and whether it acted unreasonably in refusing to make an offer of settlement, it denied Mother summary judgment, permitting the litigation to continue to resolution of the factual dispute.
Subsequently, the MCARE Fund sought summary judgment on the same two issues. On March 23, 2009, the Commonwealth Court granted the MCARE Fund summary judgment on the "occurrences" issue, but denied summary judgment on the delay damages/post-judgment interest issue. Kinney-Lindstrom v. MCARE Fund, 970 A.2d 1206 (Pa. Cmwlth. Ct. 2009) ("Kinney-Lindstrom II"). First, the court relied on its ruling in Kinney-Lindstrom I, and concluded that the failure of Dr. S. to determine promptly whether a chorioamniositis infection was present in the uterus of Mother constituted the single cause of the damages and, thus, there was a single occurrence in this case. Because the MCARE Fund already paid Mother $1 million for the single occurrence, the court concluded that the MCARE Fund was entitled to summary judgment on this claim.
Second, on the delay damages/post-judgment interest issue, the MCARE Fund argued that the Willet/Walsh standard, setting forth the circumstances where the Fund could be found liable for delay damages on a verdict that exceeded its statutory coverage limit, was no longer good law. It contended that Section 714(h) of the MCARE Act,  which directed it to pay delay damages and post-judgment interest "applicable to the fund's liability on a medical professional liability claim, " 40 P.S. § 1303.714(h), superseded the Willet/Walsh standard. According to the MCARE Fund, the Legislature's enactment of Section 714(h) effectively limited its liability to delay damages and post-judgment interest based solely on the MCARE Fund's statutory coverage limit. Because the MCARE Fund had already paid delay damages and post-judgment interest on its $1 million coverage limit on the extended claim, the MCARE Fund argued that its proportionate share had been paid, thereby entitling it to summary judgment on this issue.
As set forth in detail infra, the Commonwealth Court denied the MCARE Fund summary judgment on the delay damages/post-judgment interest issue, rejecting the MCARE Fund's interpretation of Section 714(h) as superseding the standard set forth by this Court in Willet and Walsh. It held that Section 714(h) did not preclude Mother, standing in the shoes of Dr. S., from seeking common law indemnity from the MCARE Fund for delay damages and post-judgment interest on the entire verdict, which exceeded the $1 million statutory cap.
Mother thereafter requested and was granted a bench trial on the delay damages/post-judgment interest issue, which was conducted on January 25, January 26, and February 4, 2011. As described infra, conflicting evidence was offered as to the precise nature of the settlement negotiation. In an unpublished memorandum, the Commonwealth Court denied Mother's petition for review, holding that she was not entitled to delay damages and post-judgment interest on the entire $13.15 million verdict. Kinney-Lindstrom v. MCARE Fund, (Pa. Cmwlth., No. 18 M.D. 2007, filed March 31, 2011) ("Kinney-Lindstrom III"). The court reiterated the Walsh-Willet standard, and held that indemnity is a common law equitable remedy that would shift to the MCARE Fund the liability of Dr. S. for delay damages and post-judgment interest if:
(1) the MCARE Fund had exclusive control over the settlement of Mother's underlying medical malpractice case against Dr. S.; (2) the MCARE Fund was negligent in failing to exercise its authority to settle Mother's case against Dr. S.; and (3) the MCARE Fund's negligence caused the case not to settle. While the court held that the first requirement was satisfied because the MCARE Fund exercised exclusive control over the making of a settlement offer, it concluded that the remaining requirements were not satisfied because the evidence, as detailed infra, demonstrated that the MCARE Fund reasonably declined to make an offer of settlement.
A copy of the Commonwealth Court's final order of March 31, 2011 was sent to Mother on that day. On April 14, 2011, she sought leave to file nunc pro tunc post-trial motions on both the occurrence issue and the delay damages/post-judgment interest issue. Notwithstanding that the MCARE Fund had no objection to Mother's filing of late post-trial motions, the Commonwealth Court denied nunc pro tunc relief, holding that because a bench trial had occurred, post-trial motions were due within ten days after the March 31, 2011 order, and were not filed until April 14, 2011. Kinney-Lindstrom v. MCARE Fund, (Pa. Cmwlth., No. 18 M.D. 2007, filed May 6, 2011) ("Kinney-Lindstrom IV") (citing Pa.R.C.P. No. 227.1(c)(2) (providing that "[p]ost-trial motions shall be filed within ten days after . . . the filing of the decision in the case of a trial without a jury")). The court further held that Mother's purported receipt of the order four days after it was mailed did not constitute sufficient cause for granting nunc pro tunc relief.
Failure to File Post-Trial Motions
Preliminarily, Mother challenges the Commonwealth Court's denial of her motion for leave to file post-trial motions nunc pro tunc. She disputes the lower court's conclusion that a trial occurred, which necessitated the filing of post-trial motions pursuant to Pa.R.C.P. 227.1(c)(2), and categorizes the proceeding below as merely an evidentiary hearing to adjudicate an original jurisdiction petition for review filed in the Commonwealth Court. See Pa.R.A.P. 1542 (providing that in matters addressed to the appellate court's original jurisdiction, where there are genuine issues of material fact, the court may, on its own or upon request of the parties, hold an evidentiary hearing for the development of the record). Even assuming that post-trial motions were required, Mother submits, the Commonwealth Court abused its discretion by denying her nunc pro tunc relief, considering that the MCARE Fund did not oppose her motion, and the late filing resulted from a good faith misunderstanding created by ambiguity in the applicable rules of civil and appellate procedure.
Significantly, as in the Commonwealth Court, the MCARE Fund does not take a position on these issues. Thus, we lack advocacy on whether the filing of post-trial motions was a prerequisite to appellate review of the issues raised herein, and whether the lower court abused its discretion by denying nunc pro tunc relief absent opposition by the MCARE Fund. In the absence of MCARE's objection or claim of prejudice, we decline to dismiss Mother's appeal, which raises novel issues addressed by the Commonwealth Court in a published decision. We further note that, under the circumstances presented, Mother's purported failure to file timely post-trial motions does not hamper our appellate review. Accordingly, we refrain from entertaining the merits of Mother's challenge to the Commonwealth Court's denial of her motion for leave to file post-trial motions nunc pro tunc, and proceed to address the remaining issues raised in Mother's appeal as though they were properly preserved.
Before we entertain Mother's first contention, we recognize that the Commonwealth Court resolved the occurrence issue by granting summary judgment in favor of the MCARE Fund. Thus, we must keep in mind that a motion for summary judgment will only be granted if there is no genuine issue concerning any material fact, and the moving party is entitled to judgment as a matter of law. See Pa.R.C.P. 1035.2; Wilson v. El-Daief, 964 A.2d 354, 359 (Pa. 2009). Because the question of whether a genuine issue of material fact exists is one of law, appellate review is de novo. See Buffalo Twp. v. Jones, 813 A.2d 659, 664 n.4 (Pa. 2002). In conducting such review, the record is viewed in the light most favorable to the non-moving party, and all doubts as to whether a genuine issue exists are resolved against the moving party. See Basile v. H & R Block, 761 A.2d 1115, 1118 (Pa. 2000).
We must further keep in mind that, in her appeal, Mother is asserting Dr. S.'s claims against the MCARE Fund by virtue of assignment. Mother's first contention is that the Commonwealth Court erred by finding that Dr. S.'s negligence constituted a single "occurrence" under Section 715(b) of the MCARE Act, based on this Court's prior decision in Donegal. She challenges this conclusion on two separate grounds. First, Mother contends that the interpretation of "occurrence" enunciated by this Court in Donegal is inapplicable because Donegal defined that term for purposes of construing a homeowner's insurance policy, and not as set forth in the MCARE Act. Second, Mother maintains that even if we conclude that the Donegal interpretation of "occurrence" should apply equally to cases construing the MCARE Act, she has satisfied that standard by demonstrating two causes of her children's injuries, i.e., Dr. S's. failure to diagnose two separate infections that arose in each child at different times prior to birth, which resulted in severe permanent injuries to her children.
We begin by examining the applicability of our decision in Donegal. In that case, a man went on a shooting spree, killing five people and injuring another. The surviving victim and the estates of the deceased victims filed complaints against the parents of the shooter, contending that they failed to obtain adequate mental health treatment for their son, failed to confiscate his firearm, and failed to notify the appropriate authorities that their son was unstable and possessed a firearm. Thus, the insureds/parents were not the direct cause of the harm inflicted upon the multiple victims, but were alleged to have been negligent in failing to prevent their son from committing these atrocities.
On appeal, we examined whether, under the parents' homeowner's insurance policy, the injuries to the six individual victims constituted six separate "occurrences" or one single "occurrence" for purposes of ascertaining the limits of the parents'/insureds' liability coverage. Notably, the policy at issue in Donegal defined "occurrence" as an "accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period in . . . [b]odily injury or [p]roperty damage." Id. at 289.
In determining the meaning of "occurrence" as so defined, this Court in Donegal considered two competing approaches: (1) the "cause" approach, adopted by most jurisdictions, which focuses on the act of the insured that gave rise to liability and determines the number of occurrences by examining whether there is a single cause or multiple causes of the damages; and (2) the "effects" approach, which looks to the effect of the insured's acts and determines the number of occurrences by examining the number of individual claims or injuries that resulted from the accident. Id. at 293.
We adopted the "cause" approach, and reasoned that "[d]etermining the number of occurrences by looking to the underlying negligence of the insured [as opposed to the number of claims or injuries resulting therefrom] recognizes that the question of the extent of coverage rests upon the contractual obligation of the insurer to the insured." Id. at 296. As the policy at issue in Donegal was intended to insure the parents of the shooter for their liabilities, we held that an occurrence should be defined to encompass an event over which the parents/insureds had some control. Id. We concluded that because the liability of the shooter's parents was premised upon their inaction, i.e., their failure to confiscate their son's weapon and/or notify authorities of his unstable condition, the resulting injuries ...