Michael W. Peters, M.D. and Deaconess Hospital, Inc. v. Cynthia S. Kendall and Michael J. Kendall , 2013 Ind. App. LEXIS 636 ( 2013 )

Dec 23 2013, 5:56 am
FOR PUBLICATION
ATTORNEYS FOR APPELLANTS: ATTORNEYS FOR APPELLEES:
WILLIAM W. DRUMMY KAREN B. NEISWINGER
HOLLY A. REEDY Indianapolis, Indiana
Wilkinson Goeller Modesitt
Wilkinson & Drummy, LLP REED S. SCHMITT
Terre Haute, Indiana Rhine Ernest, LLP
Evansville, Indiana
DOUGLAS V. JESSEN
Statham Allega & Jessen, LLP
Evansville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
MICHAEL W. PETERS, M.D. and DEACONESS )
HOSPITAL, INC., )
)
Appellants-Defendants, )
)
vs. ) No. 82A01-1302-PL-55
)
CYNTHIA S. KENDALL and MICHAEL J. )
KENDALL, )
)
Appellees-Plaintiffs. )
APPEAL FROM THE VANDERBURGH CIRCUIT COURT
The Honorable Carl A. Heldt, Senior Judge
Cause No. 82C01-0803-PL-112
December 23, 2013
OPINION - FOR PUBLICATION
RILEY, Judge
STATEMENT OF THE CASE
Appellants-Defendants, Dr. Michael W. Peters (Dr. Peters) and Deaconess Hospital,
Inc. (Deaconess Hospital) (collectively, the Medical Group), appeal the trial court’s denial
of their motion for partial summary judgment in the medical malpractice suit brought by
Cynthia S. and Michael J. Kendall (the Kendalls).
We affirm.
ISSUES
The Medical Group raises four issues on appeal, and the Kendalls also raise four
issues on cross-appeal.1 We find one of the cross-appeal issues is dispositive and restate it
as the following: Whether the Proof of Claim filed by the Kendalls in the liquidation
proceedings of Dr. Peters’ insurer constitutes a binding contract.
FACTS AND PROCEDURAL HISTORY
On October 5, 2001, Cynthia Kendall (Cynthia), who was then forty-three years old,
was at a festival when she began experiencing disorientation, difficulty with speech, and
pain and weakness on the left side of her body. Her husband, Michael Kendall (Michael),
drove her to the emergency room at Deaconess Hospital in Evansville, where she was
examined by Dr. Peters. Dr. Peters ordered tests and diagnosed Cynthia as having
1
The Medical Group’s issues, which we have restated, are as follows: (1) whether a release provision
included in the Proof of Claim is ambiguous; (2) whether the parties’ intent in executing the release is
admissible; (3) whether the release is sufficient to discharge Dr. Peters’ medical malpractice liability; and
(4) whether the release discharges Deaconess Hospital’s vicarious liability as Dr. Peters’ employer. The
Kendalls’ remaining cross-appeal issues, as restated, are as follows: (1) whether the trial court correctly
denied the Medical Group’s two summary judgment motions based on genuine issues of material fact; (2)
whether the release is ambiguous; and (3) whether Indiana or Pennsylvania law governs this case.
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experienced a “transient ischemic attack.” (Appellees’ Br. p. 2). After treating Cynthia
with four baby aspirin, Dr. Peters discharged her without a neurological or neurosurgical
consultation and informed her that she should follow-up with her family physician. At the
time of her discharge, Cynthia’s symptoms had not subsided, and, once home from the
hospital, they only worsened. Approximately one hour later, she called for an ambulance
and returned to Deaconess Hospital. After performing an ultrasound, medical personnel
administered heparin to treat the dissection of Cynthia’s right carotid artery. Despite the
heparin therapy, two days later, a C.T. scan depicted “a large fronto-parietal infarction on
the right side of her brain”—in other words, Cynthia had suffered a stroke. (Appellants’
App. p. 51). Cynthia received anti-coagulation therapy and rehabilitation, but the stroke
resulted in “permanent residual dysfunction[,]” including paralysis and weakness in half of
her body. (Appellees’ Br. p. 2).
At the time of Cynthia’s stroke, Dr. Peters had medical malpractice insurance
through PHICO Insurance Company of Pennsylvania (PHICO). Dr. Peters’ policy, which
was in effect from January 3, 2001 through January 3, 2002, had a liability limit of
$250,000 per occurrence and an aggregate limit of $750,000. Four months after Cynthia’s
stroke, on February 1, 2002, the Commonwealth Court of Pennsylvania declared PHICO
insolvent and appointed a Liquidator to commence liquidating the company. Thirty days
later, all liability policies issued by PHICO were cancelled, at which point PHICO “ceased
to pay for the costs of defense and for indemnification of settlements made or judgments
entered in lawsuits against the insureds under those policies, instead providing a means for
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recovery from the assets of PHICO . . . on claims within the coverage of those policies” by
filing a Proof of Claim in the Liquidation. (Appellants’ App. p. 163).
On February 24, 2003, the Kendalls filed a proposed complaint with the Indiana
Department of Insurance (Department) in accordance with the Indiana Medical
Malpractice Act (Act). In their proposed complaint, the Kendalls alleged that the Medical
Group’s negligence had resulted in Cynthia’s permanent disabilities. Subsequent to filing
their proposed complaint, the Kendalls received a blank Proof of Claim form from the
PHICO Liquidator. On February 9, 2004, Cynthia completed and signed the Proof of
Claim form, omitting the amount of her claim and attaching a copy of the proposed
complaint filed with the Department. Immediately prior to the signature line, the Proof of
Claim contained a provision stating, in part, that “the undersigned hereby releases any and
all claims which have been or could be made against such PHICO insured . . . subject to
coverage being accepted by the Liquidator.” (Appellants’ App. p. 42). On March 8, 2004,
the Kendalls filed the Proof of Claim. Nearly five years after filing the proposed complaint,
on December 19, 2007, the Department issued an opinion rendered by the Medical Review
Panel, which determined that “[t]he evidence does not support the conclusion that [the
Medical Group] failed to meet the applicable standard of care as charged in the complaint.”
(Appellants’ App. pp. 67-69).
On March 10, 2008, the Kendalls filed their Complaint with the trial court, alleging
the Medical Group was negligent based on the failure to promptly diagnose and
appropriately treat Cynthia. The Kendalls seek compensation for Cynthia’s physical and
emotional pain and suffering, permanent physical disability, impairment to earning
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capacity, and substantial medical expenses, as well as for Michael’s loss of “services,
society, companionship, consortium and other benefits of his marital relationship.”
(Appellants’ App. p. 28).
As evidence refuting the conclusion of the Medical Review Panel, the Kendalls filed
an affidavit of Dr. David L. Gregory (Dr. Gregory), a physician board-certified in
Emergency Medicine. Dr. Gregory stated that he had reviewed Cynthia’s medical and
rehabilitation records and opined that the Medical Group had “deviated from the standard
of care.” (Appellants’ App. p. 51). Specifically, Dr. Gregory concluded that Dr. Peters had
“failed to initially diagnose and treat [Cynthia’s] impending stroke or arrange for [a]
specialty consultation[,]” and discharging her with ongoing symptoms “was below the
applicable standard of care and contributed to the delay in diagnosis.” (Appellants’ App.
pp. 51-52). Furthermore, Dr. Gregory noted that “[i]f the nurses had properly assessed
[Cynthia] and documented their assessments, [she] may have received a more timely
referral to a neurologist for proper testing, diagnosis, and treatment.” (Appellants’ App. p.
51). On July 29, 2009, the Kendalls executed a second, “identical set o[f] Proof of Claim
forms” they received from the Liquidator, this time specifying a claim in the amount of
$250,000. (Appellees’ Br. p. 3).
On December 3, 2010, the Medical Group filed its first motion for partial summary
judgment with the trial court, claiming the Kendalls released their claim against Dr. Peters
in the full amount of his “maximum liability of $250,000.00 under [the Act].” (Appellants’
App. p. 34). On December 21, 2010, the Liquidator provided the Kendalls with a Notice
of Claim Evaluation (NOCE), which valued their claim at $0.00. PHICO’s claims analyst
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stated that, in arriving at this valuation, he had examined the evidence as a whole for “any
breach of the applicable standard of care for emergency medicine physicians” and had
concluded that the Kendalls did not establish “a violation of the standard of care and
causation in particular.” (Appellants’ App. p. 163). On January 12, 2011, the Kendalls
filed an objection to the NOCE, and, on November 23, 2011, the Liquidator issued a revised
NOCE, which valued the Kendalls’ claim at $250,000 based on PHICO’s policy limit. On
December 4, 2011, the Kendalls executed the revised NOCE per its directive: “If you
ACCEPT the NOCE, sign and return one copy.” (Appellants’ App. p. 182). Shortly
thereafter, PHICO made an interim payment to the Kendalls for 30% of the revised value
of their claim—that is, $75,000.
On December 13, 2011, the trial court entered partial summary judgment for the
Medical Group, concluding that Dr. Peters and Deaconess Hospital “are qualified health
care providers under the [Act] with respect to [the Kendalls’] claims in this case.”
(Appellants’ App. p. 149). As to the issue of whether the Kendalls had released their claim
against Dr. Peters, however, the trial court denied the Medical Group’s summary judgment
motion, finding a genuine issue of material fact. Four months later, on April 30, 2012, the
Medical Group filed a Renewed Motion for Partial Summary Judgment “based on new
evidence that the Liquidator accepted coverage of [the Kendalls’] claim filed in the PHICO
Liquidation proceeding.” (Appellants’ App. p. 150). On July 31, 2012, the trial court heard
arguments on the renewed summary judgment motion. On November 20, 2012, the trial
court denied the Medical Group’s renewed motion based, again, on its finding “that
genuine issues of material fact still exist as to whether [the Kendalls] released their claim
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against Dr. [Peters]” by filing a Proof of Claim in PHICO’s liquidation (Appellants’ App.
p. 24).
On December 12, 2012, the Medical Group filed a motion to certify an interlocutory
order for immediate appeal, which the trial court granted on January 2, 2013, and, on March
12, 2013, we accepted jurisdiction. Additional facts will be provided as necessary.
DISCUSSION AND DECISION
Finding one issue is dispositive of this summary judgment appeal, we address the
Kendalls’ claim on cross-appeal that the Proof of Claim, which includes a release of
liability provision, lacks the essential elements to render it a binding contract.
I. Standard of Review
In reviewing a trial court’s ruling on a motion for summary judgment, we apply the
same standard used by the trial court. Manley v. Sherer, 992 N.E.2d 670, 673 (Ind. 2013).
Summary judgment is appropriate when the designated evidentiary material establishes
there is no genuine issue of material fact and the moving party is entitled to judgment as a
matter of law. Id. If the moving party makes a prima facie showing that there are no
factual disputes and that he is legally entitled to judgment, the burden shifts to the non-
moving party to set forth specific evidence that demonstrates there is a genuine issue of
material fact. Perry v. Driehorst, 808 N.E.2d 765, 768 (Ind. Ct. App. 2004), reh’g denied,
trans. denied. Our court will construe all facts and inferences in favor of the non-moving
party and will resolve all doubts concerning the existence of an issue of material fact
against the moving party. Manley, 992 N.E.2d at 673. In determining whether summary
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judgment is appropriate, we may rely upon any theory supported by the evidence. Thomas
v. Deitsch, 743 N.E.2d 1218, 1219 (Ind. Ct. App. 2001).
II. Release of Liability
We first note that the parties agree that the standard rules of contract law apply to
documents purporting to release the liability of others. See Depew v. Burkle, 786 N.E.2d
1144, 1147 (Ind. Ct. App. 2003), reh’g denied, trans. denied. The existence of a contract
is a question of law. Conwell v. Gray Loon Outdoor Mktg. Grp., Inc., 906 N.E.2d 805, 813
(Ind. 2009). Formation of a contract requires an offer and acceptance, consideration, and
a meeting of the minds of the contracting parties. Id. at 812-13. In order for a contract to
be valid and enforceable, the parties must intend to be bound, and the essential terms must
be reasonably definite and certain. Sands v. Helen HCI, LLC, 945 N.E.2d 176, 180 (Ind.
Ct. App. 2011), trans. denied. It is well-settled that, in order to be valid, a release must be
supported by consideration. Bogigian v. Bogigian, 551 N.E.2d 1149, 1151 (Ind. Ct. App.
1990), reh’g denied.
In this case, the Kendalls filed two separate Proofs of Claim in PHICO’s liquidation.
Pursuant to Pennsylvania law, each contained the same release of liability provision:
If the foregoing Proof of Claim alleges a claim against a PHICO insured
(third party claim), the undersigned hereby releases any and all claims which
have been or could be made against such PHICO insured based on or arising
out of the facts supporting the above Proof of Claim up to the amount of the
applicable policy limits and subject to coverage being accepted by the
Liquidator, regardless of whether any compensation is actually paid to the
undersigned.
(Appellants’ App. pp. 42, 64). The Kendalls contend that they did not “give a full and
binding release” by signing the Proof of Claim because the Proof of Claim “in no manner
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constitutes a binding contract, as there is no offer, no acceptance, no consideration and no
meeting of the minds.” (Appellees’ Br. pp. 10-11). The Kendalls argue that the document
is not labeled as a contract or release, does not identify “the name of any party allegedly
being released,” and does not “purport to offer any specific amount to [the Kendalls] to
settle their claim.” (Appellees’ Br. p. 10). Instead, the Kendalls note that the Liquidator
sent them a blank form, requesting that they fill in the circumstances giving rise to their
claim and provide an “amount of claim.” (Appellees’ Br. p. 10). The Medical Group
responds that the Proof of Claim satisfies the criteria of a contract because “there was valid
consideration” as “the Kendalls were permitted to make a claim for damages in the
liquidation proceeding.” (Appellants’ Reply Br. p. 3).
While the Medical Group is correct that monetary consideration is not required,
there is no reasonably definite language in the release compelling PHICO to accept
coverage, consider the merits of the Kendalls’ claim, or pay one cent of compensation.
“[I]t is fundamental that a contract is unenforceable if it fails to obligate the parties to do
anything.’” Licocci v. Cardinal Assocs., 445 N.E.2d 556, 559 (Ind. 1983). The Medical
Group relies on a recent decision of this court in which we stated that “[a]ny consideration
which will sustain a promise to pay will suffice” and argues that, “[w]ithout making such
a claim, [the Kendalls] would have not been entitled to recover any funds from the
liquidation.” Lily, Inc. v. Silco, LLC, No. 82A05-1209-PL-459, 2013 WL 5276028, at *9
(Ind. Ct. App. Sept. 19, 2013); (Appellants’ Reply Br. p. 3). In Ritenour v. Mathews, 42
Ind. 7, 14 (Ind. 1873), our supreme court established that a promise to do what one “is
already bound to do by law or by contract” is insufficient consideration. In the present
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case, PHICO’s legal and contractual obligation to pay the malpractice damages preceded
the Kendalls’ execution of the Proof of Claim.
First, PHICO’s duties are governed by the Act. Ind. Code art. 34-18. Dr. Peters
and Deaconess Hospital are qualified health care providers under the Act and are, thus, not
liable in a malpractice action for any amount in excess of $250,000. I.C. §§ 34-18-2-14(1);
34-18-3-2; 34-18-14-3(b). If it is established that a physician’s malpractice has caused
damages greater than $250,000, any overage is paid from the Patient’s Compensation Fund
(Fund). I.C. § 34-18-14-3(c). The Fund caps the total amount recoverable per injury at
$1,250,000. I.C. § 34-18-14-3(a)(3). Pursuant to the Act, Dr. Peters filed proof of his
insurance coverage through PHICO with the Department and paid the required surcharge
amount. See I.C. §§ 34-18-3-2, 34-18-5-1, 34-18-13-2. Dr. Peters’ policy with PHICO
was in force at the time of the alleged malpractice involving Cynthia; as such, Dr. Peters
and PHICO might be liable to Cynthia to the extent and manner specified in the Act.2 I.C.
§ 34-18-13-1. By virtue of Dr. Peters’ status as a qualified health care provider, the law
presumes that his PHICO-issued policy includes a provision obligating PHICO “to pay an
award imposed against its insured under [the Act].” I.C. § 34-18-13-4.
Second, PHICO’s duties are governed by its insurance policy with Dr. Peters. In
Indiana Insurance Guaranty Association v. Bedford Regional Medical Center, 863 N.E.2d
308 (Ind. 2007), which arose from the same PHICO insolvency, our supreme court
2
Deaconess Hospital also filed proof of financial responsibility with the Department, listing its
malpractice carrier as ProAssurance Indemnity Company, Inc. In the parties’ designated materials,
however, there is evidence that Deaconess Hospital may also be considered a “policyholder” of PHICO
because it obtained the liability policies for its physicians under the pseudonym Physician Services of
Deaconess Hospital.
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analyzed the payment of lost wages under the Indiana Insurance Guaranty Association
(IIGA) Law of 1971, which requires the IIGA to pay for the claims that would have been
covered under the policy of a now-insolvent insurer. Id. at 309-10 (citing I.C. § 27-6-8-7).
In Indiana Insurance Guaranty Association, a hospital settled its malpractice liability with
the patient’s estate, and the court held that the IIGA was obligated to reimburse the hospital
because its insurance policy would have required PHICO to pay the full amount of the
claim had PHICO not been insolvent. Id. at 309-11, 314. Based on the supreme court’s
holding, the Kendalls are entitled to compensation for Dr. Peters’ malpractice, if
established, notwithstanding PHICO’s insolvency, and if PHICO fails to uphold the
obligations of its policy, Dr. Peters must pay the first $250,000 of the Kendalls’ damages
and then pursue recovery of those costs from the IIGA.
Accordingly, PHICO has a legal and contractual duty to pay its policy limit for any
damages determined to be the result of Dr. Peters’ malpractice. It is, therefore, insufficient
as consideration for the release of all liability that the Kendalls were permitted to file a
Proof of Claim that obligated PHICO to do no more than it was already bound to do. Even
were we to accept the Medical Group’s contention that it is sufficient consideration that,
by filing the Proof of Claim, the Kendalls could potentially receive a payment without first
having to prove the merits of their claim to a jury, we find nothing in the Proof of Claim
demonstrating that the parties bargained for their respective benefits and detriments.
Bogigian, 551 N.E.2d at 1151.
The mere presence of some incident to a contract which might, under certain
circumstances, be upheld as a consideration for a promise, does not
necessarily make it the consideration for the promise in that contract. To
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give it that effect, it must have been offered by one party, and accepted by
the other, as one element of the contract.
Id. (quoting Fire Ins. Assoc., Ltd. v. Wickham, 141 U.S. 564, 579 (1891)). Because we
conclude, as a matter of law, that the release is not a binding contract for lack of
consideration, we need not address the remaining elements of contract formation or the
parties’ arguments concerning their intent in signing the release, the ambiguity of the
release, and the conflict of Pennsylvania and Indiana laws regarding the validity and effect
of the release.
CONCLUSION
Based on the foregoing, we conclude that the trial court appropriately denied the
Medical Group’s partial summary judgment motion because the Kendalls did not release
the Medical Group from liability by filing a Proof of Claim in the PHICO liquidation.
Affirmed.
MAY, J. and VAIDIK, J. concur
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