Medical Malpractice - Recent Appellate Decisions - 8/07

Medical Malpractice - Recent Appellate Decisions
Prepared by Bell, Gierhart & Moore - August, 2007

Spoliation of Evidence/Sanctions
Morrison v. Rankin, 2007 WI App ___ (Wisconsin Court of Appeals 7/26/07) (Recommended for publication).

This case involves issues of Spoliation of Evidence, which led to a sanction of imposing liability for a lack of informed consent; the jury awarded damages of $2.2 million; the Court of Appeals affirmed and recommended the decision for publication.

This case presents a unique and troubling set of facts that had to be frustrating for everyone involved. The medical care in question related to failed back surgery where the original claim was limited to negligence in the surgery, with a specific agreement that there was no informed consent claim. After the trial started, it became apparent that there were possible issues about the physician’s complication rate with the procedure and about whether that might raise an informed consent issue. The trial judge gave the plaintiff a choice of continuing the trial without the informed consent claim or continuing the trial to allow discovery on the informed consent issues. Not surprisingly the plaintiff opted to continue the trial..

On June 10, 2004, the plaintiff served a motion for continuance of trial to permit discovery on informed consent issues relating to the defendant’s complication rate and his duty to inform the plaintiff of his experience with the procedure. On the same date, the plaintiff served the defendant with interrogatories asking question about his prior surgeries and the complications and injuries sustained by previous patients.

On July 28, 2004, Rankin shredded several thousand pounds of patient records while readying for sale the properties where the records were stored. The destroyed records included all of his patient records.

The trial judge concluded in the context of the lawsuit, the defendant knew or should have known that he had duty to maintain the records; knew or should have known that some or all of those records may have been relevant in a retrial on the issue of informed consent; and knew or should have known that some of those records might have been favorable to the plaintiff in developing that cause of action. The judge stated that he believed the doctor’s destruction of his records raised “a strong inference that the records destroyed would have revealed evidence that was unfavorable to [the doctor] and favorable to the plaintiff.”

Based on those conclusions, the trial court directed a verdict in favor of the plaintiff on the issue of informed consent and scheduled a trial limited to damages. The jury returned a verdict of $2,232,577.04. The defendant appealed.

The Court of Appeals affirmed the trial court’s decision, finding that the circuit court had properly exercised its discretion in directing a verdict after determining that the doctor knew or should have known that the documents he destroyed would be evidence in the malpractice action, and that those actions constituted egregious conduct.

The Court of Appeals also concluded that the verdict was fully covered by the doctor’s primary insurer and the Patient’s Compensation Fund. They had raised a question of whether coverage applied, characterizing the damages as sanctions imposed against the doctor, not for his professional services. The court held that damages were based on an informed consent claim, not a spoliation claim, and were therefore covered by the insurer and the Fund. In some ways this seems surprising, since the finding of a consent violation was based solely on the doctor’s intentional act of destroying all of his medical records. While maybe not called a “spoliation” claim, that is what the case became; and one can question why the insurer and the Fund should be forced to pay it that situation.

The decision was recommended for publication, probably to make a strong statement that the courts will not tolerate this type of destruction of evidence.

Default Judgment/Direct Action Claims
Otto v. PIC, 2007 WI App ___ (Wisconsin Court of Appeals 7/24/07) (Recommended for publication).

This case involves another unusual and unfortunate fact setting, which led to a Default Judgment against a professional liability insurer. The case also involved an issue of an offset to damages for payments by a subrogated health insurer.

The underlying medical claim was based on an alleged negligent failure to diagnose esophageal cancer, which eventually led to the patient’s death. When the case was first filed, it listed fictitious insurers for the doctors and clinics, using common references like the “ABC Insurance Company.” When an amended complaint was filed it named the specific insurance company; and the amended complaint was served on the company after the lawyer who had appeared for the defendants said he was not authorized to accept service for the company. The answer to the amended complaint did not say that it was filed on behalf of the insurance company, listing only the doctors and clinic.

In late 2004, more than a year after the answer was due, the plaintiff filed a motion for a default judgment; in response, the insurer filed a motion to extend the time to answer. In June 2005, the trial court found there was no excusable neglect and held the insurance company in default for failure to timely serve an answer. The court held that the insurer was liable to the plaintiff for the entire amount of damages, which were determined to be $972,469.81. The insurer asked for a credit against the damages for the amount paid by the subrogated health insurer, which was denied by the trial court.

The Court of Appeals affirmed the trial court’s decision, noting that the insurer failed to show any excusable neglect and finding that the default extended to the issue of liability, not just coverage. The court also held that because the statute of limitations had expired on the subrogation claim of the health insurer, the defendant’s insurance company was entitled to a credit for the amount of medical expenses paid by the health insurer, which amounted to $42,635.26.

The default judgment issues of this case are quite rare and will probably not occur again for this insurer. The issue of a credit for the medical expenses could be helpful in future cases where the health insurer doesn’t pursue or is barred from pursuing a subrogation claim.

Claims against University of Wisconsin Hospital and Clinics Authority
Rouse v. Theda Clark Medical Center, 2007 WI 87 (Wisconsin Supreme Court 7/6/07).

This case involved an important issue relating to the University of Wisconsin Hospitals and Clinics Authority (“UWHCA”), the entity that operates the UW Hospital in Madison and employs, among others, the nurses and resident physicians who work at the hospital. The issue was whether the UWHCA, which was created by State statute, comes under the provisions of section 893.80 of the Wisconsin Statutes which applies to governmental organizations, as defined in that statute. Among other things, section 893.80 requires that a notice of claim be given before suit is filed and it imposes a $50,000 damage limitation.

The trial court dismissed the claims against the UWHCA because the plaintiffs had not given the required notice of claim. That decision was affirmed by the Court of Appeals and then again by the Supreme Court. The Supreme Court analyzed the organization, structure and operating powers of the UWHCA, ultimately concluding that while it had many attributes of a private organization, the UWHCA was a “political corporation” under section 893.80.

In a dissent, Chief Justice Abrahamson said that the decision does not deal with the issue of whether the $50,000 damage limitation should apply to the UWHCA, but that damage limit is an integral part of section 893.80. The majority decision directly held that the UWHCA was a "political corporation" for the purposes of § 893.80, which necessarily means that any claim against the UWHCA for alleged medical malpractice by a resident physician, nurse or other employee providing health care services, would be limited to $50,000. The majority decision also said in a footnote that it was not addressing the issue of whether the $50,000 damage limit was unconstitutional as applied to the UWHCA.

It is unclear how the $50,000 damage limit would impact the potential involvement of the Wisconsin Injured Patients and Families Compensation Fund, which by statute has potential coverage for claims of medical malpractice after primary coverage (of at least $1 million) has been paid. As mentioned in the court’s decision, the UWHCA has been paying assessments to the Fund, as all Chapter 655 health care providers are required to do. These issues are left to be resolved in a future case or perhaps by the legislature.

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