ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
Elizabeth H. Knotts Robert L. Thompson
Rori L. Goldman Fort Wayne, Indiana
Indianapolis, Indiana
Richard L. Schultheis
ATTORNEYS FOR AMICUS CURIAE Indianapolis, Indiana
INDIANA STATE MEDICAL ASSOCIATION
Thomas J. Costakis
Libby Y. Mote
Indianapolis, Indiana
FILED
____________________________________________________________________________
Mar 10 2009, 8:39 am
In the CLERK
Indiana Supreme Court
of the supreme court,
court of appeals and
tax court
_________________________________
No. 49S04-0806-CV-344
JIM ATTERHOLT, COMMISSIONER OF
THE INDIANA DEPARTMENT OF INSURANCE,
AS ADMINISTRATOR OF THE INDIANA
PATIENT’S COMPENSATION FUND,
Appellant (Defendant below),
v.
GENEVA HERBST, PERSONAL
REPRESENTATIVE OF THE ESTATE OF
JEFFRY A. HERBST, DECEASED,
Appellee (Plaintiff below).
_________________________________
Appeal from the Marion Superior Court, No. 49D07-0511-PL-045446
The Honorable Gerald Zore, Judge
_________________________________
On Petition to Transfer from the Indiana Court of Appeals, No. 49A04-0702-CV-106
_________________________________
March 10, 2009
Boehm, Justice.
We hold that when a claimant seeks excess damages from the Patient’s Compensation
Fund after obtaining a judgment or settlement from a health care provider in a medical malprac-
tice case, the Fund may introduce evidence of the claimant’s preexisting risk of harm if it is rele-
vant to establish the amount of damages, even if it is also relevant to liability issues that are fo-
reclosed by the judgment or settlement.
Facts and Procedural History
On March 6, 2002, thirty-four-year-old Jeffry Herbst suffered from a fever, congestion,
nausea, loss of appetite, and decreased urine output. At 10:30 a.m. that day, Herbst’s primary
care physician diagnosed the condition as bilateral pneumonia and sent Herbst to the hospital,
where he died at 9:00 that night. An autopsy determined that Herbst died of fulminant myocardi-
tis, an inflammation of the heart characterized by acute and severe onset.
Herbst’s Estate sought to bring a wrongful death action against the primary care physi-
cian, the physician’s employer, and the hospital. Both the physician and the hospital are quali-
fied health care providers under the Medical Malpractice Act. That statute provides that before a
claim for negligence may be brought against a qualified provider, the proposed complaint must
be submitted to a medical review panel. The Estate’s proposed complaint alleged that the health
care providers failed to comply with the appropriate standard of care in assessing and treating
Herbst’s condition and that this failure was a factor in Herbst’s death. The medical review panel
determined that the primary care physician had failed to meet the appropriate standard of care,
but the failure was not a factor in Herbst’s death. The panel found that the hospital met the ap-
propriate standard of care, and made no finding regarding the physician’s employer.
Under the Medical Malpractice Act, the liability of each qualified health care provider is
limited to $250,000. Additional damages may be recovered from the Patient’s Compensation
Fund under conditions explained in more detail below. Herbst’s Estate settled with the primary
care physician and the hospital under an agreement that permitted access to the Fund.
The Estate then brought this action, seeking the statutory maximum in additional damag-
es from the Patient’s Compensation Fund. In Cahoon v. Cummings, 734 N.E.2d 535, 541 (Ind.
2000), we held that damages for negligently causing an increased risk of harm are ―proportional
to the increased risk attributable to the defendant’s negligent act or omission.‖ The Estate antic-
ipated that the Fund would invoke this doctrine and contend that the damages from Herbst’s
2
death were only a fraction, if any, of the total dollar value placed on the death because Herbst’s
condition was likely fatal irrespective of any malpractice. Seeking to present this issue, the Es-
tate moved for partial summary judgment, requesting a ―preliminary determination of the law
applicable,‖ specifically that
(a) the Court will determine the amount of damages, if any, due to the plaintiff,
not whether the health care provider defendants are liable for the compensable
damages alleged; (b) the Indiana Patient’s Compensation Fund (PCF) may not li-
tigate any issues of liability or proximate causation, which are deemed established
by settlement with the health care provider defendants; and (c) the question pre-
sented is the amount of the compensable damages alleged, not the liability for, or
the proximate cause of, such damages.
The Fund responded that it was not seeking to relitigate whether the providers were liable for
Herbst’s death, but rather challenged the amount of damages attributable to the providers’ con-
duct. The trial court granted the Estate’s motion without explanation and denied the Fund’s re-
quest to certify the order for interlocutory appeal.
At a bench trial, the Fund attempted to introduce expert testimony that even with proper
care, Herbst had a less than ten percent chance of surviving the hospitalization, and had he sur-
vived, he would have been unable to return to work. The trial court excluded this evidence. The
trial court found that the ―evidence establishes that the damages of the Estate and the beneficia-
ries, including funeral and burial expenses, loss of earnings, loss of services, and loss of love and
affection and parental guidance would exceed the sum of $2,500,000.00,‖ and awarded the Es-
tate the statutory maximum of $1 million.
The Fund appealed, arguing that the trial court erred in granting the partial summary
judgment and also in excluding the expert testimony. The Court of Appeals affirmed the trial
court in an opinion discussed below. Atterholt v. Herbst, 879 N.E.2d 1221, 1227 (Ind. Ct. App.
2008). We granted transfer and reverse in part.
Standards of Review
We review a summary judgment order de novo. Lean v. Reed, 876 N.E.2d 1104, 1107
(Ind. 2007). Summary judgment is appropriate when there is no genuine issue of material fact
and the moving party is entitled to a judgment as a matter of law. Ind. Trial Rule 56(C). We
3
grant relief from a trial court’s erroneous exclusion of evidence only when the error affects ―the
substantial rights of the parties.‖ T.R. 61.
Liability and Damages for Medical Malpractice
Under the Indiana Medical Malpractice Act, the total recovery in a medical malpractice
action is limited to $1,250,000 per ―injury or death.‖ The Act caps a health care provider’s mal-
practice liability at $250,000 per occurrence if the provider maintains sufficient insurance and
pays the required surcharge to the Patient’s Compensation Fund. Ind. Code §§ 34-18-3-1, -14-
3(b) (2004). The Fund is financed by the surcharges collected from providers throughout the
state and pays ―excess damages.‖ Recovery of excess damages from the Fund is allowed only
after a health care provider or the provider’s insurer has paid the first $250,000, id. § 34-18-15-
3(1), or made a settlement in which the sum of the present cash payment and cost of future peri-
odic payments exceeds $187,000. Id. § 34-18-14-4(b). Multiple providers’ cash payments and
contributions to a periodic payments agreement are aggregated for purposes of the $187,000 re-
quirement. Id. § 34-18-14-4(c). If the Fund and claimant cannot agree on the amount to be paid
from the Fund, the court must hold a hearing to ―determine the amount for which the fund is lia-
ble.‖ Id. § 34-18-15-3(4)–(5). In determining this amount, ―the court shall consider the liability
of the health care provider as admitted and established.‖ Id. § 34-18-15-3(5).
In this case, the Estate filed a petition to access the Fund after settling with the health care
providers under an agreement in which the providers contributed a total of $187,001 in cash and
payments to purchase an annuity. The Estate and the Fund dispute the meaning of the statutory
provision that ―liability‖ is to be treated as ―established‖ by the settlement. The Estate argues
that ―liability‖ includes causation and the statute therefore precludes the Fund from introducing
evidence related to causation issues. We understand the Estate’s contention to embrace both
causation in fact and scope of liability, sometimes described as proximate cause. The Estate thus
argues that any evidence of Herbst’s risk of death bears on causation—whether the death results
from malpractice—and is therefore precluded. The Fund responds that its evidence is admissible
because it is relevant to the amount of damages for which it is liable.
The Medical Malpractice Act does not define ―liability.‖ However, the Act provides that
undefined legal terms have the meaning consistent with the common law. I.C. § 34-18-2-2. Ac-
4
cording to Black’s Law Dictionary (8th ed. 2004), liability is the ―quality or state of being legally
obligated or accountable.‖ To say that one is ―liable‖ does not establish the amount of damages.
In this case evidence of Herbst’s underlying risk of death whether or not he was properly treated
is relevant to both liability—whether malpractice caused his death—and to damages—the
amount for which the Fund is responsible. For this reason, it is admissible and its exclusion was
error.
Prior cases are consistent with our holding today. The plaintiff relies principally on Dil-
lon v. Glover, 597 N.E.2d 971 (Ind. Ct. App. 1992), trans. denied. In Glover, a physician negli-
gently failed to diagnose the plaintiff’s lung cancer from an initial x-ray, and the patient died. Id.
at 972. The patient’s estate brought a wrongful death claim against the physician. The patient’s
estate settled with the physician for the statutory maximum and then pursued excess damages
from the Patient’s Compensation Fund. Id. At the trial on excess damages, evidence established
that had the cancer been diagnosed properly, the patient would have had a thirty percent chance
to live five years, rather than the eight percent chance he had when the cancer was actually diag-
nosed. Id. The Fund argued that because the patient never had a greater than fifty percent
chance of survival, the physician did not proximately cause the patient’s death, and the patient’s
Estate was not entitled to any excess damages. Id. The Court of Appeals held that this argument
was impermissible because the settlement established liability, which included the issue of
whether the physician’s negligence proximately caused the patient’s damages. Id. at 973. The
Court of Appeals expressly did not decide an issue of liability—whether increased risk of harm
is a compensable injury in Indiana. Id. at 972. Moreover, the Court of Appeals noted that the
Fund was free to argue regarding the correct standard for compensation of the injury. Id. at 973–
94. The issue presented here—the extent of damages—was thus not addressed.
The liability issue left open in Glover was decided in Mayhue v. Sparkman, 653 N.E.2d
1384, 1388 (Ind. 1995), where we held that a plaintiff may bring a medical malpractice claim
against a negligent doctor even if the patient had a greater than fifty percent chance of harm in
the absence of malpractice. We adopted Section 323 of the Restatement (Second) of Torts and
explained the proper approach to such claims: ―when a plaintiff proves negligence and an in-
crease in the risk of harm, the jury is permitted to decide whether the medical malpractice was a
substantial factor in causing the harm suffered by the plaintiff.‖ Mayhue, 653 N.E.2d at 1388.
5
Therefore, in a Mayhue claim, evidence of increased risk of harm is relevant to establish the
health care provider’s liability.
Evidence of increased risk of harm is also relevant to valuation of damages. As noted in
Glover, although the Fund was precluded from challenging liability, it was free to challenge the
trial court’s finding as to damages, presumably by offering evidence of the patient’s underlying
risk of harm. 597 N.E.2d at 973–74. This was spelled out in Cahoon v. Cummings, 734 N.E.2d
535, 541 (Ind. 2000), where we held that ―upon a showing of causation under Mayhue, damages
are proportional to the increased risk attributable to the defendant’s negligent act or omission.‖
This principle applies to the plaintiff’s claim here. In response to the Estate’s summary judg-
ment motion, the Fund designated deposition testimony from each member of the medical review
panel that Herbst would have died regardless of the treatment he received. If so, although causa-
tion in fact is no longer in issue, the damages would be zero because the negligent act increased
the probability of death by zero percent. At trial when the evidentiary issue was presented, ac-
cording to the Fund’s offer to prove, the Fund’s witness would testify that Herbst had only a ten
percent chance of survival, and if he lived would never be able to work. If that is the case, any
malpractice by either provider increased his chance of harm by no more than ten percent, and the
Fund is liable for only ten percent of the value of his survival. Moreover, if with proper care
Herbst still had no chance of working in the future, no lost wages are recoverable from the Fund.
If the physician and hospital were not qualified providers, this reasoning would apply to
the Estate’s claim under basic tort principles. I.C. § 34-18-3-1. Under tort law, liability is estab-
lished if the defendant’s negligence causes the plaintiff’s damages, but the extent of damages is
limited to the damage caused by the defendant. If the claim is for increased risk of harm, as it is
in Herbst’s case if the Fund’s expert is correct, recoverable damages are the dollar value of the
total harm suffered multiplied by the percentage of the increased risk of harm attributable to the
defendant’s negligence. See generally Joseph H. King, Jr., Causation, Valuation, and Chance in
Personal Injury Torts Involving Preexisting Conditions and Future Consequences, 90 Yale L.J.
1353 (1981). The Medical Malpractice Act does not change this calculus. In effect the Estate’s
claim is that it can recover under the Medical Malpractice Act the full value of Herbst’s death
even though that loss would be only ten percent compensable if the Medical Malpractice Act did
not apply. As already explained, we think the language of the Medical Malpractice Act does not
6
support the Estate’s position, but we also observe that the Act was plainly not intended to expand
recovery for medical malpractice. See Johnson v. St. Vincent Hosp., Inc., 273 Ind. 374, 379–80,
404 N.E.2d 585, 589–90 (1980) (describing events leading to Medical Malpractice Act).
In this case, the Court of Appeals affirmed the trial court and held that the Fund’s argu-
ment and evidence were inadmissible. Atterholt v. Herbst, 879 N.E.2d 1221, 1227 (Ind. Ct. App.
2008). The Court of Appeals reasoned that evidence of increased risk of harm would be relevant
to establishing causation under Mayhue, but was irrelevant where causation was established by
settlement as it was in Glover. The Court of Appeals recognized the ―potential for unjust out-
comes‖ but concluded that this was not a problem because ―[i]f a patient has only a small chance
of survival . . . healthcare providers should not be overly eager to settle such claims.‖ Id.
We respectfully disagree with the Court of Appeals. Relevance is not an either-or propo-
sition. Evidence of increased risk of harm can be relevant to both causation under Mayhue and
valuation of damages. Here, the settlement between the Fund and the health care providers prec-
luded consideration of causation, but left open the amount of damages. The trial court therefore
correctly granted partial summary judgment restating the statute and the Glover holding, but
erred in excluding the Fund’s evidence regarding Herbst’s risk of death before any malpractice.
Second, we disagree that providers’ resistance to settlement provides an adequate safe-
guard against invasion of the Fund. On the contrary, a health care provider would presumably
readily settle a case such as Herbst’s where there are potentially large damages. Even if, as the
Fund argues, only ten percent of Herbst’s more than $2,500,000 damages were caused by negli-
gence, a health care provider would face a judgment of at least $250,000 plus the substantial cost
of defense. Even though liability is capped at $250,000, a provider has substantial incentive to
settle for that amount, and even more to enter into a settlement for periodic payments costing
$187,000.
7
Conclusion
Because the statement of law sought by the Estate at summary judgment was correct on
its face, we affirm the trial court’s grant of partial summary judgment. The case is remanded for
a determination of the extent of the Fund’s liability consistent with the law as explained in this
opinion.
Shepard, C.J., and Dickson, Sullivan, and Rucker, JJ., concur.
8