Franciscan’s indemnification claim against radiology provider not barred by statute of limitations, COA affirms

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A company that provides radiology services had a contractual duty to indemnify Franciscan Alliance, Inc. after the hospital system settled a medical malpractice claim brought about by alleged negligent care that resulted in a man’s death, the Court of Appeals of Indiana affirmed Thursday.

According to court records, between 2004 and 2011, Lake Imaging was a qualified health care provider, as defined in the Medical Malpractice Act, who provided radiology services to Franciscan Alliance Inc.’s patients.

Pursuant to an agreement, effective Jan.1, 2004, Lake Imaging agreed to “indemnify and hold [Franciscan] harmless from any liability claimed as a result of [Lake Imaging’s] negligence in the provisions of services undertaken under this [A]greement.”

Joseph Shaughnessy was a patient at Franciscan in April 2011.

While in Franciscan’s care, Lake Imaging’s radiologists interpreted two CT scans performed on Shaughnessy.

Shaughnessy died on April 25, 2011.

It was later discovered that Lake Imaging’s employed radiologists had missed the presence of a right-sided subdural hematoma on the CT scans.

In April 2013, Shaughnessy’s sons filed a proposed medical malpractice complaint with the Indiana Department of Insurance against Franciscan and other providers, alleging that negligent medical care resulted in Shaughnessy’s death.

Lake Imaging was not named in the proposed complaint.

During discovery, one of the named providers divulged that Lake Imaging’s radiologists had failed to report the presence of a right-sided hematoma on Shaughnessy’s CT scans.

The Shaughnessys subsequently amended their proposed complaint to pursue a vicarious liability claim against Franciscan based on the radiologists’ negligence.

Because the two-year statute of limitations for medical malpractice claims under the MMA had expired by then, the Shaughnessys could not name Lake Imaging or its employed radiologists as defendants in their amended proposed complaint.

On Jan. 29, 2014, Franciscan notified Lake Imaging of its intent to seek indemnification pursuant to the agreement.

Lake Imaging did not respond.

On July 21, 2016, Franciscan sent correspondence to Lake Imaging and its insurance company, ProAssurance Indemnity Co., offering to tender the defense in the medical malpractice lawsuit instigated by the Shaughnessys.

Franciscan advised that it intended to settle the lawsuit premised solely on the negligence of Lake Imaging’s radiologists and to pursue indemnification against Lake Imaging unless it received written notice within 20 days that ProAssurance intended to assume the defense or objected to Franciscan settling the matter.

While Lake Imaging did not respond, ProAssurance responded on Aug. 9, 2016, rejecting Franciscan’s tender and instructing Franciscan to use its “own judgment regarding the advisability of settling [the lawsuit].”

Franciscan settled with the Shaughnessys on Sept. 25, 2016.

On July 17, 2018, Franciscan filed its complaint against Lake Imaging, alleging breach of contract for Lake Imaging’s failure to provide competent medical care and for failure to indemnify Franciscan.

Franciscan also sought a declaratory judgment against ProAssurance for payment of any judgment rendered against Lake Imaging.

Lake Imaging moved for summary judgment, claiming that, because Franciscan premised its claim on alleged medical malpractice by Lake Imaging, the MMA’s two-year statute of limitations had lapsed.

Instead of addressing the statute of limitations claim, the Johnson Superior Court dismissed Franciscan’s indemnification claim without prejudice, concluding that it lacked subject-matter jurisdiction because the MMA required Franciscan to present its claim to the DOI for an opinion rendered by the medical review panel before filing its complaint.

Lake Imaging appealed and Franciscan cross-appealed.

The appellate court affirmed in May 2021, holding that, because Franciscan’s claim rested on Lake Imaging’s alleged negligence, the MMA applied.

The Indiana Supreme Court disagreed in Lake Imaging, LLC v. Franciscan Alliance, Inc., 182 N.E.3d 203, 210 (Ind. 2022) and concluded that Franciscan’s indemnification claim is “an ordinary contract claim, rather than a claim for medical malpractice[.]”

The high court remanded with instructions for the trial court to conduct further proceedings on Franciscan’s indemnification claim and also to consider the potential liability of ProAssurance under Lake Imaging’s insurance policy with ProAssurance.

On remand and in light of the high court’s decision, the trial court ordered supplemental briefing on all motions for summary judgment.

On Oct. 24, 2022, the trial court issued summary judgment in favor of Franciscan on its indemnification claim against Lake Imaging.

In denying Lake Imaging’s request to apply the Professional Services Statute’s two-year statute of limitations, the trial court noted that the high court had already “acknowledge[ed] that the language of Ind. Code [§] 34-11-2-3 [of the PSS] and Indiana’s [MMA] is ‘strikingly similar’” but had decided “to apply either a six-or ten-year statute of limitations to the indemnification claim.”

The trial court concluded that Franciscan’s “tender of payment in settlement of the [MMA] trigger[ed] Lake Imaging’s duty to indemnify Franciscan” under the Agreement as Lake Imaging’s obligation to indemnify arises “when the party seeking indemnity pays the underlying claim; pays judgment on the underlying claim; or tenders payment in settlement of the underlying claim.”

Lake Imaging appealed the trial court’s summary judgment on remand in favor of Franciscan, arguing that the Franciscan’s claim is barred by the two-year statute of limitations of the PSS.

The provider also contended there was no remaining breach of contract claim upon which Franciscan can be indemnified because the trial court dismissed the breach of contract claim to provide competent medical services.

The appellate court affirmed, finding that the trial court properly declined to apply the PSS’s two-year limitations period and properly entered summary judgment in favor of Franciscan on its indemnification claim.

Judge Patricia Riley wrote the opinion for the appellate court.

According to Riley, although the PSS applies to actions “for damages brought in contract based upon professional services rendered or which should have been rendered,” just like the MMA’s “whether in contract or in tort” phrase, the PSS’s statutory language does not transform Franciscan’s indemnification claim into a medical malpractice claim as the language, just as in the MMA, is merely a recognition of the contractual nature of the patient’s relationship with his healthcare provider.

“Accordingly, based on the law of the case doctrine and our supreme court’s characterization of Franciscan’s indemnification claim as a contract claim, we affirm the trial court’s conclusion that Franciscan’s claim is not barred by the statute of limitations,” Riley wrote.

Riley also wrote that while the appellate court agreed with Lake Imaging that the high court “affirm[ed] the trial court’s dismissal of Franciscan’s claim that Lake Imaging breached their contract by committing medical malpractice[,]” it also held that “[b]ecause Franciscan’s claim for breach of contract [for failure to indemnify] was not one for medical malpractice, we reverse the trial court’s dismissal of that claim.”

“Thus, the supreme court’s decision did not extinguish Franciscan’s indemnification claim, it revived it,” Riley wrote.

The appellate judge noted the trial court on remand concluded that because Franciscan tendered payment to settle the medical malpractice suit with the Shaughnessys, Lake Imaging’s duty to indemnify Franciscan was triggered.

“Accordingly, the trial court held that Franciscan was entitled to judgment on its claim as a matter of law.  As Lake Imaging does not contest this holding, we affirm the trial court’s entry of summary judgment in Franciscan’s favor,” Riley wrote.

Judges L. Mark Bailey and Elizabeth Tavitas concurred in Lake Imaging, LLC v. Franciscan Alliance, Inc. f/d/b/a Saint Margaret Mercy Health Care Centers, 22A-CT-2783.

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