IN justices decline to expand med-mal act to indemnity claims filed by one care provider against another

The Indiana Medical Malpractice Act does not apply to claims for indemnification filed by one medical provider against another, the Indiana Supreme Court has ruled. The court’s decision means a breach-of-contract claim filed against a radiology services provider can proceed, because the MMA’s statute of limitations did not preclude the claim.

Justice Christopher Goff wrote for the unanimous court Tuesday in Lake Imaging, LLC v. Franciscan Alliance, Inc., et al., 21S-CT-478.

The case centers on Joseph Shaughnessy, a patient at Franciscan Alliance in April 2011. At that time, Lake Imaging LLC provided radiology services to Franciscan and interpreted two CT scans performed on Shaughnessy.

Shaughnessy died on April 25, 2011, prompting his sons to file a proposed medical malpractice complaint against Franciscan, but not Lake Imaging. Franciscan settled with the Shaughnessys in September 2016, then sought indemnity from Lake Imaging on the theory that its alleged negligence in interpreting the CT scans had led to Joseph’s death.

Franciscan filed suit in July 2018, alleging breach of contract from Lake Imaging’s failure to provide “competent medical care” and for failure to indemnify Franciscan. Additionally, Franciscan sought declaratory judgment against ProAssurance Indemnity Co., Lake Imaging’s insurer, for payment of any judgment against Lake Imaging.

Lake Imaging responded with a motion for summary judgment, arguing that because Franciscan’s claim was premised on alleged malpractice, the Medical Malpractice Act’s two-year statute of limitations had lapsed.

The Johnson Superior Court, however, determined it lacked subject-matter jurisdiction over the complaint because the MMA required Franciscan to first take its claim to the Department of Insurance for an opinion from a medical-review panel, which it had not done. Thus, the breach of contract claim was dismissed without prejudice, and the parties cross-appealed.

The Court of Appeals of Indiana affirmed in May 2021, finding that because Franciscan’s claim was based on Lake Imaging’s alleged medical negligence, the MMA applied. The lower appellate panel interpreted the MMA as covering any “claimant,” not just an “injured patient,” and as encompassing any “contract” claim “against a health care provider” based on “professional services or health care that was provided or that should have been provided.”

The Supreme Court, however, disagreed.

“Today, we’re asked to extend the reach of the Medical Malpractice Act … to include a claim for indemnification by one medical provider against another,” Goff wrote Tuesday. “We decline that invitation because indemnification sounds in contract, and because neither the text of the MMA nor precedent interpreting the Act support categorizing such a claim as one for medical malpractice. We therefore hold that a breach-of-contract claim for failure to indemnify need not follow the procedures contained within the Act.”

The high court agreed with Franciscan’s argument that the MMA only applies to “‘a patient or the representative of a patient who has a claim for bodily injury or death on account of malpractice.’” It also agreed that Franciscan does not meet the act’s definition of a “patient” under Indiana Code § 34-18-2-22 or § 34-18-8-1. The latter statute, Goff wrote, “expressly provides that the MMA is intended to cover only claims for bodily injury or death, not claims for breach of contract.”

Further, the justices rejected Lake Imaging’s argument that I.C. 34-18-7-1 allows the MMA to apply to Franciscan’s claim because the act applies to “any” claim, “whether in contract or tort.”

“… (T)here is nothing in the MMA to suggest that it extends beyond the physician-patient relationship to encompass commercial contracts between healthcare providers,” Goff wrote. “Instead, the inclusion of ‘whether in contract or tort’ ensures that claims by patients for medical malpractice resulting in bodily injury or death, including those framed as breach-of-contract claims, are brought within the procedural requirements, under the same limitations, established by the Act.”

In reaching its decision, the high court distinguished the case of Cutchin v. Beard, 171 N.E.3d 991 (Ind. 2021), noting Cutchin involved a malpractice claim resulting from bodily injury or death, while the instant case involved a breach of contract claim.

Additionally, the court noted that expanding the MMA’s application to the type of claim at issue here would conflict with the purpose of the act by forcing a provider seeking to enforce indemnification rights to preemptively sue for declaratory judgment before a contractual claim accrues. Here, that would mean Franciscan would’ve had to sue Lake Imaging for a contractual claim before it knew that the Shaughnessys would file a malpractice claim.

“Such an arrangement would effectively transform the collaborative role of independent healthcare providers into an adversarial one — an arrangement that runs contrary to the MMA’s purpose of ‘curtailin[ing] liability for medical malpractice,’” Goff wrote, citing Chamberlain v. Walpole, 822 N.E.2d 959, 963 (Ind. 2005).

Further, expanding the MMA would conflict with the purpose of a medical review panel and possibly draw out the litigation process, the court said.

Thus, because the MMA did not apply to Franciscan’s claim, the trial court did have subject-matter jurisdiction and the two-year statute of limitations did not apply, the justices concluded. Although there was “no clear answer” in caselaw as to whether a six- or 10-year statute of limitations should apply, the justices noted Franciscan’s claim, filed in September 2016, falls within both.

Finally, the high court rejected Lake Imaging’s argument that because its agreement with Franciscan expired on April 30, 2011, any obligation to indemnify Franciscan expired before Franciscan demanded payment in May 2018.

“Nothing in the Agreement indicates that the obligation to indemnify for past services would end when the contract terminated,” Goff wrote. “The services provided to Mr. Shaughnessy were provided under the Agreement, so, as long as the act of professional negligence upon which the indemnity claim is based took place while the contract was in effect, the timing of the Shaughnessys’ suit does not prevent Franciscan’s recovery.”

The case was remanded for further proceedings, including the consideration of one specific question: whether ProAssurance has an obligation to indemnify Lake Imaging for any adverse judgment.

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