Preferred Risk Mutual Insurance v. Reiswig

980 P.2d 895, 87 Cal. Rptr. 2d 187, 21 Cal. 4th 208, 99 Cal. Daily Op. Serv. 6260, 99 Daily Journal DAR 7983, 1999 Cal. LEXIS 4997

• Court: California Supreme Court
• Decided: August 5, 1999
• Docket: S073975
• Status: Published

Opinions

Opinion

CHIN, J.

Code of Civil Procedure section 364, subdivision (a),¹ part of the Medical Injury Compensation Reform Act (MICRA), requires plaintiffs to give defendants 90 days’ notice of intent to sue for actions “based upon” defendants’ professional negligence. Section 364, subdivision (d), tolls the “applicable statute of limitations” governing the negligence action for 90 days following proper statutory notice. We must decide whether subdivision (d) applies to an equitable indemnity action that is based on professional negligence, but governed by a non-MICRA statute of limitations. We conclude it does, and we reverse the Court of Appeal’s judgment.

Facts

This appeal is from a judgment of dismissal entered after the trial court sustained a demurrer without leave to amend. Under well-settled law, therefore, we assume the truth of all properly pleaded material allegations. (Phillips v. Desert Hospital Dist. (1989) 49 Cal.3d 699, 702 [263 Cal.Rptr. 119, 780 P.2d 349].)

On April 4, 1993, Rebekka Pratte (Pratte) was injured when her hand was slammed in the door of a van owned by the First Church of God— Santa Maria, Inc. (the Church). She was treated by defendant doctors Reo Reiswig, Karen S. Kolba, and C. Baring Farmer (the doctors). After treatment she developed a serious condition known as complex regional pain syndrome.

Pratte sued the Church, which was insured by plaintiff Preferred Risk Mutual Insurance Company (Preferred Risk). On January 24,1996, Preferred Risk paid the $1 million policy limit to Pratte in exchange for a release of all claims against the Church. On July 2,1996, Pratte sued Doctors Reiswig and Farmer for malpractice. Because the action was “based upon” her physicians’ alleged negligence, it was governed by MICRA’s statutory provisions, including section 364, which governs the notice of intention and commencement of professional negligence actions. (§ 364, subds. (a), (d).) Pratte followed those statutes in pursuing her claim.

On January 16, 1997, Preferred Risk served Doctors Reiswig and Kolba with section 364, subdivision (a), notices of intent to sue them for malpractice. On February 19, 1997, it served a similar notice on Dr. Farmer. On April 10, 1997, Preferred Risk filed a complaint in subrogation to the Church’s right of equitable indemnity against all three doctors, essentially claiming that they should indemnify it for the amount it spent to settle Pratte’s action against the Church because their malpractice caused Pratte’s injuries.

The doctors demurred to the complaint on the grounds that it did not state a subrogation cause of action and was barred by the general one-year personal injury statute of limitations in section 340, subdivision (3). They asserted that, because section 340, subdivision (3), applies to general tort actions and is not part of the MICRA statutory scheme, Preferred Risk could not seek protection under the MICRA 90-day tolling provision for actions “based upon” professional negligence. (§ 364, subd. (d).) The trial court sustained the demurrer on statute of limitations grounds, entering judgment of dismissal for defendants. The Court of Appeal affirmed the judgment. We granted review to decide whether section 364, subdivision (d), applies to Preferred Risk’s equitable indemnity action.

Background

A person whose negligence causes injury that a physician’s malpractice aggravates may seek equitable indemnity from the physician. (Smith v. Parks Manor (1987) 197 Cal.App.3d 872, 878 [243 Cal.Rptr. 256].) The equitable indemnity cause of action does not accrue until the person pays the injured third party’s claim. (People ex rel. Dept. of Transportation v. Superior Court (1980) 26 Cal.3d 744, 757 [163 Cal.Rptr. 585, 608 P.2d 673].) A liability insurer that pays damages to a third party on behalf of an insured tortfeasor stands in the same position as its insured with respect to the right to recover against other tortfeasors on a comparative fault basis. (Truck Ins. Exchange v. Superior Court (1997) 60 Cal.App.4th 342, 350 [70 Cal.Rptr.2d 255].)

Preferred Risk paid Pratte on January 24, 1996. Its indemnity cause of action accrued on that date for purposes of commencing the statute of limitations, because one is injured by another’s wrongful act when one pays more than one’s proper share of a settlement to a plaintiff. The parties agree that section 340, subdivision (3), which governs all general tort actions, governs the equitable indemnity action. That section imposes a one-year limitations period for “[a]n action ... for injury to . . . one caused by the wrongful act or neglect of another . . . Thus, Preferred Risk was required to file its complaint by January 24, 1997, unless its action was tolled or extended by law.²

Section 364, subdivision (a), provides that “[n]o action based upon the health care provider’s professional negligence may be commenced unless the defendant has been given at least 90 days’ prior notice of the intention to commence the action.” Failure to comply with the 90-day notice provision does not invalidate court proceedings and is not jurisdictional, although it may subject a plaintiff’s attorney to State Bar disciplinary proceedings. (§ 365.) Section 364, subdivision (d), states: “If the notice is served within 90 days of the expiration of the applicable statute of limitations, the time for the commencement of the action shall be extended 90 days from the service of the notice.” (§ 364, subd. (d).) Preferred Risk filed its complaint on April 10, 1997, more than one year after the indemnity cause of action accrued on January 24, 1996. The action is time-barred unless tolled under section 364, subdivision (d), for 90 days after January 16, 1997, when Preferred Risk served notice of intent to sue on Doctors Reiswig and Kolba.

The Court of Appeal concluded that the 90-day tolling provision of section 364, subdivision (d), does not apply to equitable indemnity claims. The court did acknowledge that, because section 364, subdivision (d), tolls “the applicable statute of limitations” and is not limited to MICRA statute of limitations provisions, it arguably could apply even to non-MICRA limitations periods, as it has in other cases. (See, e.g., Anson v. County of Merced (1988) 202 Cal.App.3d 1195, 1204-1205 [249 Cal.Rptr. 457] (Anson) [§ 364 notice extends limitations period under Gov. Code, § 945.6].) The court concluded, however, that because section 364 applies only to an “action based upon the health care provider’s professional negligence,” and defines professional negligence as a “negligent act. . . by a health care provider in the rendering of professional services, which ... is the proximate cause of a personal injury or wrongful death . . .” (§ 364, subds. (a), (f)(2)), the statute applies only to claims by a patient or a patient’s heirs, and not to parties seeking indemnity for the same injury. We conclude the Court of Appeal erred.

Discussion

As we have observed, the Legislature enacted MICRA in 1975 in response to rapidly increasing premiums for medical malpractice insurance. (Delaney v. Baker (1999) 20 Cal.4th 23, 33-34 [82 Cal.Rptr.2d 610, 971 P.2d 986]; Woods v. Young (1991) 53 Cal.3d 315, 319 [279 Cal.Rptr. 613, 807 P.2d 455] (Woods).) The Legislature viewed MICRA as “ ‘an interrelated legislative scheme ... to deal specifically with all medical malpractice claims.’ ” (Woods, supra, 53 Cal.3d at p. 324.) The purpose of the notice of intent to sue and the 90-day tolling period of section 364 was to decrease the number of actions premised on professional negligence by establishing a procedure to encourage the parties to negotiate “ ‘outside the structure and atmosphere of the formal litigation process.’ ” (Woods, supra, 53 Cal.3d at p. .) We have held that the tolling period of section 364, subdivision (d), applies to those injuries governed by the MICRA statute of limitations under section 340.5. (Woods, supra, 53 Cal.3d at p. 327; Russell v. Stanford University Hospital (1997) 15 Cal.4th 783, 789 [64 Cal.Rptr.2d 97, 937 P.2d 640] (Russell) [§ 364 tolls three-year discovery period of § 340.5].) The cases agree that MICRA provisions should be construed liberally in order to promote the legislative interest in negotiated resolution of medical malpractice disputes and to reduce malpractice insurance premiums. (Russell, supra, 15 Cal.4th at p. 790; see American Bank & Trust Co. v. Community Hospital (1984) 36 Cal.3d 359, 363-364 [204 Cal.Rptr. 671, 683 P.2d 670, 41 A.L.R.4th 233].)

Notwithstanding the clear policy behind section 364, to encourage settlements and lower insurance premiums, the doctors assert that the tolling provision of section 364, subdivision (d), does not apply to equitable indemnity actions because they are not governed by MICRA statute of limitations provisions. Instead, equitable indemnity, actions are simple common law tort actions filed to regain money lost by another’s negligence, with the general tort statute of limitations under section 340, subdivision (3), alone applying to the claims. The doctors reason that, because the actions seek to recover economic loss, and because section 340, subdivision (3), a non-MICRA provision, governs them, the tolling provision of section 364, subdivision (d), cannot protect them.

Our cases implicitly reject the doctors’ contention. We have held that the MICRA provisions may apply to equitable indemnity actions. (Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital (1994) 8 Cal.4th 100, 114 [32 Cal.Rptr.2d 263, 876 P.2d 1062] (Western Steamship).) Western Steamship held that Civil Code section 3333.2, subdivision (b), which imposes a statutory cap on noneconomic damages in medical malpractice claims, limits those damages to $250,000 in all MICRA actions, including derivative actions for partial equitable indemnity brought by a concurrent tortfeasor. (Western Steamship, supra, 8 Cal.4th at p. 104.)

Western Steamship involved the doctrine of equitable indemnity in the MICRA context and Civil Code section 3333.2. Subdivision (a) of that section provides: “In any action for injury against a health care provider based on professional negligence, the injured plaintiff shall be entitled to recover noneconomic losses . . . .” Subdivision (b) of that section limits noneconomic damages to $250,000. Western Steamship rejected the argument that an action for equitable indemnity is distinct from its related medical malpractice suit that MICRA governs because it seeks only economic damages resulting from the malpractice settlement payment. (Western Steamship, supra, 8 Cal.4th at p. 107.) After examining the equitable indemnity doctrine, however, and noting that it simply involves an apportionment of damages among tortfeasors, we held that categorizing indemnity actions as involving only economic factors would “misperceive[] the proper scope of the court’s inquiry in cases of equitable indemnification.” (Ibid.) We observed that MICRA “reflects a strong public policy to contain the costs of malpractice insurance by controlling or redistributing liability for damages, thereby maximizing the availability of medical services to meet the state’s health care needs. [Citation.] . . . Exempting indemnity actions from the $250,000 limit would threaten not only this goal but also the broader purpose of MICRA by resurrecting the pre-MICRA instability associated with unlimited noneconomic damages and increasing the overall cost of malpractice insurance to account for these larger recoveries. [Citations.]” (Id. at p. 112.) Thus, Western Steamship concluded that because indemnity cannot occur without liability, the MICRA limitation on damages applied with equal force to an equitable indemnity action based on an original professional malpractice lawsuit. (Id. at p. 114.)

The doctors attempt to distinguish Western Steamship on the ground that we specifically differentiated between substantive questions involving MICRA and simple procedural ones invoking statutes of limitations and other limitations on liability available to defendants in indemnity actions. (Western Steamship, supra, 8 Cal.4th at pp. 114-115.) Like the Court of Appeal, the doctors rely on our statement in Western Steamship separating MICRA’s substantive and procedural provisions: “[F]or certain procedural purposes, such as statutes of limitations, an indemnity claim is an independent action. [Citation.] As to matters of substantive law, however, it is wholly derivative and subject to whatever immunities or other limitations on liability would otherwise be available.” (Ibid., fn. omitted.)

Although Western Steamship distinguished between substantive and procedural statutes to facilitate its analysis, the comparison has little force in this case. The doctors fail to acknowledge that Western Steamship relied on an out-of-state case that construed a medical malpractice statute of limitations to apply to contribution actions against health care providers. (Western Steamship, supra, 8 Cal.4th at p. 112 [determined that Civ. Code, § 3333.2 includes actions for equitable indemnity in order to effectuate goal of reducing insurance premiums], citing Hayes v. Mercy Hosp. and Medical Center (1990) 136 Ill.2d 450 [145 Ill.Dec. 894, 557 N.E.2d 873, 876-877, 88 A.L.R.4th 321].) Moreover, Civil Code section 3333.2, the statute at issue in Western Steamship, applies in actions “against a health care provider based on professional negligence.” This language is virtually identical to that of section 364, subdivision (a), which applies to actions “based upon the health care provider’s professional negligence.” We can reasonably infer, therefore, that the Legislature intended the parallel language of the two MICRA provisions to be construed identically. Thus, although Western Steamship does not specifically resolve the question whether the tolling provisions of section 364, subdivision (d), should apply to equitable indemnity actions based on medical malpractice actions, it helps us understand the statute’s application in the non-MICRA equitable indemnity context.

The doctors also assert that, even if we assume Western Steamship does not preclude application of section 364, subdivision (d), to Preferred Risk’s equitable indemnity action, a literal statutory interpretation does, because the indemnity was not, in the language of the statute, “based upon” the doctors’ negligence. (§ 364, subd. (a).) In other words, Preferred Risk itself “did not suffer a personal injury or wrongful death, nor did the Church of God—in whose shoes Preferred Risk stands.” Thus, because Preferred Risk’s equitable indemnity action is not “based upon” professional negligence, its notice of intent to sue the doctors does not trigger the tolling provision of section 364, subdivision (d).

The doctors’ contention does not withstand scrutiny. Western Steamship recognized that, although equitable indemnity is based upon restitution, its restitutionary nature does not preclude the courts from apportioning liability among multiple tortfeasors on a comparative negligence basis. (Western Steamship, supra, 8 Cal.4th at pp. 108-109.) Indeed, Western Steamship assumed that an action for partial equitable indemnity may be based upon professional negligence and may indeed be subject to MICRA’s limit on noneconomic damages. (Id. at p. 111.) Moreover, although we have never attempted to define for all purposes the phrase “based upon” professional negligence, we have recognized that, in deciding whether an action is “based upon” professional negligence, the test is whether it flows or originates from a healthcare provider’s negligent act or omission. (See Central Pathology Service Medical Clinic, Inc. v. Superior Court (1992) 3 Cal.4th 181, 187-188, fn. 3, 192 [10 Cal.Rptr.2d 208, 832 P.2d 924] [court must examine allegations of complaint to determine whether plaintiff’s injury is related to manner in which professional services were rendered].)

The courts have also rejected a similar contention in another nonMICRA statute of limitations context. (Anson, supra, 202 Cal.App.3d at pp. 1204-1205.) Anson held that the section 364, subdivision (d), tolling provision extended the six-month statute of limitations period of Government Code section 945.6, which governs actions against public entities. Citing section 364, subdivision (d), Anson observed the statute specifically states that, if a notice of intention is “ ‘served within 90 days of the expiration of the applicable statute of limitations,’ ” the limitations period is extended 90 days from service of notice. (Anson, supra, 202 Cal.App.3d at p. 1204, italics added by Anson.) “Had the Legislature intended the 90-day extension only to apply to the 1-year statute of limitations of Code of Civil Procedure section 340.5, it could have so stated. Instead, it used the words ‘the applicable statute of limitations.’ [^] ‘Government Code section 945.6 is a statute of limitation.’ [Citation.] Since we have held Government.Code section 945.6 to be the applicable statute of limitations in this case, a plain reading of the language of subdivision (d) of Code of Civil Procedure section 364 extends the six-month period by ninety days from service of the notice of intention to institute legal action. As this court has explained, courts are ‘required to give effect to statutes according to the usual, ordinary import of the language employed in framing them.’ [Citation.]” (Anson, supra, 202 Cal.App.3d at pp. 1204-1205; see Wurts v. County of Fresno (1996) 44 Cal.App.4th 380, 385 [51 Cal.Rptr.2d 689] [§ 364’s purpose is not merely procedural, and statute applies to other non-MICRA actions].)

The doctors attempt to distinguish Anson on the ground that it involved a negligence action against the governmental entity that employed the negligent physicians and was therefore “based upon” the health care provider’s negligence; it was not an equitable indemnity action like Preferred Risk’s, which is “based upon” settling the underlying negligence action. The doctors rely on a case holding that section 364, subdivision (d), does not apply to battery actions because those actions are not “based upon” professional negligence. (Noble v. Superior Court (1987) 191 Cal.App.3d 1189, 1192-1193 [237 Cal.Rptr. 38] [§ 364 does not apply to battery action, which is not a “professional negligence” action].) As we explained above, however, equitable indemnity actions that flow from professional negligence actions (as opposed to unrelated tort actions) are “based upon” professional negligence and may be subject to the tolling provision of section 364, subdivision (d). We reject the doctors’ contention on that basis.

Conclusion

We conclude that section 364, subdivision (d), which tolls for 90 days the limitations period for an action based upon a health care provider’s professional negligence, applies to equitable indemnity actions based upon professional negligence and governed by separate statutes of limitation, including section 340, subdivision (3). Had the Legislature intended the tolling provision of section 364, subdivision (d), to apply only to section 340.5, rather than the more general “applicable statute of limitations,” it could easily have so stated. By applying section 364, subdivision (d), to cases based upon a health care provider’s professional negligence, including derivative claims for equitable indemnity that follow settlement of the original action, we further the legislative purpose of the 90-day tolling period, and MICRA in general, to give doctors and their insurers an opportunity to negotiate with prospective plaintiffs and settle derivative claims without unnecessary litigation. (See Woods, supra, 53 Cal.3d at p. 320.) Accordingly, we reverse the Court of Appeal’s judgment and remand for proceedings consistent with our conclusion.

George, C. J., Baxter, J., Werdegar, J., and Brown, J., concurred.

1 All statutory references are to the Code of Civil Procedure unless otherwise noted.

2 Because its notice of intent to sue Dr. Farmer was served after the one-year limitations period of section 340, subdivision (3), expired, Preferred Risk is not appealing the sustaining of the demurrer as it applies to its action against Dr. Farmer.

In the Court of Appeal, Preferred Risk asserted as an alternative argument that the one-year MICRA statute of limitations in section 340.5 applied to its action, which automatically fell under the protection of section 364, subdivision (d), as a derivative MICRA lawsuit. The Court of Appeal concluded that section 340.5 does not govern indemnity actions, and in its petition for review and opening brief, Preferred Risk conceded the point. Prior to oral argument in this court, we asked the parties for supplemental briefing on the question whether section 340.5 had any application to this case. In light of the supplemental briefing and our own review of the question, we conclude the statute has no application to Preferred Risk’s indemnity action.