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Med mal insurer wins coverage dispute with surgery center

900 North Michigan Avenue shops

A federal appeals court upheld a lower court ruling in favor of a medical malpractice insurer for not settling a case that led to a $5.17 million verdict against a surgery center in litigation filed by a woman who was left a quadriplegic.

According to Thursday’s ruling by the 7th U.S. Circuit Court of Appeals in Chicago in Surgery Center at 900 North Michigan Avenue LLC v. American Physicians Assurance Corp. Inc. et al., a physician performed outpatient laparoscopic surgery on Gwendolyn Tate at the center in November 2002.

Ms. Tate, who was discharged by Surgery Center’s anesthesiologist, checked into a hospital four days later with a perforated bowel that eventually rendered the previously healthy 34-year-old a quadriplegic, according to the ruling.

Ms. Tate sued the physician and Surgery Center in Illinois state court for medical malpractice. The physician’s insurer settled the case for his policy limit of $1 million. The center’s insurer, East Lansing, Michigan-based APA, refused two requests to settle the case for its policy’s $1 million limit, according to the ruling.

The case went to trial, and a jury returned a verdict for Ms. Tate for $5.17 million. The surgery center’s president, Guita Griffiths, settled with Ms. Tate for $2.25 million of which APA paid its $1 million insurance limit.

Surgery Center then sued APA in U.S. District Court in Chicago for charges including negligence and breach of fiduciary duty, claiming APA had acted in bad faith for failing to settle for the policy limit.

The case proceeded to trial, at the end of which the court granted APA’s motion for summary judgment dismissing the case. The ruling was affirmed by a three-judge panel of the 7th Circuit on appeal.

“Juries can be unpredictable, so there is always a possibility of liability in a jury trial even in the strongest of cases,” said the ruling. “That mere possibility of liability is not enough to prevent an award of judgment as a matter of law for APA. Surgery Center needs evidence that its liability was reasonably probable for the duty to settle to have arisen — it has none,” said the ruling.

“Griffiths, Surgery Center’s president and main witness at trial, did little to help Surgery Center’s case and, in fact, severely undermined it. Document after document showed that Griffiths also believed the case was defensible and Surgery Center would not be found liable because it was not negligent in providing care to Tate,” the ruling said, in affirming the lower court ruling.

APA’s attorney had no comment.

Surgery Center’s law firm, Spellmire Bruck LLP, said in a statement: “We are of course disappointed with the decision. We believe we set forth sufficient facts and evidence and a jury, rather than the court, should have been given the opportunity to weigh the evidence and decide the case.” 

The frequency of medical malpractice claims has dropped substantially, but average case management expenses and indemnity payments continue to rise, according to a report issued in February. 


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