PREFERRED RISK MUTUAL INSURANCE COMPANY v. REISWIG

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Court of Appeal, Second District, Division 6, California.

PREFERRED RISK MUTUAL INSURANCE COMPANY, Plaintiff and Appellant, v. Reo REISWIG et al., Defendants and Respondents.

B116718.

Decided: September 02, 1998

Bonne, Bridges, Mueller, O'Keefe & Nichols and Mark B. Connely, San Luis Obispo, for Defendants and Respondents. Lori B. Feldman, San Francisco, for Plaintiff and Appellant.

Here we hold that Code of Civil Procedure section 364, which requires a plaintiff to give notice of intent to sue before filing an action for medical malpractice, does not apply to a complaint for equitable indemnity.

BACKGROUND

This appeal is from a judgment of dismissal following an order sustaining a demurrer without leave to amend.   We assume the facts alleged in the complaint are true.  (See Winding Creek v. McGlashan (1996) 44 Cal.App.4th 933, 936, 52 Cal.Rptr.2d 236.)

On April 4, 1993, Rebekka Pratte was injured when her hand was slammed in the door of a van owned by the First Church of God (Church).   She was treated by respondents Reo Reiswig, M.D., Karen Kolba, M.D. and C. Baring Farmer, M.D. (Drs. Reiswig, Kolba and Farmer), but developed a serious condition known as complex regional pain syndrome.

Pratte filed suit against the Church, which was insured by appellant Preferred Risk Mutual Insurance Company (Preferred Risk).   On January 24, 1996, Preferred Risk paid the policy limits of $1 million to Pratte in exchange for a release of all claims against the Church.

On January 16, 1997, less than one year after the settlement with Pratte, Preferred Risk served Drs. Reiswig and Kolba with notices of intent to sue a health care provider under Code of Civil Procedure section 364.1  On February 19, 1997, more than one year after the settlement with Pratte, it served a similar notice on Dr. Farmer.

On April 10, 1997, Preferred Risk filed a complaint in subrogation naming all three doctors as defendants.   The complaint alleged that the doctors were negligent in their medical treatment of Pratte following the van door accident and sought recovery of the $1 million paid on behalf of the Church.

The doctors demurred to the complaint on the grounds that it did not state a cause of action and had been filed after the statute of limitations expired.   The trial court overruled the demurrer on the first ground, but sustained it without leave to amend as to the second.   It concluded that section 364 does not require a plaintiff in an equitable indemnity action to file a notice of intent to sue against a defendant health care provider, and therefore, the section 364 notices in this case did not toll the one-year statute of limitations which began to run at the time Preferred Risk paid the settlement amount to Pratte.

A judgment dismissing the action was entered, and this appeal follows.

DISCUSSION

I.Introduction

 Preferred Risk paid $1 million to Rebekka Pratte to settle all of her claims against the Church.   An insurer who pays damages to a third party is subrogated to the rights of the insured, and may pursue a claim of equitable indemnity against joint or successive tortfeasors who are partially liable for the claimant's injuries.  (Smith v. Parks Manor (1987) 197 Cal.App.3d 872, 878, 243 Cal.Rptr. 256.)   In such cases the insurer stands in the shoes of its insured with respect to the right to recover against other culpable parties.   (Truck Ins. Exchange v. Superior Court (1997) 60 Cal.App.4th 342, 350, 70 Cal.Rptr.2d 255;  Allstate Ins. Co. v. Loo (1996) 46 Cal.App.4th 1794, 1799, 54 Cal.Rptr.2d 541.)

 When a party's negligence causes injuries to another which are then aggravated by a treating physician's malpractice, that party may seek equitable indemnity from the physician as a successive tortfeasor.  (Ash v. Mortensen (1944) 24 Cal.2d 654, 657, 150 P.2d 876;  Blecker v. Wolbart (1985) 167 Cal.App.3d 1195, 1201, 213 Cal.Rptr. 781.)   Having settled with Pratte on behalf of the Church, Preferred Risk was entitled to seek equitable indemnity from physicians who negligently treated her for the injuries arising from the van door accident.  (See Smith v. Parks Manor, supra, 197 Cal.App.3d at p. 878, 243 Cal.Rptr. 256.)

 The parties agree that a cause of action for equitable indemnity does not accrue until the indemnitee suffers a loss through payment of a claim.   (People ex rel. Dept. of Transportation v. Superior Court (1980) 26 Cal.3d 744, 757, 163 Cal.Rptr. 585, 608 P.2d 673;  E.L. White v. City of Huntington Beach (1978) 21 Cal.3d 497, 506, 146 Cal.Rptr. 614, 579 P.2d 505;  City of San Diego v. U.S. Gypsum Co. (1994) 30 Cal.App.4th 575, 587-588, 35 Cal.Rptr.2d 876.)   Here the complaint alleged that Preferred Risk paid Pratte the settlement amount on January 24, 1996, meaning that its cause of action for equitable indemnity accrued on that date.

The parties also agree the limitations period was one year, although they disagree about its source.  (See Smith v. Parks Manor, supra, 197 Cal.App.3d at p. 882, 243 Cal.Rptr. 256.)   Preferred Risk was thus required to file its complaint for equitable indemnity by January 24, 1997, absent a tolling or extension of the relevant statute of limitations.  (See Kulesa v. Castleberry (1996) 47 Cal.App.4th 103, 106, 54 Cal.Rptr.2d 669.)   It did not file its complaint until almost three months after this date.

Preferred Risk contends the notices of intent to sue served on Drs. Reiswig and Kolba on January 16, 1997, tolled the one-year limitations period for ninety days.   It acknowledges the notice of intent to sue Dr. Farmer was served after the one-year period had expired, but argues the trial court should have granted leave to amend the complaint to allege that the action was commenced within a year of discovering Dr. Farmer's negligence, as allowed by section 340.5.  (See Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1109, 245 Cal.Rptr. 658, 751 P.2d 923;  Henry v. Clifford (1995) 32 Cal.App.4th 315, 323, 38 Cal.Rptr.2d 116.)

In this appeal, we must therefore determine (1) the applicable statute of limitations;  and (2) whether the notices of intent to sue under section 364 tolled this statute.

II.

Section 340, Subdivision (3) Establishes the Limitations Period Applicable to Equitable Indemnity Actions, Even When Professional Negligence is the Underlying Theory of Liability

The parties agree that Preferred Risk's indemnity action is subject to a one-year limitations period.   Preferred Risk argues that this one-year period arises from section 340.5, which establishes the limitations periods generally applicable to medical malpractice actions.   Respondent doctors urge us to instead apply section 340, subdivision (3), which prescribes a one-year limitations period for most torts.2

We conclude that section 340, subdivision (3) governs equitable indemnity claims.   The statutory language of section 340.5 does not apply to such actions, even when the underlying theory of liability is medical malpractice.

A. Section 340.5 Does Not Apply to An Equitable Indemnity Action.

 The Legislature amended section 340.5 as part of the Medical Injury Comprehensive Reform Act (MICRA), which contains “a variety of provisions all of which are calculated to reduce the cost of insurance by limiting the amount and timing of recovery in cases of [medical malpractice].”  (Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital (1994) 8 Cal.4th 100, 111, 32 Cal.Rptr.2d 263, 876 P.2d 1062.)   Section 340.5 provides that “In an action for injury or death against a health care provider based upon such person's alleged professional negligence, the time for the commencement of action shall be three years after the date of injury or one year after the plaintiff discovers ․ the injury.”   The statute defines professional negligence as “a negligent act or omission to act by a health care provider in the rendering of professional services, which act ․ is the proximate cause of a personal injury or wrongful death . ․” (§ 340.5, italics added.)   The “injury” referred to in section 340.5 is thus the personal injury or death which results from an act of medical malpractice.  (See Gutierrez v. Mofid (1985) 39 Cal.3d 892, 896, 218 Cal.Rptr. 313, 705 P.2d 886 [“injury” triggering § 340.5 is a person's physical condition and its negligent cause].)

 The “injury” in an action for equitable indemnity, by contrast, consists of the indemnitee's payment to the injured party and is independent of the underlying claim.  (Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital, supra, 8 Cal.4th at pp. 114-115, 32 Cal.Rptr.2d 263, 876 P.2d 1062;  Fleck v. Bollinger Home Corp. (1997) 54 Cal.App.4th 926, 931, 63 Cal.Rptr.2d 407.)  “The basis for the remedy of equitable indemnity is restitution.   ‘ “[O]ne person is unjustly enriched at the expense of another when the other discharges liability that it should be his responsibility to pay.” ’ ”  (Children's Hospital v. Sedgwick (1996) 45 Cal.App.4th 1780, 1786, 53 Cal.Rptr.2d 725.)   The injury allegedly suffered by Preferred Risk in paying the settlement is an economic harm rather than the type of personal injury which triggers section 340.5.  (See Hensler v. City of Glendale (1994) 8 Cal.4th 1, 22-23, 32 Cal.Rptr.2d 244, 876 P.2d 1043 [statute of limitations is determined by “gravamen” of cause of action].)

B. Section 340, subdivision (3) is the Relevant Statute of Limitations.

Section 340.5 is limited to medical malpractice actions brought by the injured patient or the patient's representative.   Indemnity claims against a physician as a successive tortfeasor must therefore be governed by the statute of limitations generally applicable to equitable indemnity actions.   Although the parties agree that the limitations period for such actions is one year, they cite no case which identifies the statute establishing this one-year period.

The law in this area is murky.   Published cases addressing the timeliness of equitable indemnity suits have generally been concerned with when the cause of action accrues, rather than which statute of limitations applies.  Smith v. Parks Manor, supra, 197 Cal.App.3d at page 882, 243 Cal.Rptr. 256, appears to be the only case directly holding that an equitable indemnity claim is governed by a one-year limitations period.  Smith relied on De La Forest v. Yandle (1959) 171 Cal.App.2d 59, 62, 340 P.2d 52, for this proposition, but De La Forest simply determined that because the parties seeking indemnification had filed suit within one year of a settlement, their indemnity action was “not barred by any statute of limitations pleaded.”  (De La Forest, supra, at p. 62, 340 P.2d 52;  see also General Brewing Corp. v. Clark (1968) 264 Cal.App.2d 518, 519-520, 70 Cal.Rptr. 907 [argument that indemnity claim was barred by one-year period in § 340, subd. (3) was rejected because cause of action had not yet accrued].)

 Section 340, subdivision (3) imposes a one-year limitations period for “[a]n action ․ for injury to or for the death of one caused by the wrongful act or neglect of another․”  A party is injured by the wrongful conduct of its fellow tortfeasors when it pays more than its share of a settlement to an injured plaintiff.   An action for equitable indemnity is thus an action for “injury ․ caused by the wrongful act or neglect of another,” as defined by section 340, subdivision (3).  (Compare County of San Diego v. Sanfax Corp. (1977) 19 Cal.3d 862, 871-879, 140 Cal.Rptr. 638, 568 P.2d 363 [§ 340, subd. (3) applies to action by employer against negligent third party to recover amount of workers' compensation benefits paid to employee injured by the third party's negligence].)   We conclude that section 340, subdivision (3) is the relevant statute of limitations for causes of action based on equitable indemnity, at least when there is no more specific statute governing a particular type of indemnity claim.  (See, e.g., § 337.15, subd. (c) [indemnity claims in construction defect case].)

III.

Section 364 Does Not Apply to Claims for Equitable Indemnity

 The one-year limitations period of section 340, subdivision (3) began to run on January 24, 1996, when Preferred Risk settled Pratte's claim against the Church.   It expired on January 24, 1997, absent some intervening event which tolled or extended the one-year period.   Preferred Risk claims the one-year period was tolled for ninety days when it served respondent doctors with notices of intent to sue under section 364.3  We conclude that neither the statutory language of section 364 nor the underlying purpose of that statute requires us to extend its provisions to an action for equitable indemnity.

Section 364 provides, “(a) No 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. [¶] (d) 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.”

Respondent doctors argue that section 364 is a MICRA provision and affects only the limitations period listed in section 340.5.   They claim that because the limitations period in this case is defined by the non-MICRA provision of section 340, subdivision (3), section 364 does not apply.  (See Mero v. Sadoff (1995) 31 Cal.App.4th 1466, 1478-1479, 37 Cal.Rptr.2d 769 [if action is one of ordinary negligence governed by § 340 rather than medical malpractice under § 340.5, 90-day tolling provision of § 364 is not applicable].)

It is true that most published decisions which address the tolling provision of section 364 have done so in cases where section 340.5 is the relevant statute of limitation.   But a properly filed section 364 notice tolls the “applicable statute of limitations” (§ 364, subd. (d), italics added), and courts have construed this language to extend to the non-MICRA limitations period for medical malpractice claims against government entities under the Tort Claims Act. (Anson v. County of Merced (1988) 202 Cal.App.3d 1195, 1204, 249 Cal.Rptr. 457 [notice under § 364 extends limitations period under Gov.Code, § 945.6];  see also Wurts v. County of Fresno (1996) 44 Cal.App.4th 380, 51 Cal.Rptr.2d 689.)   The question is not whether section 364 tolls only the statutory period of section 340.5, but whether it applies in a case which does not involve a claim for medical malpractice by an injured patient.

Section 364 applies to an “action based upon the health care provider's professional negligence.”  (§ 364, subd. (a).)  “Professional negligence” is defined as a “negligent act or omission to 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, subd. (f)(2).)   In other words, section 364 applies to claims by a patient who has been injured by a practitioner's medical malpractice, or that patient's heirs in a wrongful death case.

Preferred Risk argues that such an interpretation defeats the purpose of section 364, which is to “decrease the number of medical malpractice actions filed by establishing a procedure that encourages parties to negotiate ‘outside the structure and atmosphere of the formal litigation process.’ ”  (Woods v. Young (1991) 53 Cal.3d 315, 320, 279 Cal.Rptr. 613, 807 P.2d 455.)   The drafters of MICRA believed that a 90-day notice period would give doctors accused of professional negligence and their insurers an opportunity to negotiate with prospective plaintiffs and settle claims without costly litigation.  (Id. at pp. 320-326, 279 Cal.Rptr. 613, 807 P.2d 455.)

These goals will not be met by extending the tolling provisions of section 364 to joint tortfeasors who file a claim for equitable indemnity against an allegedly negligent physician.   Medical malpractice claims typically involve complex factual issues.   If the 90-day period is effective in reducing the number of malpractice lawsuits, it will only be in those rare cases where liability is relatively clear one way or another.   An indemnity action which involves multiple tortfeasors and requires the apportionment of fault between a negligent actor and a physician who treats the injuries flowing from that negligence is unlikely to be resolved in 90 days.

Moreover, it will be a rare situation in which the party injured by medical malpractice will not file a direct claim against a negligent physician.   In this case, for example, Pratte filed a lawsuit against two of the respondent doctors on July 2, 1996.4  Notices under section 364 are filed by the injured party in such cases, making further notice by joint tortfeasors both unnecessary and ineffective in promoting early settlement.

Preferred Risk points out that the MICRA provision limiting noneconomic damages to $250,000 in a medical malpractice case has been held applicable to equitable indemnity claims.  (Civ.Code, § 3333.2;  Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital, supra, 8 Cal.4th 100, 32 Cal.Rptr.2d 263, 876 P.2d 1062.)  Civil Code section 3333.2 operates as a substantive limitation on liability which would be circumvented if it did not apply to third party claims.  “ ‘The Legislature could reasonably have determined that an across-the-board limit would provide a more stable base on which to calculate insurance rates.’  [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, 32 Cal.Rptr.2d 263, 876 P.2d 1062.)

The Supreme Court in Western Steamship, supra, was careful to distinguish between the substantive and procedural aspects of MICRA.  “[F]or certain procedural purposes, such as statutes of limitations, an indemnity claim is an independent action․  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.”  (8 Cal.4th at pp. 114-115, 32 Cal.Rptr.2d 263, 876 P.2d 1062.)

 Section 364, unlike Civil Code section 3333.2, is a procedural statute.   It does not thwart the stated goals of MICRA to limit its tolling provision to direct claims of medical malpractice by an injured patient or that patient's heir.   The Legislature specifically reduced the limitations period for medical malpractice actions when it enacted MICRA.   To extend the applicable limitations period in an action for equitable indemnity which seeks apportionment based on a party's alleged medical malpractice “is inconsistent with the spirit” of that statutory scheme.  (Noble v. Superior Court (1987) 191 Cal.App.3d 1189, 1193, 237 Cal.Rptr. 38.)

The judgment is affirmed.   Costs are awarded to respondents.

FOOTNOTES

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

2.   In relevant part, section 340.5 provides, “In an action for injury or death against a health care provider based upon such person's alleged professional negligence, the time for the commencement of action shall be three years after the date of injury or one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the injury, whichever occurs first․  [¶] (2)'Professional negligence' means a negligent act or omission to act by a health care provider in the rendering of professional services, which act or omission is the proximate cause of a personal injury or wrongful death․”Section 340, subdivision (3) establishes a one-year period of limitations for “An action for libel, slander, assault, battery, false imprisonment, seduction of a person below the age of legal consent, or for injury to or for the death of one caused by the wrongful act or neglect of another․”

3.   As we have already noted, Dr. Farmer was not served with a notice of intent to sue until the one-year limitations period had expired.

4.   We have taken judicial notice of Pratte v. Reiswig (Super. Ct. San Luis Obispo County, 1995, No. CV079278).

COFFEE, Associate Justice.

STONE, P.J., and YEGAN, J., concur.

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