BURNS et al. v. AMERICAN CAS. CO. et al.*
In a taxpayers' suit for recovery of insurance premiums paid by the County of Santa Clara, plaintiffs appeal from a summary judgment in favor of defendants.
Principal Questions Presented.
1. Do insurance policies covering a county hospital's liability for malpractice, mistake, error or negligence, cover liability under section 53051, Government Code?
2. Was a summary judgment proper where premiums paid by the county were for insurance policies covering hazards for which the county could be liable as well as those for which it could not be liable?
The action was dismissed without prejudice as against all defendants except four: American Casualty Company, Fireman's Fund Indemnity Company, and two groups of subscribing Underwriters at Lloyd's London. The complaint in the first count alleges that plaintiffs as taxpayers sue on behalf of themselves and all other taxpayers of the county. It alleges the procurement by the board of supervisors of certain policies of ‘malpractice insurance’ covering the Santa Clara County Hospital, as follows: from defendant American Casualty Company for the period August 26, 1946, to August 26, 1949; from defendant Fireman's Fund for the period August 26, 1949, to December 22, 1949; from one group of Underwriters at Lloyd's for the period December 22, 1949, to December 22, 1950, and from the other group two policies for the period December 22, 1950, to December 22, 1951. The amounts paid for these policies are set forth. It is alleged that these policies ‘to the extent that they insure the Santa Clara County Hospital against malpractice constitute an illegal expenditure of public funds * * * for the reason that under the law of California the Santa Clara County Hospital is not and cannot be held liable for malpractice.’ Demand was made upon the district attorney to institute this suit. He refused to do so. Judgment is asked against the respective defendants for the premiums paid each respectively, ‘or such part of that sum as paid for insuring the Santa Clara County Hospital * * *.’ The second count incorporates the entire first count and then alleges that doubt exists as to whether the American Casualty and Fireman's Fund policies cover staff physicians and other employees of the hospital, and as to what portion of the premiums of all policies is attributable to the hospital and what portion to the staff physicians and other employees of the hospital. The prayer asks that the court resolve this doubt.
Defendants answered, attaching photostatic copies of the policies involved and alleging that the policies afforded the county substantial and valuable protection against liability. All parties moved for judgment on the pleadings.
Plaintiffs contend that public funds spent as insurance premiums may be recovered if the liability so insured is nonexistent, citing Opinion No. 2995, I Opinions of the Attorney General of Ohio, 303 (1931); Board of Education of Raleigh County v. Commercial Casualty Ins. Co., 116 W.Va. 503, 182 S.E. 87; Adkins v. Western & Southern Indemnity Co., 117 W.Va. 541, 186 S.E. 302. Defendants do not challenge the existence or extent of the rule as stated by plaintiffs. Defendants do not claim that in this case, at the time the insurance was purchased, there existed a reasonable doubt as to liability of a county for malpractice, but assume that the county was not then liable for such tort. For these reasons we do not pass on the scope of the stated rule, but will, as do the parties, assume its application to the facts of this case. Plaintiffs then contend that the policies in question covered the county for malpractice only by the hospital and that as the county cannot be held liable for such malpractice, the premiums must be refunded. It is the theory of the defendants that by their terms the policies covered more than hospital malpractice and gave the county a substantial protection against liability, particularly for liability under section 53051, Government Code, for dangerous or defective condition of property. That there can be such liability, see concurring opinion in Madison v. City and County of San Francisco, 106 Cal.App.2d 232, 252, 234 P.2d 995, 236 P.2d 141; Bauman v. City and County of San Francisco, 42 Cal.App.2d 144, 108 P.2d 989.
What Do Policies Cover?
It has been held frequently that a county or its board of supervisors is not liable for injury incurred by any patient in a county hospital due to malpractice. Latham v. Santa Clara County Hospital, 104 Cal.App.2d 336, 231 P.2d 513; Madison v. City and County of San Francisco, supra, 106 Cal.App.2d 232, 234 P.2d 995, 236 P.2d 141; Talley v. Northern San Diego County Hospital Dist., 41 Cal.2d 33, 257 P.2d 22. This brings us to a study of the policies themselves. They are all made in favor of the county and the members of its board of supervisors.
The insuring clauses follow:
American Casualty Company:
‘Bodily injury, shock or mental anguish, including death at any time resulting therefrom, sustained during the policy period by any person or persons (a) while being treated at the premises and arising out of malpractice, error or mistake, including personal restraint, committed in connection with such treatment or (b) because of the performance of an autopsy at the premises. Premises as used herein shall mean the premises described in the declarations on the reverse side hereof. Medical or surgical treatment rendered in connection with ambulance service and Public Health Service shall be deemed to occur ‘at the premises.”
Fireman's Fund Indemnity Company:
‘Liability for Malpractice, Error or Mistake
‘To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of malpractice, error or mistake, committed during the policy period in the treatment of patients of the Insured at the premises or in the performance of autopsies at the premises.’
Underwriters at Lloyd's London:
‘* * * to pay or make good to the Assured to the extent hereinafter mentioned such damages as may be awarded against the Assured in respect of:
‘Professional services rendered, or which should have been rendered by the Assured to any person while receiving treatment in the within mentioned Hospital or its out patient department or in an ambulance maintained by the Hospital (but the Underwriters shall not be liable for negligence in the operation or maintenance of the ambulance itself), provided such claim or claims for damages are solely based upon malpractice, error, negligence or mistake, breach of implied contract, loss of services, property damage, autopsies, inquests, personal restraint, the dispensing of drugs or medicine, assault, slander, libel, undue familiarity, anesthesia, hallucination, malicious prosecution, replevin of property or arising from any counterclaims in suits brought by the Assured for the collection of fees—all the foregoing being hereinafter known as ‘malpractice.” These certificates also covered physicians, dentists, internes, etc.
Summarizing the American Casualty and Fireman's Fund policies, they cover ‘malpractice, error or mistake.’ Summarizing the Lloyd's policies they cover ‘malpractice, error, negligence or mistake’ plus damages from breach of contract, assault, slander, libel, malicious prosecution.
Plaintiffs contend that ‘malpractice, error or mistake’ constitute an ‘oratorical triad’ meaning ‘malpractice’ as that term is commonly understood. In Sutherland v. Fidelity & Casualty Co. of New York, 103 Wash. 583, 175 P. 187, the court said: ‘The words ‘malpractice,’ ‘error,’ and ‘mistake,’ as used in this indemnity policy, do not mean necessarily the same thing. If they were so intended, it was an idle thing to insert more than the word ‘malpractice.’ A physician may err or make a mistake, without being guilty of malpractice. This policy covers malpractice. It covers error and it covers mistake in the practice of appellant's profession; and if liability flows from either, and he is required to pay damages on that account, we think it is plain that the policy here undertook to insure against such mistake or such error, as well as against malpractice.' That case points out that ‘malpractice’ has a somewhat narrow meaning, namely the failure of the one charged with malpractice to exercise diligence, care and skill, such as ordinarily possessed by the members of his profession. Thus a physician may err or make a mistake without necessarily being guilty of malpractice. The same qualification would apply to a hospital. In Ford Hospital v. Fidelity & Casualty Co., 106 Neb. 311, 183 N.W. 656, a hospital nurse, while bathing a child ‘made a ‘mistake’ within the meaning of the insurance policy when she allowed the hand of the helpless child to come in contact with a hot appliance.' 183 N.W. at page 658. There the policy covered, as in our case, the hospital for liability “in consequence of any malpractice, error, or mistake * * *.” 183 N.W. at page 658. The court in holding that the policy was applicable placed its emphasis on the nurse's ‘mistake’ and did not even mention ‘malpractice.’ In our case, the words ‘mistake, error’ and also ‘negligence’ in the policies necessarily mean more than ‘malpractice.’ ‘* * * when reasonably possible, meaning must be given to every sentence, clause and word of a contract of insurance so as to avoid rendering portions of it inoperative. 1 Couch on Insurance, sec. 180, p. 367.’ United Service Automobile Ass'n v. Miles, 139 Tex. 138, 161 S.W.2d 1048, 1050. But the county's sovereign immunity from liability in the operation of its hospital applies to liability from not only ‘malpractice’ but also from ‘mistake, error or negligence’ unless these terms, or any of them, cover the type of liability expressly provided by section 53051, Government Code, namely, liability resulting from dangerous or defective condition of public property. This brings us to the crux of the case, namely, do the terms ‘mistake, error or negligence’ as used in the policies, include defective and dangerous condition of hospital property? This question is partially answered by American Policyholders Ins. Co. v. Michota, 1952, 156 Ohio St. 578, 103 N.E.2d 817. There a chiropodist held an insurance policy in which the insurer agreed to defend him in any action brought to enforce the liability imposed by law for an injury “arising out of the practice of the insured's profession” and to pay any sums he might be obligated to pay “because of injury resulting from professional services rendered or which should have been rendered.” 103 N.E.2d at page 818. The patient had gone to the doctor for treatment of a foot ailment. He instructed her to sit in a metal hydraulic chair designed for the occupancy of patients. Due to the failure of the doctor to ‘lock’ the chair before directing the patient to sit in it, it suddenly rotated as she was attempting to get into it, throwing her to the floor and injuring her. In a declaratory relief action brought by the insurer to determine if it was liable to the doctor for the amount of a judgment obtained against him by the patient, the insurer contended that the policy was strictly limited to those injuries which might arise out of the actual rendition of professional services, and that injury due to the condition of the chair was not covered. Pointing out, 103 N.E.2d at page 819, ‘that, in conformity with the well established and universally recognized rule, any doubt or ambiguity with respect to the meaning of the phraseology employed in the policy must be resolved in favor of the insured and against the insurer, which prepared and issued the policy and collected a premium therefor,’ the court held that nowhere in the policy was the liability of the insurer limited to ‘malpractice’ nor to the failure of the doctor to use that standard of professional skill in the treatment of patients prescribed by law. It further held that the patient's injury was ‘due to the negligence of the doctor in failing to maintain apparatus employed by him in his practice of chiropody in a safe condition’ (emphasis added) and that ‘Maintaining the treatment chair in a proper and safe condition for the accommodation of patients was a service or duty directly connected with the practice * * * of his profession * * *.’ 103 N.E.2d at page 819. (Emphasis added.) Thus maintaining its hospital property in a nondangerous and nondefective condition was a service or duty of the Santa Clara County Hospital directly connected with its operation and its treatment of and service to its patients. See Madison v. City and County of San Francisco, supra, 106 Cal.App.2d 232, 252, 234 P.2d 995, 236 P.2d 141. Therefore, its failure to do so would be due either to mistake, error or negligence, and hence included in those terms in the policy. While, because of sovereign immunity, a patient would not have a cause of action based on mistake, error or negligence, he would have one based on dangerous or defective condition of hospital property, even though that condition was caused by mistake, error or negligence.
Was Summary Judgment Proper?
As we have determined, the policies covered risks for which the county could be held liable as well as those for which it could not. Obviously, the premiums were based upon both. The county should be refunded the portion of the premiums based upon liability for risks for which it could not be held liable. While the action is for a return of the entire premium, the greater includes the lesser and the defendants would be liable to return to the county the proportion of the premium charged for improper coverage.
Plaintiffs having, therefore, pleaded such a cause of action, the judgment will have to be reversed. As the facts are peculiarly within the knowledge of defendants, the burden will be theirs to plead and prove that the premiums are divisible between the legal and illegal considerations, and, if so, the proportions attributable to the legal considerations. In the event of their failure to do so, the county would be entitled to a return of all premiums.
Statute of Limitations.
Defendants raise the bar of the statute of limitations. Although the complaint states the dates of coverage of the various policies, it does not state the dates of the payments of the premiums. If these dates correspond with the dates of the beginning of the coverage periods, it would appear that recovery on one or more, although not all, of the premiums would be barred. The trial court, of course, will consider this question.
The judgment is reversed.
PETERS, P. J., and FRED B. WOOD, J., concur.