Mosier v. Southern California Physicians Ins. Exchange

• Citation: 74 Cal.Rptr.2d 550,63 Cal.App.4th 1022
• Decision Date: 08 May 1998
• Docket Number: No. B088559,B088559
• Court: California Court of Appeals
• Parties: , 98 Cal. Daily Op. Serv. 3574, 98 Daily Journal D.A.R. 4851 Robert MOSIER, et al., Plaintiffs and Respondents, v. SOUTHERN CALIFORNIA PHYSICIANS INSURANCE EXCHANGE, Defendant and Appellant.

Page 550

74 Cal.Rptr.2d 550

63 Cal.App.4th 1022, 98 Cal. Daily Op. Serv. 3574,

98 Daily Journal D.A.R. 4851

Robert MOSIER, et al., Plaintiffs and Respondents, v. SOUTHERN CALIFORNIA PHYSICIANS INSURANCE EXCHANGE, Defendant and Appellant.

No. B088559.

Court of Appeal, Second District, Division 4, California.

May 8, 1998.

Rehearing Denied May 29, 1998.

Lewis, D'Amato, Brisbois & Bisgaard, Robert K. Wrede, Graham E. Berry and Robert F. Lewis, Los Angeles; Horvitz & Levy, Christina J. Imre, H. Thomas Watson, Encino, and Ellis J. Horvitz, Calabasas, for Defendant and Appellant.

Marcus M. Kaufman, Newport Beach, Bruce G. Fagel, Beverly Hills, and Daniel U. Smith, Kentfield, for Plaintiffs and Respondents.

HASTINGS, Associate Justice.

This case presents a unique fact situation involving a courtesy defense provided to Dr. Neil Jouvenat, an uninsured physician, by appellant, Southern California Physicians Insurance Exchange (hereinafter SCPIE), which resulted in a jury verdict against SCPIE for fraud and conspiracy to breach fiduciary duty. Although the instant appeal involves only one plaintiff, one defendant and two counts, it is inextricably intertwined with two prior legal proceedings.

The first is the underlying medical malpractice action, brought by Ashley Hughes (Ashley), a quadriplegic, ventilator-dependent minor, and various family members, against Jouvenat and other defendants for debilitating medical injuries she suffered in their care during her delivery and the first few days of her life (hereinafter referred to as the "personal injury action").

The second involves a bankruptcy petition filed by Jouvenat shortly after the verdict was rendered in the personal injury action. Respondent Robert Mosier was appointed the interim bankruptcy trustee for Jouvenat's estate.

The instant action was prosecuted by Mosier based upon allegations that SCPIE defrauded Jouvenat by inducing him to accept the courtesy defense and conspired to breach fiduciary duties owed to Jouvenat by counsel retained by SCPIE, Darrell Forgey, of the law firm of Hillsinger & Costanzo. ¹ After a seven-week trial, a jury found the allegations true and concluded that the original allocation of fault against Jouvenat in the personal injury action, 70 percent, should have been only 40 percent. A judgment was subsequently entered against SCPIE, directing it to pay Mosier, an interim trustee for the bankruptcy estate of Jouvenat, $4,221,078.90 in compensatory damages, $14 million in punitive damages and $24,311.82 in costs.

SCPIE appeals, raising numerous issues. After a thorough review of the record, while we conclude there is sufficient evidence to support the findings of the jury relating to fraud and breach of fiduciary duty, we conclude there is insufficient evidence to support a finding that Jouvenat was injured or that the compensatory damages are causally related to SCPIE's breaches of duty.

STATEMENT OF FACTS

We review the facts, bearing in mind that we must resolve all evidentiary conflicts favorably to respondent Mosier and accord him the benefit of all reasonable inferences which can be drawn from the evidence. (Campbell v. Southern Pacific Co. (1978) 22 Cal.3d 51, 60, 148 Cal.Rptr. 596, 583 P.2d 121; Hasson v. Ford Motor Co. (1977) 19

Cal.3d 530, 544, 138 Cal.Rptr. 705, 564 P.2d 857.)

Background Facts

The facts regarding Ashley's birth are, for the most part undisputed. She was born on March 31, 1987, at Pomona Valley Hospital (the Hospital). Her mother, Kristy, was a minor and Ashley's legal guardian at all pertinent times was her grandmother, Linda Hughes.

Jouvenat, Kristy's obstetrician-gynecologist, had been on the Hospital staff since 1985. As part of the offer of employment, the Hospital had agreed to pay his malpractice insurance premiums, and Jouvenat had secured malpractice coverage through SCPIE. Prior to Ashley's birth, a dispute arose between the Hospital and Jouvenat relating to the tax consequences of the hospital's payment of Jouvenat's malpractice premiums. As a result of this dispute, the hospital stopped paying the premiums, and at the time Ashley was born Jouvenat's policy with SCPIE had lapsed. Following Ashley's birth, SCPIE agreed to retroactive reinstatement of the insurance, but without coverage for the incident relating to the birth of Ashley. Thus, Jouvenat was uninsured for this incident.

The delivery of Ashley was difficult, and Jouvenat utilized a forceps procedure in a manner not authorized by the Hospital. Due to Ashley's position in the birth canal and the direction in which Jouvenat turned her, Ashley's neck was twisted 180 degrees, resulting in severe injury to her spinal cord.

Immediately after her birth, Ashley was transferred to the care of the hospital's staff neonatologists, Drs. Andrew Hsu and Yu-Sheng Wu (collectively referred to as Hsu and Wu), and Dr. Kong-Tay Wu. (To avoid confusion, Dr. Kong-Tay Wu will always be referred to by his full name, while Dr. Yu-Sheng Wu will be referred to only as "Wu" or Dr. Wu.) At this point, no one was aware that any injury to Ashley had occurred during delivery, although it was clear that she was not in good health. Ashley was placed in intensive care while the neonatologists attempted to ascertain what was wrong with her. She was treated for breathing difficulties and four days later she was referred to the care of a pediatric neurologist who misdiagnosed her as having a rare congenital disease called Werdnig-Hoffman syndrome. The neonatologists informed Ashley's family that Ashley probably would not survive.

Ashley was transferred to Loma Linda Hospital where the spinal cord injury was properly diagnosed. Because of the spinal cord injury, Ashley was rendered a quadriplegic. She is also dependent on a ventilator to breathe.

The Personal Injury Lawsuit

Ashley's legal guardian, Ashley's mother and Ashley's aunt (who was in the delivery room) brought a lawsuit against Jouvenat, the hospital, Drs. Hsu and Wu, Dr. Kong-Tay Wu, and the pediatric neurologist Dr. Rice. These plaintiffs were represented by attorney Bruce Fagel.

The theory against Jouvenat was that his manner of delivery had caused a lesion to the spinal cord, resulting in Ashley's quadriplegia and ventilator dependency. The theory of recovery against the neonatologists was that they had aggravated the original injury caused by Jouvenat. It was asserted that had the neonatologists timely diagnosed the spinal cord injury and promptly treated it with steroids, as recommended by a leading pediatric textbook, Ashley would not be dependent on a ventilator to breathe. It was also alleged that Hsu and Wu had fraudulently covered up Jouvenat's negligence and their own failure to diagnose the injuries to Ashley. ²

Jouvenat initially engaged the services of attorney George McDonald; however, McDonald withdrew for nonpayment of fees two years before trial commenced, leaving Jouvenat to represent himself. While Jouvenat was representing himself, he testified in a deposition that he had problems with alcohol and drug abuse during the time period immediately The three neonatologists, Hsu and Wu, and Kong-Tay Wu, were insured by SCPIE. Policy limits for Hsu and Wu were $6 million, collectively. SCPIE retained Marshall Silberberg, of the law firm of Baker, Silberberg and Keener (BSK), to represent Hsu and Wu. It retained another law firm to represent Kong-Tay Wu.

prior to and after Ashley's birth. However, he disputed that he had actually been under the influence at the time of delivery in March 1987. ³

A few days prior to the scheduled trial, Silberberg and SCPIE jointly came to the conclusion that it would be disastrous to have Jouvenat appear at the trial unrepresented by counsel. This conclusion was at least partly based upon the sympathetic plight of Ashley, the allegations of drug abuse and alcoholism against Jouvenat, and the potential joint and several liability among the doctors. They feared that without a joint defense, the damages would be monumental. The decision was made to offer Jouvenat a "courtesy defense," that is, SCPIE would select and pay for an attorney to represent Jouvenat at trial, but it was emphasized that Jouvenat would not receive indemnity. As a result, Lee Breitbarth of SCPIE asked Forgey, a local attorney who had previously done a substantial amount of work for SCPIE, to undertake the representation of Jouvenat. Forgey agreed and substituted in as Jouvenat's counsel on the day trial was initially scheduled to begin. The trial was ultimately continued to a date a few months later.

Prior to trial, the hospital and Kong-Tay Wu settled with Ashley in the aggregate amount of $3,234,539.

During trial, Jouvenat, on Forgey's advice, admitted liability, leaving only the liability of Hsu and Wu to be addressed during the plaintiffs' case-in-chief. Forgey presented a joint defense with Hsu and Wu and did not argue to the jury that Jouvenat's percentage of responsibility for Ashley's injuries should be reduced to take into account the negligence of Hsu and Wu in aggravation of the injury. The jury returned with a verdict in Ashley's favor, finding Jouvenat 70 percent at fault and Hsu and Wu each 15 percent at fault. The jury also concluded that Hsu and Wu were each guilty of intentionally concealing or suppressing material facts concerning Ashley's medical condition.

Hsu and Wu made a post-trial motion, which Forgey did not oppose, to credit the amount of the prior settlements against the judgment. Prior to the entry of judgment, and the ruling on their motion, SCPIE settled with the plaintiffs on behalf of Hsu and Wu for less than their pro rata share of the judgment. Judgment was then entered against Jouvenat, in the amount of $9,849,184, plus costs. This amount represents Jouvenat's 70 percent-apportioned fault damages after offset of the settlement amounts between plaintiffs and the Hospital and Kong-Tay Wu, and subtraction of the 30 percent apportioned...