Patients Compensation Fund v. Lutheran Hosp.-LaCrosse, Inc.

• Decision Date: 26 January 1999
• Docket Number: No. 96-1344,HOSPITAL-L,96-1344
• Parties: PATIENTS COMPENSATION FUND, Plaintiff-Respondent-Petitioner, v. LUTHERANaCROSSE, INC., Wisconsin Hospital Association Optional Segregated Account, Nancy Bowell, R.N., ABC Insurance Company, Carol Cowell, R.N., American Family Mutual Insurance Company, Darlene Denstad, L.P.N., DEF Insurance Company, Trudy Pierick, R.N., GHI Insurance Company, Sharon Wiebke, R.N. and JKL Insurance Company, Defendants-Appellants.
• Court: Wisconsin Supreme Court

Page 35

588 N.W.2d 35

223 Wis.2d 439

PATIENTS COMPENSATION FUND, Plaintiff-Respondent-Petitioner, v. LUTHERAN HOSPITAL-LaCROSSE, INC., Wisconsin Hospital Association Optional Segregated Account, Nancy Bowell, R.N ABC Insurance Company, Carol Cowell, R.N., American Family Mutual Insurance Company, Darlene Denstad, L.P.N., DEF Insurance Company, Trudy Pierick, R.N., GHI Insurance Company, Sharon Wiebke, R.N. and JKL Insurance Company Defendants-Appellants.

No. 96-1344.

Supreme Court of Wisconsin.

Argued Nov. 10, 1998.

Decided Jan. 26, 1999.

For the plaintiff-respondent-petitioner there were briefs by Paul J. Kelly and Schellinger Doyle, S.C., Brookfield and oral argument by Paul J. Kelly.

For the defendants-appellants there was a brief by W.A. Kirkpatrick and Hale, Skemp, Hanson, Skemp Sleik, LaCrosse and oral argument by W.A. Kirkpatrick.

¶1 N. PATRICK CROOKS, J

The Wisconsin Patients Compensation Fund (the Fund) appeals a published decision of the court of appeals ¹ reversing an order of the La Crosse County Circuit Court. The circuit court, Judge Dennis G. Montabon presiding, held that the Fund could seek contribution for its payment in settlement of a malpractice claim from the professional liability insurer of a registered nurse, as long as it established that the nurse was negligent. The court of appeals reversed, holding that the Fund could not sue the registered nurse because the Fund's subrogation rights are restricted to claims against Wis. Stat. ch. 655 ² "health care providers" and/or their insurers.

¶2 The issue presented is whether the Fund has subrogation rights which would allow it to bring a claim for contribution against an allegedly negligent employee of a health care provider and/or the employee's insurer, following the Fund's settlement of a malpractice claim against the health care provider. We conclude that the Fund does not have such subrogation rights which would permit it to pursue a claim for contribution against one whose alleged negligence arose while he or she was conducting a health care provider's business, when that person is not a Wis. Stat. ch. 655 health care provider or a health care provider's insurer. ³ Accordingly, we affirm the decision of the court of appeals.

I.

¶3 The facts of this case are not in dispute. The Fund's action for contribution originated as a result of a settlement in a medical malpractice case, Stach v. Lawnicki, No. 92-CV-418 (La Crosse County Cir. Ct. filed May 29, 1992). Plaintiff Zachary Stach was admitted to Lutheran Hospital--La Crosse (Lutheran Hospital) for surgical correction of a ureteral stenosis. Clyde C. Lawnicki, M.D., performed the surgery on September 17, 1991. Afterward, Dr. Lawnicki prescribed two medications for Zachary: Belladonna suppositories for bladder spasms and morphine sulphate for pain.

¶4 At 6:40 a.m. the next day, Zachary went into cardiopulmonary arrest. Although medical personnel were able to resuscitate Zachary, he suffered considerable neurological damage as a consequence of the cardiopulmonary arrest.

¶5 In May 1992, Zachary and his parents, James and Angel Stach, filed their complaint in the Stach medical malpractice action. The Staches named Dr. Lawnicki, Lutheran Hospital, Gundersen Clinic, Ltd. (Dr. Lawnicki's employer), Wisconsin Hospital Association Optional Segregated Account (Lutheran Hospital's insurer, hereinafter "WHA"), and the Patients Compensation Fund as defendants in the suit.

¶6 The Staches alleged that Zachary's cardiopulmonary arrest was caused by an excessive amount of morphine within his system. According to the Staches, this morphine surplus resulted from the combination of the morphine sulfate and Belladonna suppositories, which also contained morphine. The Staches asserted that Dr. Lawnicki negligently prescribed the medications and that Lutheran Hospital's pharmacy and the nurses who administered the medications negligently failed to notice the error in regard to the prescribed medications. The Staches further alleged that Lutheran Hospital's nurses failed to assess properly Zachary's condition.

¶7 The parties in Stach entered into mediation. On February 8, 1994, the Fund agreed to pay $10 million in settlement of the case. Lutheran Hospital contributed $200,000 of its $400,000 liability insurance policy limits toward the settlement. ⁴

¶8 The Fund filed the present action on January 26, 1995, seeking contribution for the settlement in Stach from Lutheran Hospital, WHA, the nurses at Lutheran Hospital that treated Zachary, and the nurses' insurers. The Fund sought $200,000 from Lutheran Hospital, representing the remaining portion of the hospital's liability insurance policy limits of $400,000. In addition, the Fund claimed that it was entitled to recover up to the limits of the nurses' professional liability insurance policies.

¶9 Carol Cowell, R.N. (Nurse Cowell) was the only nurse named as a defendant who had professional liability coverage. Nurse Cowell's professional liability insurance was contained in a rider to her American Family Mutual Insurance Company (American Family) homeowner's insurance policy. ⁵ The Fund asserted that it was entitled to contribution from Nurse Cowell of $300,000, the limit of her professional liability coverage.

¶10 The Fund moved for a declaratory judgment pursuant to Wis. Stat. § 806.04(1). The Fund asked the court to declare that Lutheran Hospital and Nurse Cowell had $500,000 of liability insurance available to satisfy its contribution claim. The Fund arrived at the amount of $500,000 by adding $200,000 (Lutheran Hospital's $400,000 insurance policy limits less the $200,000 the hospital voluntarily paid in the settlement) to $300,000 (the limits of Nurse Cowell's professional liability insurance policy). ⁶

¶11 In an order issued February 28, 1996, the circuit court ruled that Lutheran Hospital was liable for the additional $200,000, which Lutheran Hospital apparently conceded. As to Nurse Cowell, however, the court stated, "Nurse Cowell's American Family liability policy is not subject to the Fund's contribution claim." Memorandum Decision and Order, Feb. 28, 1996 at 9. The court reasoned that the issue of Nurse Cowell's negligence was not ripe for judicial determination because the case had been settled in the mediation stage. Finding that the Fund was bound by Wis. Stat. ch. 655 and that Nurse Cowell was not a ch. 655 "health care provider," the court ruled that Nurse Cowell was covered under her employer's liability insurance policy pursuant to Wis. Stat. § 655.005(2).

¶12 The Fund filed a motion with the circuit court, asking for reconsideration of the portion of the February 28, 1996, order which involved Nurse Cowell's insurance policy. The Fund contended that the only reason it had filed the motion for a declaratory judgment was to obtain a determination of the amount of insurance available to satisfy its contribution claim. According to the Fund, it had not intended to request a determination of the amount of insurance coverage actually owed by the defendants.

¶13 The circuit court responded by issuing a new order on April 29, 1996. In its new order, the court replaced its previous order as to Nurse Cowell with the statement, "Nurse Cowell's American Family liability policy is subject to the Fund's contribution claim, if it is demonstrated in this action that Nurse Cowell was negligent." Order, Apr. 29, 1996 at 2. In the order, the court stated that it had intended to rule this way "based upon the previous submissions of the parties." Order, Apr. 29, 1996 at 2.

¶14 The court of appeals granted the defendants leave to appeal and reversed the circuit court's April 29, 1996, order. The court of appeals began by holding that any authority of the Fund to sue must arise from Wis. Stat. ch. 655. Patients Compensation Fund v. Lutheran Hosp., 216 Wis.2d 49, 54-55, 573 N.W.2d 572 (Ct.App.1997). The court held that since Nurse Cowell was not a "health care provider" as defined by ch. 655, ch. 655 precluded the Fund from suing Nurse Cowell or her insurer. Id. at 57-59, 573 N.W.2d 572. Instead, the court ruled that the Fund's subrogation claims against Lutheran Hospital and Nurse Cowell are limited by ch. 655 to a total amount of $400,000. Id. at 51, 58-59, 573 N.W.2d 572. The court concluded that "the Fund's subrogation rights are limited to claims against one who is a health care provider or a health care provider's insurer, as those terms are defined for purposes of ch. 655, after the Fund has become obligated to pay an amount for which another is responsible." Id. at 60, 573 N.W.2d 572.

II.

¶15 This court granted the Fund's petition to review the court of appeals' decision, and we now affirm the court of appeals. We begin by examining the nature of the Fund's claim. The Fund seeks a determination from this court that it may pursue a claim for contribution against Nurse Cowell and/or her insurer following the Fund's payment in settlement of a case in which the plaintiffs alleged that Nurse Cowell and her employer, Lutheran Hospital, were negligent. As we shall explain, the Fund's ability to pursue its contribution claim depends upon whether the Fund possesses subrogation rights in this scenario.

¶16 A contribution claim lies when joint tortfeasors, due to their concurring negligence, share a common liability to a third party, but one of the tortfeasors has shouldered more than his or her fair share of the common burden. See General Accident Ins. Co. v. Schoendorf & Sorgi, 202 Wis.2d 98, 103, 549 N.W.2d 429 (1996). The joint tortfeasor who has borne a disproportionate amount of the common liability may then bring an action for contribution against the other joint tortfeasors to force them to contribute their fair shares of the loss. See id.; see also Swanigan v. State Farm Ins. Co., 99 Wis.2d 179, 196, 299 N.W.2d 234, 242 (1980).

¶17 The Fund's contribution action stems from the Stach malpractice action. The injured...