Preferred Risk Mutual Ins. Co. v. Reiswig

• Decision Date: 05 August 1999
• Docket Number: No. S073975,S073975
• Citation: 87 Cal.Rptr.2d 187,21 Cal.4th 208,980 P.2d 895
• Court: California Supreme Court
• Parties: , 980 P.2d 895, 99 Cal. Daily Op. Serv. 6260, 1999 Daily Journal D.A.R. 7983 PREFERRED RISK MUTUAL INSURANCE COMPANY, Plaintiff and Appellant, v. Reo REISWIG et al., Defendants and Respondents

Page 187

87 Cal.Rptr.2d 187

21 Cal.4th 208, 980 P.2d 895, 99 Cal. Daily Op. Serv. 6260,

1999 Daily Journal D.A.R. 7983

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

No. S073975.

Supreme Court of California

Aug. 5, 1999.

Law Offices of Lori B. Feldman, Lori B. Feldman, San Francisco; Murchison & Cumming and Edmund G. Farrell III, Los Angeles, for Plaintiff and Appellant.

Law Offices of Randall B. Hamud and Randall B. Hamud, San Diego, as Amici Curiae on behalf of Plaintiff and Appellant.

Horvitz & Levy, Sandra J. Smith and John A. Taylor, Jr., Encino, for California Medical Association, California Dental Association and California Healthcare Association as Amici Curiae on behalf or Plaintiff and Appellant.

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

CHIN, J.

Code of Civil Procedure section 364, subdivision (a), ¹ part of the Medical Injury Compensation Reform Act (MICRA), requires plaintiffs to give defendants 90 days' notice of intent to sue for actions "based upon" defendants' professional negligence. Section 364, subdivision (d), tolls the "applicable statute of limitations" governing the negligence action for 90 days following proper statutory notice. We must decide whether subdivision (d) applies to an equitable indemnity action that is based on professional negligence, but governed by a non-MICRA statute of limitations. We conclude it does, and we reverse the Court of Appeal's judgment.

FACTS

This appeal is from a judgment of dismissal entered after the trial court sustained a demurrer without leave to amend. Under well-settled law, therefore, we assume the truth of all properly pleaded material allegations. (Phillips v. Desert Hospital Dist. (1989) 49 Cal.3d 699, 702, 263 Cal.Rptr. 119, 780 P.2d 349.)

On April 4, 1993, Rebekka Pratte (Pratte) was injured when her hand was slammed in the door of a van owned by the First Church of God--Santa Maria, Inc. (the Church). She was treated by defendant Doctors Reo Reiswig, Karen S. Kolba, and C. Baring Farmer (the doctors). After treatment she developed a serious condition known as complex regional pain syndrome.

Pratte sued the Church, which was insured by plaintiff Preferred Risk Mutual Insurance Company (Preferred Risk). On January 24, 1996, Preferred Risk paid the $1 million policy limit to Pratte in exchange for a release of all claims against the Church. On July 2, 1996, Pratte sued Doctors Reiswig and Farmer for malpractice. Because the action was "based upon" her physicians' alleged negligence, it was governed by MICRA's statutory provisions, including section 364, which governs the notice of intention and commencement of professional negligence actions. (§ 364, subds. (a), (d).) Pratte followed those statutes in pursuing her claim.

On January 16, 1997, Preferred Risk served Drs. Reiswig and Kolba with section 364, subdivision (a), notices of intent to sue them for malpractice. On February 19, 1997, it served a similar notice on Dr. Farmer. On April 10, 1997, Preferred Risk filed a complaint in subrogation to the Church's right of equitable indemnity against all three doctors, essentially claiming that they should indemnify it for the amount it spent to settle Pratte's action against the Church because their malpractice caused Pratte's injuries.

The doctors demurred to the complaint on the grounds that it did not state a subrogation cause of action and was barred by the general one-year personal injury statute of limitations in section 340, subdivision (3). They asserted that, because section 340, subdivision (3), applies to general tort actions and is not part of the MICRA statutory scheme, Preferred Risk could not seek protection under the MICRA 90-day tolling provision for actions "based upon" professional negligence. (§ 364, subd. (d).) The trial court sustained the demurrer on statute of limitations grounds, entering judgment of dismissal for defendants. The Court of Appeal affirmed the judgment. We granted review to decide whether section 364, subdivision (d), applies to Preferred Risk's equitable indemnity action.

BACKGROUND

A person whose negligence causes injury that a physician's malpractice aggravates may seek equitable indemnity from the physician. (Smith v. Parks Manor (1987) 197 Cal.App.3d 872, 878, 243 Cal.Rptr. 256.) The equitable indemnity cause of action does not accrue until the person pays the injured third party's claim. (People ex rel. Dept. of Transportation v. Superior Court (1980) 26 Cal.3d 744, 757, 163 Cal.Rptr. 585, 608 P.2d 673.) A liability insurer that pays damages to a third party on behalf of an insured tortfeasor stands in the same position as its insured with respect to the right to recover against other tortfeasors on a comparative fault basis. (Truck Ins. Exchange v. Superior Court (1997) 60 Cal.App.4th 342, 350, 70 Cal.Rptr.2d 255.)

Preferred Risk paid Pratte on January 24, 1996. Its indemnity cause of action accrued on that date for purposes of commencing the statute of limitations, because one is injured by another's wrongful act when one pays more than one's proper share of a settlement to a plaintiff. The parties agree that section 340, subdivision (3), which governs all general tort actions, governs the equitable indemnity action. That section imposes a one-year limitations period for "[a]n action ... for injury to ... one caused by the wrongful act or neglect of another...." Thus, Preferred Risk was required to file its complaint by January 24, 1997, unless its action was tolled or extended by law. ²

Section 364, subdivision (a), provides that "[n]o 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." Failure to comply with the 90-day notice provision does not invalidate court proceedings and is not jurisdictional, although it may subject a plaintiff's attorney to State Bar disciplinary proceedings. (§ 365.) Section 364, subdivision (d), states: "[i]f 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." (§ 364, subd. (d).) Preferred Risk filed its complaint on April 10, 1997, more than one year after the indemnity cause of action accrued on January 24, 1996. The action is time-barred unless tolled under section 364, subdivision (d), for 90 days after January 16, 1997, when Preferred Risk served notice of intent to sue on Drs. Reiswig and Kolba.

The Court of Appeal concluded that the 90-day tolling provision of section 364, subdivision (d), does not apply to equitable indemnity claims. The court did acknowledge that, because section 364, subdivision (d), tolls "the applicable statute of limitations" and is not limited to MICRA statute of limitations provisions, it arguably could apply even to non-MICRA limitations periods, as it has in other cases. (See, e.g., Anson v. County of Merced (1988) 202 Cal.App.3d 1195, 1204-1205, 249 Cal.Rptr. 457 (Anson ) [§ 364 notice extends limitations period under Gov.Code, § 945.6].) The court concluded, however, that because section 364 applies only to an "action

based upon the health care provider's professional negligence," and defines professional negligence as a "negligent 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, subds. (a), (f)(2)), the statute applies only to claims by a patient or a patient's heirs, and not to parties seeking indemnity for the same injury. We conclude the Court of Appeal erred.

DISCUSSION

As we have observed, the Legislature enacted MICRA in 1975 in response to rapidly increasing premiums for medical malpractice insurance. (Delaney v. Baker (1999) 20 Cal.4th 23, 33-34, 82 Cal.Rptr.2d 610, 971 P.2d 986; Woods v. Young (1991) 53 Cal.3d 315, 319, 279 Cal.Rptr. 613, 807 P.2d 455 (Woods ).) The Legislature viewed MICRA as " 'an interrelated legislative scheme ... to deal specifically with all medical malpractice claims.' " (Woods, supra, 53 Cal.3d at p. 324, 279 Cal.Rptr. 613, 807 P.2d 455.) The purpose of the notice of intent to sue and the 90-day tolling period of section 364 was to decrease the number of actions premised on professional negligence by establishing a procedure to encourage the parties to negotiate " 'outside the structure and atmosphere of the formal litigation process.' " (Woods, supra, 53 Cal.3d at p. 320, 279 Cal.Rptr. 613, 807 P.2d 455.) We have held that the tolling period of section 364, subdivision (d), applies to those injuries governed by the MICRA statute of limitations under section 340.5. (Woods, supra, 53 Cal.3d at p. 327, 279 Cal.Rptr. 613, 807 P.2d 455; Russell v. Stanford University Hospital (1997) 15 Cal.4th 783, 789, 64 Cal.Rptr.2d 97, 937 P.2d 640 (Russell ) [§ 364 tolls three-year discovery period of § 340.5].) The cases agree that MICRA provisions should be construed liberally in order to promote the legislative interest in negotiated resolution of medical malpractice disputes and to reduce malpractice insurance premiums. (Russell, supra, 15 Cal.4th at p. 790, 64 Cal.Rptr.2d 97, 937 P.2d 640; see American Bank & Trust Co. v. Community Hospital (1984) 36 Cal.3d 359, 363-364, 204 Cal.Rptr. 671, 683 P.2d 670.)

Notwithstanding the clear policy behind section 364, to encourage settlements and lower insurance premiums, the doctors assert that the tolling provision of section 364, subdivision (d), does not apply to equitable indemnity actions because they are not governed by MICRA statute of limitations provisions. Instead, equitable indemnity actions are simple common law tort actions filed to regain monies lost by another's negligence, with the general tort stat...