The State of Michigan Court of Appeals (“Appeals Court”) recently held in a Michigan medical malpractice case that the amount of a settlement paid by one medical malpractice defendant to all of the plaintiffs prior to trial to settle all of their claims reduces the amount of the jury’s verdict against the remaining jointly liable defendants dollar-for-dollar for identical claims, pursuant to the common-law rule of setoff (““where a negligence action is brought against joint tortfeasors, and one alleged tortfeasor agrees to settle his potential liability by paying a lump sum in exchange for a release, and a judgment is subsequently entered against the non-settling tortfeasor, the judgment is reduced pro tanto [only by that extent] by the settlement amount”).
The Underlying Facts
The medical malpractice plaintiffs were the parents of a child who suffered a hypoxic brain injury, respiratory depression, metabolic acidosis, permanent brain damage, and blindness, allegedly as a result of medical negligence that occurred on September 27 and 28, 2008, during labor and delivery. The mother suffered a ruptured uterus as well.
The medical malpractice defendants were the doctors who participated in the care provided during the labor and delivery and their employers (including the hospital where the delivery took place). The defendant hospital settled all of the plaintiffs’ claims before trial for payment in the amount of $600,000, which did not differentiate between all of the plaintiffs’ claims (which included the physical injuries suffered by the mother and child, claims for the child’s past and future medical expenses, the mother’s claim for lost wages, the pain and suffering claims, and the loss of consortium claim) — the settlement payment was for “any and all claims” that all plaintiffs may have arising from the incident that “occurred on or about September 28, 2008.”
The trial judge ruled that because the defendant hospital’s settlement payment was for the claims of all three plaintiffs but the jury returned a verdict of no cause on the parents’ separate claims, which were included in the hospital’s settlement payment, it would be manifestly unjust to apply the full settlement to offset the jury award that was for the child only. The trial judge therefore ordered a setoff of $162,058.11, representing that portion of the settlement paid in exchange for release of liability for the child’s injuries.
The Appeals Court held, “we can find no basis in the release and settlement agreement between plaintiffs and [the defendant hospital] or the jury’s verdict to allocate any portion of the [the defendant hospital’s] payment to injuries other than those of [the child], nor do we have the ability to alter the settlement agreement, which is, of course, a contract. Consequently, we reverse the trial court’s decision regarding setoff … Plaintiffs might have been able with [the defendant hospital’s] agreement to apportion the settlement among their separate claims … Plaintiffs here did not do so. Plaintiffs collectively settled all their claims against a jointly liable tortfeasor arising out of a single instance of malpractice involving [the child’s] birth for a single undifferentiated lump sum of $600,000. After trial against the non-settling defendants on all the same claims, a jury determined the value of all plaintiffs’ claims. To ensure that plaintiffs are fully but not overly compensated for all their claims, the entire [defendant hospital’s] settlement must be offset against the amount the jury determined were all plaintiffs’ collective damages … Where there is a recovery ‘for an injury identical in nature, time and place, that recovery must be deducted from [the plaintiffs’] other award’ … to avoid speculative apportionments of an undifferentiated lump sum settlement paid by a jointly liable codefendant to settle more than one plaintiffs’ claim arising from a single alleged incident of malpractice, the entire settlement must offset the entire jury award to all plaintiffs … any necessary apportionment of the [the defendant hospital’s] settlement among the three plaintiffs should be made in accordance with the fact finders’ determination. The jury determined that [the parents’] claims were valued at zero. Accordingly, if it were possible to apportion the undifferentiated lump sum settlement, [the parents’] portion should be valued at zero. Doing so results in setting off the entire [defendant hospital’s] settlement from damages that remain after applying the relevant statutory adjustments to arrive at the final judgment in favor of [the child’s] conservator.”
The Appeals Court also addressed whether a discount on an incurred medical expense negotiated between medical services providers and health care insurers is a “collateral source” that may reduce a jury award for such medical expense under Michigan law (MCL 600.6303). The Appeals Court held, “the insurance discounts that reduced the amount of the medical expenses that plaintiffs would otherwise have been responsible to pay must also plainly be ‘benefits received or receivable from an insurance policy’ and, therefore, a ‘collateral source’ within the meaning of the first sentence of MCL 600.6303(4) … both the cash payments and discount, i.e., the ‘benefits received or receivable from an insurance policy,’ are excluded as statutory collateral source benefits.”
The Appeals Court concluded, “Although we find that an insurance discount is a ‘collateral source’ by which plaintiffs’ medical expenses were ‘paid or payable’ and that such a discount is a benefit ‘received or receivable from an insurance policy,’ the plain terms of the exclusion from the statutory collateral source rule of § 6303(4) when a contractual lien is exercised is not limited to the amount of the lien; it applies to all benefits the ‘legal entity entitled to the lien’ provides.”
MAKENZIE GREER, Minor, KENNETH GREER, Individually and as Conservator, and ELIZABETH GREER v. ADVANTAGE HEALTH and ANITA R. AVERY, M.D., Defendants-Appellants, and TRINITY HEALTH MICHIGAN d/b/a ST. MARY’S HOSPITAL and KRISTINA MIXER, M.D., Defendants. No. 312655 Kent Circuit Court LC No. 10-009033-NH. Release for publication on May 13, 2014. Click here to read the entire written opinion.
If you or a loved one suffered serious injury or other harm as a result of medical malpractice in Michigan or in another U.S. state, you should promptly seek the legal advice of a Michigan medical malpractice attorney or a medical malpractice attorney in your state who may investigate your medical malpractice claim for you and represent you or your loved one in a medical malpractice case, if appropriate.
Click here to visit our website or telephone us on our toll-free line (800-295-3959) to be connected with Michigan medical malpractice lawyers or medical malpractice lawyers in your U.S. state who may assist you with your medical negligence claim.
Turn to us when you don’t know where to turn.