PROVIDENCE, Rhode Island (Legal Newsline) - The Rhode Island Supreme Court has ruled that a health care facility is obligated to pay the statutory minimum of $100,000 to the estate of a women who died due to negligence at the facility even though the facility was supposed to pay the first $2 million under the terms of the policy.
Chief Justice Paul A. Suttell wrote the Jan. 14 opinion for the unanimous five-member court.
"In June 2006, Pearl E. Archambault tragically died while in the care of Haven Health Center of Greenville, LLC (Haven Health) after a nurse mistakenly administered a lethal overdose of morphine," according to the opinion.
Plaintiff Tracie Peloquin, Administratrix of her estate, filed a medical malpractice action against Haven Health and Denise Hardesty, the nurse who misinterpreted the physician's order and administered the overdose to Archambault.
Haven Health, as well as any Haven Health employee, was insured by Columbia during the period of the accident with policy limits of $1 million per claim and $3 million in the aggregate.
"However, the policy also contained a self-insured retention endorsement (SIR Endorsement) requiring Haven Health to pay the first $2 million of "all 'damages' and all 'claim expenses' resulting from each 'claim' under the Professional Liability Coverage Form," the opinion states.
Columbia's obligation to pay would only begin to pay on a claim after Haven Health had paid for first $2 million.
From 2007 to 2009, both Haven Health and Hardesty filed bankruptcy. The bankruptcy court approved the sale of substantially all of the assets of Haven Health and related entities and Hardesty's bankruptcy was discharged.
As a result of the bankruptcy of the defendants, Peloquin amended her complaint to add Columbia as a defendant under a state statute which permits an injured party to proceed against an insurer when the insured has filed for bankruptcy.
Peloquin also added Haven Eldercare, LLC and Haven Eldercare of New England, LLC to the amended complaint. After Haven Health, HE and HENE failed to respond to the amended complaint, the trial court entered a default judgment of $364,421.63 against the three.
Peloquin then moved for summary judgment against Columbia, asking the court to declare the SIR endorsement "void and unenforceable as against public policy" and to enter judgment against Columbia for the $100,000 plus interest that plaintiff argued Columbia was statutorily obligated to provide. The court, however, granted summary judgment in favor of Columbia and plaintiff appealed to the state's high court.
"The parties disagree," Suttell wrote, "about whether the SIR Endorsement in the Columbia Policy, which required Haven Health to cover the first $2 million of any damages awarded and expenses incurred in connection with a claim, is valid under Rhode Island law.
"To date, the Department of Business Regulation (DBR) has not promulgated any such regulations, and the parties disagree on whether healthcare providers may lawfully self-insure in the absence of DBR action.
Peloquin argued that self-insurance did not require the minimum coverage levels required by statute and so was effectively no insurance at all. Particularly, with claims under $2 million, Columbia's coverage was meaningless.
"Thus, plaintiff urges that this Court should declare the SIR Endorsement void as against public policy to the extent of the statutorily mandated minimum insurance limits.
After extensive arguments on both sides were presented, the Court declared, "Although plaintiff emphasizes public policy in urging that this Court declare the present SIR Endorsement void, we need not undertake a public policy analysis here because we read § 42-14.1-2(a) to preclude Rhode Island healthcare providers from self-insuring unless and until the DBR promulgates regulations setting forth parameters for self-insurance."
The Court looked at self-insurance in other contexts and noted that generally there was a process in place whereby the state looked at the ability of the business to pay claims in the event of the necessity. In this case, there was no process in place to insure the viability of Haven House.
"Because the DBR has not yet promulgated rules and regulations allowing persons or entities with sufficient financial resources to be self-insurers, we hold that the Columbia policy's SIR Endorsement is invalid under § 42-14.1-2(a). Therefore, plaintiff may recover from Columbia, even though her judgment against Haven Health does not exceed the $2 million SIR Endorsement amount," concluded Suttell on the issue.
Columbia argued that the statute did not require the minimum $100,000 per claim that Peloquin argued for. The Court announced that it did not have to examine the issue.
"Because plaintiff consistently has taken the position that she is entitled only to $100,000 of her damages award (plus interest), we need not determine whether that statute actually limits her recovery in this way.
"We already have determined the SIR Endorsement in the Columbia policy to be invalid, and we hold that plaintiff should receive the $100,000 in damages to which she consistently has argued she is entitled.
Finally, Peloquin argued that Columbia should have to pay a total of $200,000 of the plaintiff's total damages, $100,000 each for Haven Health and Hardesty.
Columbia responded that Peloquin waived her right to make that argument by not raising it at the summary judgment level before the trial court and the Supreme Court agreed.
"Here, plaintiff had the opportunity to make this argument when she moved for summary judgment against defendant, but she failed to do so. Thus, because plaintiff did not present this argument to the hearing justice below, we hold that plaintiff waived her right to assert this argument here, and her recovery for damages is limited to the $100,000 claim amount that she asserted below.
"For the reasons set forth in this opinion, we vacate the judgment of the Superior Court, and we remand the record to the Superior Court with instructions to enter judgment in favor of the plaintiff for $100,000, plus pre-judgment and post-judgment interest calculated on the basis of that amount."