Ellington Jeffrey, a minor by his mother and father, Victor Jeffrey and Lynell Jeffrey and Victor and Lynell Jeffrey, individually v. Stephen Robertson, Insurance Commissioner (mem. dec.)

MEMORANDUM DECISION

Pursuant to Ind. Appellate Rule 65(D),

this Memorandum Decision shall not be

regarded as precedent or cited before any FILED

court except for the purpose of establishing Mar 13 2018, 5:47 am

the defense of res judicata, collateral CLERK

estoppel, or the law of the case. Indiana Supreme Court

Court of Appeals

and Tax Court

ATTORNEY FOR APPELLANTS ATTORNEY FOR APPELLEE

Robert A. Montgomery Scott B. Cockrum

Law Offices of Robert Montgomery Patrick P. Devine

Munster, Indiana Hinshaw & Culbertson LLP

Schererville, Indiana

IN THE

COURT OF APPEALS OF INDIANA

Ellington Jeffrey, a minor by his March 13, 2018

mother and father, Victor Jeffrey Court of Appeals Case No.

and Lynell Jeffrey and Victor 45A04-1706-CT-1452

and Lynell Jeffrey, individually, Appeal from the Lake Superior

Appellants-Plaintiffs, Court

The Honorable John M. Sedia,

v. Judge

Trial Court Cause No.

Stephen Robertson, Insurance 45D01-1208-CT-170

Commissioner, Indiana

Department of Insurance,

Appellee-Defendant.

Robb, Judge.

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 1 of 20

Case Summary and Issue

[1] In 2012, Victor and Lynell Jeffrey (the “Jeffreys”) 1 reached a settlement

agreement with the healthcare provider for their adopted son, Ellington Jeffrey.

The settlement agreement provided for a cash payment of $150,000 to the

Jeffreys, individually and as parents of Ellington, and for Ellington’s healthcare

provider to purchase and make contributions to an annuity for Ellington’s

benefit. The total value of the annuity is $100,000 and is payable to the

Ellington Jeffrey Special Needs Trust.

[2] The Jeffreys then sought additional compensation from the Indiana Patient’s

Compensation Fund and filed a lawsuit naming as defendant Stephen

Robertson, as the commissioner of the Indiana Department of Insurance (the

“Commissioner”). The Commissioner subsequently filed a motion for

summary judgment alleging the Jeffreys’ individual claims did not meet the

Indiana’s Medical Malpractice Act’s (“MMA”) definition of “malpractice” and

that they were not “patients” under the MMA. The trial court agreed with the

Commissioner and determined the $150,000 cash payment to the Jeffreys was

not for claims of malpractice; therefore, the Jeffreys failed to meet the statutory

minimum amount of a healthcare provider’s or insurer’s liability to seek

1

Victor and Lynell divorced in 2014 and Lynell now goes by her maiden name, Lynell Canagata. The

Jeffreys’ Notice of Appeal states the appellant is “Ellington Jeffrey, a minor, by his mother, Lynell Jeffrey.”

Amended Notice of Appeal at 1. Their complaint, however, states the plaintiffs are “Ellington Jeffrey, a

minor by his mother and father Victor and Lynell Jeffrey, and Victor and Lynell Jeffrey, Individually.”

Indiana Rule of Appellate Procedure 17(A) dictates “the party of record in the trial court . . . shall be a party

on appeal.” Consequently, both Victor and Lynell are parties and we still refer to them as “the Jeffreys.”

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 2 of 20

additional compensation from the Patient’s Compensation Fund. The Jeffreys

now appeal, raising two issues for our review, which we consolidate and restate

as whether the trial court erred in granting summary judgment in favor of the

Commissioner. Concluding the trial court erred in granting summary

judgment, we reverse and remand for further proceedings.

Facts and Procedural History 2

[3] In 2006, the Jeffreys planned to adopt a child. The Jeffreys specifically

intended to adopt a child only if there were no signs of significant health issues

and had rejected at least three prior adoptions due to concerns about the child’s

health. On February 12, 2006, V.S. gave birth to her son at Methodist Hospital

and planned to place him with an adoptive family. Lynell spoke with

Methodist Hospital’s social worker, whose job included discussing a child’s

birth abnormalities with prospective adoptive parents, and told her she was

relying on her judgment in deciding to adopt V.S.’s child. The social worker

informed Lynell that V.S.’s child was born healthy and without any

abnormalities.

[4] On February 15, 2006, Lynell traveled to Indiana from her home in New York

and met with Methodist Hospital’s social worker and head nurse. Both assured

Lynell that the child, aside from being lactose intolerant, had no significant

2

We held oral argument in this case on February 20, 2018, in Indianapolis, Indiana. We commend counsel

for their advocacy.

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 3 of 20

health issues or abnormalities. The Jeffreys executed a guardianship and took

the child, who was later named Ellington, home to New York.

[5] Prior to completing the adoption, the Jeffreys’ attorney requested V.S.’s and

Ellington’s medical records from Methodist Hospital. Methodist Hospital

responded to their request by sending inpatient records, but did not send the

Jeffreys any outpatient records.

[6] The Jeffreys completed Ellington’s adoption in August of 2006. In December

of 2006, the Jeffreys learned Ellington had severe neurological deficits. If the

Jeffreys had known of Ellington’s medical condition, they would not have

adopted him. In April of 2007, the Jeffreys finally received all the medical

records they had requested. They discovered V.S.’s medical records included a

sonogram taken on February 1, 2006, indicating Ellington had a large hole in

the left side of his brain, a condition associated with developmental delay,

intellectual disabilities, paralysis, and other severe neurological defects.

[7] Thereafter, the Jeffreys filed a proposed medical malpractice complaint against

Methodist Hospital and V.S.’s and Ellington’s doctor with the Indiana

Department of Insurance and with the trial court. Methodist Hospital and the

doctor both filed motions for summary judgment, which the trial court granted.

As to Methodist Hospital, the trial court determined the sonogram report did

not fit within the description of the documents requested by the Jeffreys. The

trial court also determined that, with respect to the Jeffreys’ claim of negligent

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 4 of 20

misrepresentation, the Jeffreys should not have relied on general statements

made by the social worker and nurse.

[8] The Jeffreys then initiated the first appeal in this case in Jeffrey v. Methodist

Hosps., 956 N.E.2d 151 (Ind. Ct. App. 2011), and argued the trial court erred in

granting summary judgment in favor of Methodist Hospital and the doctor. We

affirmed the entry of summary judgment in favor of the doctor, but reversed

with respect to Methodist Hospital. We concluded a genuine issue of material

fact existed as to whether the Jeffreys’ request to Methodist Hospital for “any

and all . . . information” should have included the sonogram. Id. at 155. We

further concluded that, with respect to the Jeffreys’ claim of negligent

misrepresentation, genuine issues of material fact existed as to whether their

reliance on the statements by the nurse and social worker was justified. Id. at

157.

[9] In January of 2012, the Jeffreys filed their fourth amended complaint with the

Indiana Department of Insurance. The Jeffreys alleged Methodist Hospital

failed to render reasonable medical care to Ellington, failed to inform the

Jeffreys of any abnormal test results, failed to refer Ellington for a neurologic

consultation, failed to communicate complete and accurate medical

information, and negligently misrepresented Ellington’s medical status. As to

Ellington, the Jeffreys’ complained he suffered damages as a result of Methodist

Hospital’s allegedly negligent acts; specifically, the complaint alleged Methodist

Hospital’s failure to inform the Jeffreys of Ellington’s test results and failure to

provide Ellington with prompt care significantly exacerbated Ellington’s

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 5 of 20

preexisting condition and reduced Ellington’s chances of leading an

independent life. The Jeffreys also alleged a derivative action as Ellington’s

parents seeking medical expenses, lost income, emotional injuries, loss of

services, loss of consortium, and future lost income and medical expenses.

Finally, the Jeffreys alleged, individually, that Methodist Hospital’s actions

denied them the opportunity to stop the adoption proceedings.

[10] In May of 2012, the Jeffreys and Methodist Hospital settled their dispute. The

Release and Settlement Agreement (“Settlement Agreement”) states as follows:

Victor Jeffrey and Lynell Jeffrey, Individually and as the Parents

of Ellington Jeffrey, a Minor, (hereinafter referred to collectively

as “Claimants”), for the sole consideration documented in this

instrument and paid to them as set forth below, do herby

discharge and forever release The Methodist Hospitals, Inc.,

(hereinafter referred to as “Hospital”) and its insurers,

employees, agents, servants, successors and assigns, from all

liabilities, claims for relief, demands, controversies, damages,

actions and/or causes of action . . . which are based on or arise

from hospital, nursing, healthcare or other services rendered by

the Hospital to Claimants at any time in connection with the

birth of Ellington Jeffrey on or about February 12, 2006, his

subsequent adoption by Victor and Lynell Jeffrey on or about

August 25, 2006, and the disclosure at any time of medical

records pertaining to Ellington Jeffrey and/or his biological

mother in contemplation of the adoption.

***

Payments Due At Time of Settlement

A cash payment in the amount of $150,000.00, payable to Victor

Jeffrey and Lynell Jeffrey, Individually and as Parents of

Ellington Jeffrey, a Minor . . . shall be made at the time of

settlement.

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 6 of 20

Periodic Payments Made According to Schedule

Periodic payments shall be made to the Ellington Jeffrey Special

Needs Trust from an annuity with a present value of $37,001, to

be paid as follows:

• $150.00 per month, guaranteed 40 years . . . .

• $8,000.00 payable [in 2024];

• $10,000.00 payable [in 2032]; and

• $10,000.00 payable [in 2043].

***

Other Provisions

[T]his Release and Settlement Agreement is a full and final

compromise of Claimants’ disputed medical malpractice claims

against Hospital. The payments made pursuant to this

instrument are not to be construed as an admission of liability by

Hospital. Rather, this compromise is designed to avoid the

expense of further litigation between the parties and to terminate

all controversies between them which are based in any way upon

hospital, nursing, healthcare or other services rendered by

Hospital to Claimants at any time in connection with the birth of

Ellington Jeffrey on or about February 12, 2006, his subsequent

adoption by Victor and Lynell Jeffrey on or about August 25,

2006, and the disclosure at any time of medical records

pertaining to Ellington Jeffrey and/or his biological mother in

contemplation of the adoption. . . .

The consideration for this Release and Settlement Agreement is

not intended as, nor is it understood to be, full compensation to

Claimants for their claims against Hospital based on the

aforesaid healthcare and services. It is specifically understood

and is the intention of the parties that the consideration received

pursuant to this instrument shall not in any way prejudice

Claimants’ right to proceed against the Indiana Patient’s

Compensation Fund for additional compensation based on such

claims. It is understood by the parties that Claimants have

always claimed actual damages in excess of $250,000, and they

specifically reserve the right to proceed against the Indiana

Patient’s Compensation Fund for additional compensation.

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 7 of 20

Appellant’s Appendix, Volume 2 at 102-05. Following the settlement, the

Jeffreys filed their lawsuit against the Commissioner seeking additional

compensation from the Indiana Patient’s Compensation Fund.

[11] On November 10, 2016, the Commissioner filed a motion for summary

judgment. The Commissioner’s motion alleged that (1) Victor and Lynell are

not “patients” under the Medical Malpractice Act, and (2) their claim of

negligent misrepresentation does not sound in “medical malpractice.” The

Jeffreys filed their motion in opposition to the Commissioner’s motion for

summary judgment on January 24, 2017. On March 15, 2017, the trial court

approved the Jeffreys’ Petition for Approval of Minor’s Personal Injury

Settlement and Order of Distribution.3 See Appellant’s Appendix, Volume 2 at

201-02. The Distribution Order approved the Jeffreys’ proposal to place the net

amount of the settlement, $81,874.82, into Ellington’s Special Needs Trust

along with his annuity payments.

[12] On June 7, 2017, the trial court granted the Commissioner’s motion for

summary judgment. The trial court’s summary judgment order stated as

follows:

3

The record is unclear why it took five years to approve and disperse the 2012 Settlement Agreement.

Additionally, the Commissioner disputes whether the petition is a proper part of the record. The record on

appeal “consist[s] of the Clerk’s Record and all proceedings before the trial court . . . .” Ind. Appellate Rule

27. The “Clerk’s Record” is the record maintained by the clerk of the court and “consist[s] of the

Chronological Case Summary (CCS) and all papers, pleadings, documents, orders, judgments, or other

materials filed in the trial court . . . .” App. R. 2(E). Thus, the petition is a proper part of the record on

appeal.

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 8 of 20

There is no dispute that the [$37,001] paid to Ellington was paid

as a result of the resolution of a claim for medical malpractice.[4]

There is also no dispute that this amount is insufficient to allow

the case to proceed to the [Patient’s Compensation] Fund. The

issue then becomes: if there is a material question of fact that the

$150,000 paid to Victor and Lynell was the result of the

resolution of a claim for medical malpractice . . . .

***

IC 34-18-2-18 provides as follows:

“Malpractice” means a tort or breach of contract based on

health care or professional services that were provided, or

that should have been provided, by a health care provider,

to a patient.

Does the failure of the social worker to disclose Ellington’s

condition to Victor and Lynell fit the statutory definition of

malpractice? A case which is particularly instructive in

answering this question is H.D. v. BHC Meadows Hosp., Inc., 884

N.E.2d 849 (Ind. Ct. App. 2008). There, a family had their

daughter admitted to a hospital for psychiatric treatment. The

parents and hospital signed a confidentiality agreement stating

that information would not be shared with the daughter’s school

or school counselor. However, her therapist at the hospital,

unaware of the agreement, sent a fax to the school counselor

indicating that the daughter was being treated for depression. . . .

The trial court dismissed [the plaintiffs’ complaint] upon finding

that it lacked subject matter jurisdiction because the claims had

not first been submitted to a medical review panel. The Court of

Appeals reversed, finding that the family’s claims were ordinary

negligence claims . . . and that the average juror could review

them just as well as a medical review panel:

4

Although the trial court’s summary judgment order declares there is no dispute, the Commissioner states he

“does not concede that Ellington Jeffrey’s claim constitutes medical malpractice . . . but did not raise the

issue at the trial court since the failure of the Jeffreys’ individual claims was a threshold issue . . . .” Brief of

Appellee at 14 n.6.

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 9 of 20

The text of the [Medical Malpractice] Act itself thus leads

one to conclude that the General Assembly intended to

exclude from the legislation’s purview conduct of a

provider unrelated to the promotion of a patient’s health or

the provider’s exercise of professional expertise, skill or

judgment . . . [t]he legislature’s establishment of a medical

review panel, the sole purpose of which is to provide an

expert determination on the question of whether a

provider complied with the appropriate standard of care,

suggests that the scope of the Act is likewise confined to

actions premised upon the exercise of profession [sic]

judgment. Moreover, we have repeatedly held that when

plaintiffs articulate claims for ordinary negligence,

unrelated to the provision of medical care or treatment,

those claims do not fall within the scope of the Medical

Malpractice Act. We fail to see why the therapist’s act of

faxing a patient’s confidential information to a fax

machine located in a school office without taking

precautions to ensure that the materials are discreetly

received by the intended recipient would necessitate

consideration by a medical review panel, 884 N.E.2d at

855, citations omitted.

Here, the Court cannot see why the social worker’s act,

intentional or not, of failing to release full and complete medical

records regarding Ellington, or Methodist’s failure to have a

medical record filing and retrieval system that would have

assured that Victor and Lynell would have known of Ellington’s

condition, would necessitate consideration by a medical review

panel.

The language of the release document signed by Victor and

Lynell and Methodist clearly sets forth their intent that the

settlement meet the statutory minimum and allow Victor and

Lynell to proceed against the [Patient’s Compensation] Fund.

However, the designated materials demonstrate no material issue

of fact that the [Patient’s Compensation] Fund was not a party to

the release document, and that the $150,000 paid to Victor and

Lynell was made in compensation for Methodist failing to inform

them of the results of the sonogram taken before Ellington’s

birth, a breach of duty not encompassed by the Medical

Malpractice Act.

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 10 of 20

Appealed Order at 3-7. The Jeffreys now appeal.

Discussion and Decision

I. Standard of Review

[13] In reviewing a summary judgment order, we apply the same standard as the

trial court. City of Lawrence Util. Serv. Bd. v. Curry, 68 N.E.3d 581, 585 (Ind.

2017). Summary judgment is appropriate only when “the designated

evidentiary matter shows that there is no genuine issue as to any material fact

and that the moving party is entitled to a judgment as a matter of law.” Ind.

Trial Rule 56(C). An issue is “genuine” if a trier of fact is required to resolve

the truth of the matter; a fact is “material” if its resolution affects the outcome

of the case. Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014).

[14] Summary judgment is a “blunt instrument” by which the non-prevailing party

is prevented from resolving its case at trial. Id. Because of this, our supreme

court has cautioned that summary judgment “is not a summary trial” and

courts on appeal should carefully “assess the trial court’s decision to ensure [a

party] was not improperly denied [their] day in court.” Id. at 1003-04 (citations

omitted). In other words, “Indiana consciously errs on the side of letting

marginal cases proceed to trial on the merits, rather than risk short-circuiting

meritorious claims.” Id. at 1004.

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II. Summary Judgment

[15] Indiana’s Medical Malpractice Act caps a claimant’s recoverable damages at

$1,250,000. Ind. Code § 34-18-14-3(a)(3). Of that $1,250,000, a healthcare

provider or its insurer is only liable for $250,000. Ind. Code § 34-18-14-3(b)(1).5

Any amount of damages in excess of the healthcare provider or insurer’s

liability shall be paid from the Indiana Patient’s Compensation Fund. Ind.

Code § 34-18-14-3(c). If a healthcare provider or its insurer agrees to settle its

liability by paying its policy limits and the claimant is demanding a sum greater

than the policy limit, then the procedure outlined by the statute must be

followed in order to recover from the Patient’s Compensation Fund. Ind. Code

§ 34-18-15-3.

[16] To fall within the MMA, a patient must have suffered from an act of medical

“malpractice.” The MMA defines “malpractice” as a “tort or breach of

contract based on health care or professional services that were provided, or

that should have been provided, by a health care provider, to a patient.” Ind.

Code § 34-18-2-18. “Health care” means an “act or treatment performed or

furnished, or that should have been performed or furnished, by a health care

provider for, to, or on behalf of a patient during the patient’s medical care,

5

These stated recovery limitations existed for an act of malpractice that occurred between June 30, 1999 and

July 1, 2017. For an act of malpractice occurring between June 30, 2017 and July 1, 2019, a claimant’s total

recoverable damages are $1,650,000; a healthcare provider or insurer is only liable for $400,000. Ind. Code §

34-18-14-3(a)(4), (b)(2).

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 12 of 20

treatment, or confinement.” Ind. Code § 34-18-2-13. A “patient” is defined as

an

individual who receives or should have received health care from

a health care provider, under a contract, express or implied, and

includes a person having a claim of any kind, whether derivative

or otherwise, as a result of alleged malpractice on the part of a

health care provider. Derivative claims include the claim of a

parent or parents, guardian, trustee, child, relative, attorney, or

any other representative of the patient including claims for loss of

services, loss of consortium, expenses, and other similar claims.

Ind. Code § 34-18-2-22. A “representative” means “the spouse, parent,

guardian, trustee, attorney, or other legal agent of the patient.” Ind. Code § 34-

18-2-25.

[17] The Commissioner’s motion for summary judgment and his brief on appeal

argue certain conditions precedent to recovery must be met in order to seek

additional compensation from the Patient’s Compensation Fund. Those

conditions precedent are (1) a settlement agreement in the amount of $250,000

from a qualified healthcare provider6; (2) the claimant must be a “patient”; and

(3) the claim must be for one of medical “malpractice.” The trial court,

agreeing with the Commissioner, determined the $150,000 cash payment made

to the Jeffreys was compensation for Methodist Hospital’s failure to inform the

6

In the case of a structured settlement, the threshold amount can be met with if “the sum of the present

payment of money to the patient (or the patient’s estate) by the health care provider (or the health care

provider’s insurer) plus the cost of the periodic payments agreement expended by the health care provider (or

the health care provider’s insurer)” exceeds $187,000. Ind. Code § 34-18-14-4(b).

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 13 of 20

Jeffreys of the result of the sonogram—a breach of duty the trial court

determined was outside the scope of the MMA. Because the trial court

concluded the $150,000 cash payment to the Jeffreys was not for claims of

“malpractice,” the Jeffreys could not aggregate the $150,000 cash payment with

the value of Ellington’s annuity to reach the statutory minimum necessary to

pursue additional compensation. Essentially, the trial court concluded there

was no genuine issue of material fact as to whether the Jeffreys met the

minimum threshold necessary to seek additional compensation from the

Patient’s Compensation Fund.

[18] As noted, the Jeffreys’ proposed complaint alleged, on behalf of Ellington, that

Methodist Hospital failed to render reasonable medical care to Ellington, failed

to inform the Jeffreys of any abnormal test results, failed to refer Ellington for a

neurologic consultation, failed to communicate complete and accurate medical

information, and negligently misrepresented Ellington’s medical status. Their

complaint alleged that as a result of these failures, Ellington suffered a direct

harm to his health. The Jeffreys, derivatively as Ellington’s parents, alleged

they suffered emotional damages, medical expenses, and lost income. Finally,

the Jeffreys, in a separate count, alleged they lost the opportunity to stop the

adoption proceedings.

[19] The Jeffreys’ settlement of these claims with Methodist Hospital included two

separate payments, an annuity with a present value of $37,001 (total value of

$100,000) payable to the Ellington Jeffrey Special Needs Trust, and a cash

payment of $150,000 payable to Victor and Lynell Jeffrey, “Individually and as

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 14 of 20

Parents of Ellington Jeffrey[.]” Appellant’s App., Vol. 2 at 102. The

Commissioner contends because the Settlement Agreement includes the

Jeffreys’ claims of wrongful adoption and negligent misrepresentation—claims

he alleges are not “malpractice,” the $150,000 cash payment cannot be

aggregated by the Jeffreys to meet the statutory minimum to seek additional

compensation from the Patient’s Compensation Fund. We disagree with the

Commissioner.

[20] The Jeffreys and Methodist Hospital’s Settlement Agreement states it

constitutes a “full and final compromise of Claimants’ disputed medical

malpractice claims against the Hospital . . . [but] is not intended as, nor is it

understood to be, full compensation to Claimants . . . [as] they specifically

reserve the right to proceed against the Indiana Patient’s Compensation

Fund[.]” Appellant’s App., Vol. 2 at 103-04. It further states that Methodist

Hospital compensated the Jeffreys, not as an admission of liability, but to

“avoid the expense of further litigation between the parties and to terminate all

controversies between them which are based in any way upon” services

provided to the Jeffreys by Methodist Hospital in connection with Ellington’s

birth. Id.

[21] A fair reading of the Settlement Agreement indicates the Jeffreys and Methodist

Hospital intended to resolve all claims, including those sounding in medical

malpractice, in a single settlement, as parties often do, and that the Jeffreys

always intended to seek further compensation from the Patient’s Compensation

Fund. At this point, Ellington has alleged, through his parents, that he suffered

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 15 of 20

damages as a result of medical care that should have been provided by

Methodist Hospital. In return for a release of all claims, Methodist Hospital

purchased an annuity with a total value of $100,000 payable to the Ellington

Jeffrey Special Needs Trust over a period of forty years. The Jeffreys,

derivatively of Ellington’s claims of malpractice, alleged they suffered

emotional damages, medical expenses, and lost income. See, e.g., Ind. Patient’s

Comp. Fund v. Wolfe, 735 N.E.2d 1187, 1193 (Ind. Ct. App. 2000) (holding

parents with a derivative claim are not entitled to a separate damages cap;

rather, their claims are included within the patient’s claim), trans. denied.

Although the Jeffreys’ claims also include a claim of wrongful adoption and

negligent misrepresentation, which the Commissioner alleges are not claims of

“malpractice,” the Settlement Agreement does nothing to carve out which part,

if any, of the $150,000 cash payment was allocated to the Jeffreys’ derivative

claims and which part, if any, was allocated to the Jeffreys’ remaining claims.

A “terminat[ion of] all controversies” does not necessarily mean a payment for

each of those specific claims. Appellant’s App., Vol. 2 at 103-04. The Jeffreys

may have intended the entire $150,000 be allocated to their derivative claim, as

the trial court’s March 15, 2017, Distribution Order placing the net proceeds

from the $150,000 payment into the Ellington’s Special Needs Trust suggests,

or they may have intended none of it to be allocated for that purpose;

regardless, that is an issue for trial. In short, a genuine issue of material fact

exists as to whether the Jeffreys have met the statutory minimum of a

healthcare provider’s or insurer’s liability necessary to seek additional

compensation from the Patient’s Compensation Fund.

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 16 of 20

[22] Moreover, the Commissioner is not prejudiced by this resolution as he may

continue to litigate the issue of damages at trial, rather than asking this court to

resolve issues that are unclear from the record. In this sense, the issue is similar

to that of excess claims to a general insurance policy, and we look to State Farm

Fire & Cas. Co. v. T.B. ex rel. Bruce, 762 N.E.2d 1227 (Ind. 2002), for guidance.

In State Farm, the insured operated a day care center. Thereafter, the insured’s

husband molested one of the children at the day care center and was

subsequently convicted of child molesting. The child then sued the insured and

her husband claiming negligence and premises liability. The insured had a

homeowner’s policy issued by State Farm; however, the homeowner’s policy

specifically excluded negligence relating to child care services. State Farm

received notice of the suit but denied coverage and refused to defend the

insured. The plaintiff and insured eventually entered into a consent judgment

for $375,000, in addition to the insured assigning all rights, interests and

remedies against State Farm arising from their homeowner’s policy to the

plaintiff. The consent judgment also included language that tended to separate

the molestation from any childcare activities undertaken by the insured. The

trial court accepted the consent judgment and later granted summary judgment

in favor of the plaintiff in proceedings supplemental against State Farm.

[23] On appeal, State Farm argued collateral estoppel did not bar it from raising a

policy exclusion defense and that it should not be bound by the factual

statements in the consent judgment that were not “necessary” to resolving the

underlying lawsuit. Id. at 1230. State Farm conceded that it was collaterally

Court of Appeals of Indiana | Memorandum Decision 45A04-1706-CT-1452 | March 13, 2018 Page 17 of 20

estopped from disputing that the insureds were negligent, but sought to

challenge certain factual statements in the consent judgment on the ground that

those findings were not necessary elements of the consent judgment. State

Farm argued that the underlying plaintiff had characterized events with the

“obvious intent” of bringing the consent judgment within the policy’s coverage.

Id. at 1231.

[24] Our supreme court agreed that the characterizations were “unnecessary to

sustain [the] complaint for damages regarding negligence” and that their “sole

purpose” was to assure the claims fall within coverage. Id. The court held that,

if an insurer has notice of the factual determinations that will be made to

resolve a lawsuit, the insurer’s failure to participate in the lawsuit “will bind it

to those determinations,” but an insurer cannot be estopped from contesting

unnecessary matters resolved in the underlying litigation. Id. at 1232. Thus,

because the underlying plaintiff’s claim did not specifically address State Farm’s

contractual obligations under the policy—even though the consent judgment

did—collateral estoppel did not bar State Farm from challenging certain factual

statements in the consent judgment.

[25] In sum, because the underlying lawsuit alleged negligence, State Farm was

estopped from challenging findings relating to negligence. However, State

Farm was not estopped from challenging factual statements in the consent

judgment that were not necessary to the case’s resolution. Therefore, it could

challenge the factual determinations in the consent judgment establishing that

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the child’s injury was unrelated to any daycare activities and summary

judgment was inappropriate.

[26] Here, the Jeffreys are seeking additional compensation from the Patient’s

Compensation Fund and have alleged damages exceeding $250,000. In the

Settlement Agreement, the Jeffreys stated their intention to pursue additional

damages from the Patient’s Compensation Fund and included language

reserving their right to do so. However, similar to State Farm’s ability to

challenge the consent agreement, the Commissioner, who is not in any way

bound by the Settlement Agreement, may still challenge at trial whether the

Jeffreys have met the statutory prerequisites necessary to seek additional

compensation from the Patient’s Compensation Fund. While it may be

possible for the Commissioner to demonstrate some of the $150,000 cash

payment was for non-medical claims, it is also possible, given the language in

the Settlement Agreement, that none was to be so allocated. However, at this

stage in the litigation, the record is undeveloped regarding how the Jeffreys

allocated the cash payment with respect to each of their claims and we decline

the Commissioner’s invitation to speculate on this issue thereby denying the

Jeffreys their day in court.

[27] Finally, from a public policy standpoint, our resolution is consistent with

Indiana’s general policy of encouraging parties to negotiate and settle their

disputes. Mendenhall v. Skinner and Broadbent Co., Inc., 728 N.E.2d 140, 145

(Ind. 2000) (noting the policy of the law is to discourage litigation and

encourage negotiation and settlement of disputes). If we were to accept the

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Commissioner’s argument that any medical malpractice settlement agreement

containing an additional claim that does not qualify as “malpractice”

automatically denies access to the Patient’s Compensation Fund, we would

discourage the settlement of an entire transaction in one single act and

incentivize the piecemeal settlement of multiple claims. It seems vastly more

efficient to settle an entire transaction in one settlement agreement rather than

require parties to settle their disputes claim by claim. This is especially true

given the fact the Commissioner may still prove at trial that the Jeffreys’ claims

do not sound in “malpractice” or that the damages do not meet the statutory

amount required for access to the Patient’s Compensation Fund.

Conclusion

[28] A genuine issue of material fact exists as to whether the Jeffreys have met the

statutory minimum amount necessary to seek additional compensation from the

Patient’s Compensation Fund and the trial court improvidently entered

summary judgment in favor of the Commissioner. Accordingly, we reverse the

trial court’s summary judgment order and remand for further proceedings.

[29] Reversed and remanded.

Crone, J., and Bradford, J., concur.

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