The 900 North Michigan Surgical Center can proceed in its bad faith lawsuit against its malpractice insurers, after a Chicago federal judge said there was sufficient evidence to believe the medical practice has a legal leg to stand on in contending its insurers needlessly cost the practice $4 million by deciding to take a malpractice case to trial and refuse a “sympathetic” plaintiff’s offer to settle the matter for $1 million.

The insurers, American Physicians Assurance Corporation Inc. and American Physicians Capital Inc., collectively referred to in court documents as APAC, had moved to dismiss claims of bad faith and breach of contract brought by the Surgery Center at 900 North Michigan Avenue LLC in federal Case No. 15-CV-04336.

U.S. District Judge Sharon Johnson Coleman ruled Dec. 30 that the bad faith charge will stand. And, while she dismissed the breach of contract charge, she gave The Surgery Center leave to file an amended complaint within 30 days.

The case stemmed from a 2003 lawsuit against The Surgery Center by a former patient, who had surgery in 2002 to treat chronic pelvic pain and uterine fibroids. During the surgery, the patient’s bowel was allegedly perforated. The surgical staff allegedly failed to recognize the error; the patient later developed sepsis that left her quadriplegic, the plaintiff alleged.

According to court documents, APAC knew the likelihood The Surgery Center would be found liable in the case was “significant,” and when the trial court granted summary judgment in favor of The Surgery Center, APAC noted it was “thankful” because the plaintiff was “very sympathetic.”

Based on that information, The Surgery Center claimed, APAC should have known when an appellate court reversed the summary judgment and remanded the case for trial that there was a good chance The Surgery Center would lose. But, according to court documents, APAC’s counsel said it was “90 percent” sure it could win at trial, so APAC declined the plaintiff’s offer to settle for $1 million. During the jury trial, court documents said, The Surgery Center asked APAC twice “if anything could be done to settle the case to no avail.”

The jury found The Surgery Center liable in the case and awarded the plaintiff about $5 million.

In its bad faith claim, The Surgery Center argued APAC had a duty to settle when the plaintiff offered to negotiate and the insurer knew there was reasonable probability the plaintiff would win at trial. In its rebuttal, APAC argued The Surgery Center’s claim alleged the probability was “significant” instead of the legal standard of “more likely than not.”

“But a complaint does not fail to state a claim merely because it fails to plead certain ‘magic words,’” Coleman wrote in her opinion. Despite the attorneys’ confidence, the judge noted the evidence, sufficient to prompt the appellate court to remand the case to trial, plus APAC’s own assessment of the plaintiff as “sympathetic,” was also sufficient to deny APAC’s motion to dismiss.

In its motion to dismiss the breach of contract claim, APAC argued there is “no contract remedy for a bad-faith failure to settle.” Rather than dispute that argument, The Surgery Center requested leave to re-plead the claim to focus on APAC’s failure to hire competent defense counsel. Coleman granted APAC’s motion to dismiss the claim, without prejudice, and granted The Surgery Center 30 days to file its amended complaint.

The Surgery Center is represented in the action by the Spellmire Law Firm, of Chicago. APAC is defended by the firm of Stamos & Trucco, of Chicago.

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Spellmire Law Firm Stamos and Trucco

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