Procedural Posture

Defendant insurer appealed from a judgment of the Superior Court of Orange County (California) in favor of plaintiff insureds, a medical center and its owner, in their action to recover reimbursement of sums paid to a patient to settle her battery claims. The insureds had also sought attorney fees and damages for bad faith in the insurer’s decision to discontinue defending the patient’s suit.

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Overview

The patient suffered vaginal bleeding as the result of the center’s having supplied the wrong pump and the wrong fluids for an operation. The insurer defended the patient’s medical malpractice claim. The patient filed another lawsuit, alleging sexual battery, arising out of the fact that the owner of the center had attempted to tamponade the patient’s vaginal bleeding during the operation that went awry. The insurer defended the claim until the limits of the policy were exhausted. The insurer did not continue to defend the claim under the limits of a later policy. The court agreed with the insurer that the allegations were “related” under the policies. But for the earlier malpractice that caused the bleeding, the owner of the center would never have touched the patient’s vaginal area in the effort to save her life, precipitating both claims. The court noted that the patient’s second lawsuit was not subject to a successful res judicata defense under the primary right test for claim preclusion. Because there was no possibility of coverage under the second suit, the insurer’s decision to discontinue its defense when it had paid the limits on the first policy was within its rights.

Outcome

The court reversed the judgment with directions to enter a judgment in the insurer’s favor.