Opinion ID: 2395541
Heading Depth: 1
Heading Rank: 2

Heading: Delay Damages and Indemnity/Contribution

Text: Fault on the part of the CAT Fund while it was in charge of the negotiations is the fundamental premise upon which the Hospital and Dr. Willet now claim indemnification from the Fund. Indemnity is a common law remedy which shifts the entire loss from one who has been compelled, by reason of some legal obligation, to pay a judgment occasioned by the initial negligence of another who should bear it. Builders Supply Co. v. McCabe, 366 Pa. 322, 325, 77 A.2d 368, 370 (1951); See Restatement of Restitution § 76 (1962). It is not a fault sharing mechanism . . . it is a fault shifting mechanism [where a defendant] seeks to recover his loss from a defendant who was actually responsible for the accident which occasioned the loss. Sirianni v. Nugent Brothers, Inc., 509 Pa. 564, 570-71, 506 A.2d 868, 871 (1986). Further, [t]he duty to indemnify will be recognized in cases where the community opinion would consider that in justice the responsibility should rest upon one rather than the other. Mixter v. Mack Trucks, Inc., 224 Pa.Super. 313, 317, 308 A.2d 139, 141-42 (1973) (quoting W. Prosser, The Law of Torts 33 (4th ed.1971)). In reaching its decision to sustain the CAT Fund's preliminary objections, the Commonwealth Court found there was no basis in law for either contribution or indemnity from the CAT Fund. However, appellants assert that under Pa. R.C.P. 238 delay damages provides such a basis, imposing vicarious liability for the delay damages which accrued while the CAT Fund was in control of the negotiations. [7] Appellants argue the negotiating obligations of the CAT Fund establish a legal basis to hold the CAT Fund liable under an indemnity claim for the delay damages they paid, restricted to a specific duration. In Judge v. Allentown & Sacred Heart Hospital Center, 90 Pa. Commw. 520, 496 A.2d 92 (1985), the Commonwealth Court considered the sufficiency of a claim for equitable indemnity. There, the CAT Fund filed an action against a hospital and its insurer seeking indemnification for the money the CAT Fund paid in settling the underlying medical malpractice action. The Commonwealth Court recognized that the right of indemnity inures to the benefit of the entity who, while not at fault, is compelled to pay damages occasioned by the negligence of another. Id. at 522-24, 496 A.2d at 94 (citing Burbage v. Boiler Engineering & Supply Co., 433 Pa. 319, 249 A.2d 563 (1969)). Accordingly, the Judge court overruled the hospital and insurer's preliminary objections, finding the CAT Fund alleged sufficient facts to support a cause of action for indemnity. Similarly, here, appellants allege they were required to pay delay damages solely as a result of the CAT Fund's failure to conduct fair and reasonable negotiations during the period of time when: 1) it exercised exclusive control over the settlement negotiations with the plaintiff; 2) it was responsible for providing the next $1 million of coverage for Dr. Willet and the Hospital; 3) it provided a total of $1.3 million of its available $2 million of its total statutory authority. Notably, appellants do not allege that the CAT Fund should have offered more than $1 million on behalf of each covered health care provider. Rather, they claim that the underlying lawsuit would have been settled for $3 million had the CAT Fund offered or tendered in settlement at least $1.8 million of its available $2 million in coverage. [8] Appellants allege the CAT Fund withheld coverage that, if offered, could have effectuated a settlement and would have avoided imposition of delay damages on appellants. As pled, these circumstances support the inference that while the CAT Fund was in control of negotiations, its offers were limited in order to minimize its payments while placing the risk of having delay damages assessed against Dr. Willet and the Hospital. [9] As such, the Commonwealth Court did not accept as true all well-pleaded material and relevant facts that 1) the CAT Fund's failure to commit up to the full amount of their coverage was the cause of failed settlement negotiations and assessment of delay damages; and 2) the law of indemnity provides a legal basis to hold the CAT Fund liable for the portion of delay damages attributable to the time period in which the CAT Fund retained exclusive control over settlement negotiations. Thus, the respective amended complaints effectively plead a cause of action for indemnification that should have survived the preliminary objections. Accordingly, the Commonwealth Court erred in sustaining the CAT Fund's preliminary objections under the demurrer standard embraced in The County of Allegheny, supra .