Opinion ID: 2771722
Heading Depth: 1
Heading Rank: 1

Heading: Nature of Indemnification Actions

Text: A claim for equitable indemnification allows an innocent party to recover the amount the innocent party must pay to a third party because of the at-fault party's breach of contract or negligence as well as attorney fees and costs which proximately result from the at-fault party's breach of contract or negligence. Town of Winnsboro v. Wiedeman-Singleton, Inc., 307 S.C. 128, 130–31, 414 S.E.2d 118, 120 (1992). Thus, damages in an equitable indemnification suit include: (1) the damages caused due to the underlying tort; and (2) the innocent party's attorneys' fees incurred in defending itself in the underlying tort suit. See, e.g., Rhett v. Gray, 401 S.C. 478, 497–98, 736 S.E.2d 873, 883–84 (Ct. App. 2012) (quoting Addy v. Bolton, 257 S.C. 28, 33, 183 S.E.2d 708, 709–10 (1971)).6 Moreover, unlike the underlying tort claim, an equitable indemnification claim does not arise at the time the underlying tort plaintiff suffered the tortious damage. Rather, an indemnity claim accrues at the time the indemnity claimant suffers loss or damage, that is, at the time of payment of the underlying claim, payment of a judgment thereon, or payment of a settlement thereof by the party seeking indemnity. Maurice T. Brunner, Annotation, When Statute of Limitations Commences to Run Against Claim for Contribution or Indemnity Based on Tort, 57 A.L.R.3d 867 (1974); accord First Gen. Servs. of Charleston, Inc. v. Miller, 314 S.C. 439, 444, 445 S.E.2d 446, 449 (1994). Therefore, an indemnification action is separate and distinct from the underlying tort action, as the damages suffered by the parties involved in each suit are distinct, and the two causes of action accrue at different times. See, e.g., Canal Ins. Co. v. Leb. Ins. Agency, Inc., 504 F. Supp. 2d 113, 117 (W.D. Va. 2007) (An indemnity claim does not seek recovery for any direct harm caused by the defendant to the plaintiff—it is clearly distinct from a direct cause of action.); McDermott v. City of New York, 406 N.E.2d 460, 462–63 (N.Y. 1980) ([T]he indemnity claim is a separate substantive cause of action, independent of the underlying wrong . . . .); Cent. Wash. Refrigeration, Inc. v. Barbee, 946 P.2d 760, 764 (Wash. 1997) (Indemnity actions are distinct, separate causes of action from the underlying wrong and are governed by separate statutes of limitations.); Brunner, supra (The cause of action for indemnity of one whose liability for a tort is secondary or constructive, against one whose liability for the tort is primary, is separate and distinct from the injured person's cause of action for the tort, and is generally recognized not to be a mere species of subrogation to the tort cause of action.).7 6 In contrast, in the underlying tort suit, the injured party may only recover damages caused by the tort itself, and may not recover attorneys' fees. 7 I note that the majority cites no authority beyond the court of appeals' opinion in this case for its conclusion that Providence Hospital's [equitable indemnification] action is an action to recover damages for injury to the person. (Citation omitted) (quotation marks omitted). While I agree that the indemnification action is closely entwined with the merits of the underlying tort action, there is no authority in the law of this State for the conclusion that the two causes of action are wholly The majority essentially equates Providence Hospital's indemnity action with the underlying tort action. However, proof of the underlying tortfeasor's liability is only one element that the hospital must prove to prevail on its equitable indemnification claim. That element is not, by itself, an action . . . to recover damages for injury to the person, but instead is a component of an action to reimburse an innocent party who has paid damages on behalf of the underlying tortfeasor. Therefore, I disagree with the majority that the medical malpractice statute of repose applies so broadly as to encompass any action even tangentially related to an action . . . to recover damages for injury to the person. Further, under the majority's reading of section 15-3-545, an innocent party named in the underlying tort suit would rarely be able to bring an equitable indemnification claim. For example, if a lawsuit is filed on the eve of the running of the statute of repose, but is not resolved until after the statute has run, the [indemnification] action will be barred before the right has even accrued. Capco of Summerville, Inc. v. J.H. Gayle Constr. Co., 368 S.C. 137, 144, 628 S.E.2d 38, 42 (2006) (emphasis added). I believe this is an unduly harsh consequence of the majority's interpretation of section 15-3-545, and one that was not intended by the General Assembly. The majority's holding represents a fundamental misunderstanding of the nature of indemnification actions which I fear will have far-reaching effects on the ability to seek indemnification. Specifically, it imposes several new requirements to bring timely indemnification actions. For example, the majority states that the underlying action must establish the fault of the underlying tortfeasor, whether or not he is a named party in that action. Indeed, the majority goes so far as to require, prior to the running of the statute of repose, either an allegation of medical malpractice against the underlying tortfeasor, or possibly even an adjudication by the innocent party against the tortfeasor. I find this new requirement to bring timely indemnification actions patently at odds with the doctrines of standing and ripeness. As explained, supra, the innocent party's right to sue for indemnification does not accrue until it actually sustains damages through either paying an injured party on behalf of the tortfeasor, or incurring attorneys' fees from defending itself in the underlying tort suit. Therefore, there is no justiciable case or controversy until the conclusion of the underlying tort action, regardless of its outcome. See, e.g., Waters v. S.C. Land interdependent. Res. Conservation Comm'n, 321 S.C. 219, 227–28, 467 S.E.2d 913, 917–18 (1996) (A justiciable controversy is a real and substantial controversy which is ripe and appropriate for judicial determination, as distinguished from a contingent, hypothetical or abstract dispute . . . . It is not enough that a threat of possible injury currently exists; the mere threat of a potential injury is too contingent or remote to support present adjudication. (citations omitted) (internal quotation marks omitted)). The plain language of section 15-3-545(A) explicitly applies to damages for injury to the person arising out of any medical, surgical, or dental treatment, omission, or operation by any licensed health care provider . . . acting within the scope of his profession. In contrast, an indemnification claim seeks to recover for the loss of a judgment or settlement an innocent third party is obligated to pay, rather than for medical injury. Here, Providence Hospital's damages arose due to its vicarious liability for a third-party tortfeasor's misdiagnosis. Thus, Providence Hospital's equitable indemnification suit does not directly seek to recover for any harm caused by the tort defendant to the underlying tort plaintiff. Accordingly, it is my view that section 15-3-545 does not bar Providence Hospital's equitable indemnification claim.8 8 Medical malpractice statutes of repose vary from state to state. However, I find persuasive the reasoning of the Missouri Supreme Court in considering a statute similar to section 15-3-545. The Missouri Supreme Court found that Missouri's medical malpractice statute of repose encompasses those actions where the consumer of health services seeks damages for injuries resulting from some improper, wrongful or careless acts or omissions on the part of the healthcare provider in the delivery of health care to the consumer. Rowland v. Skaggs Cos., 666 S.W.2d 770, 772–73 (Mo. 1984). Therefore, the court concluded that there is no reason to subject a contribution action to the medical malpractice statute of repose because an action for contribution is neither grounded in tort nor reasonably related to the types of actions enumerated in the statute of repose; rather, a contribution action accrues from the existence of a joint obligation on a liability shared by tortfeasors. Id. at 773. I would adopt this reasoning with respect to our own medical malpractice statute of repose.