Low, Ball & Lynch’s

WEEKLY LAW RESUME

July 8, 2004 Issue      By: Raymond Coates

Coverage - Related Claims

Friedman Professional Management Company, Inc. v. Norcal Mutual Insurance Company

Court of Appeal, Fourth District

(June 29, 2026)

When two separate claims arise out of the same set of facts and result in two separate lawsuits, an issue is raised as to whether there is one single occurrence.  This case examines that issue in a rather interesting factual scenario.

In 1993, Jennifer Louise Hamel went in for surgery for removal of a polyp from her uterus at an outpatient surgery center owned by Neil Friedman.  Friedman provided the surgeon an improper pump and did not have the appropriate liquid on hand for the surgery.  Hamel suffered a massive pulmonary edema and cardiac arrest.  In 1994, she filed a malpractice claim against Friedman and the surgeon.  During that case, Friedman refused to consent to a settlement for policy limits.  It was later discovered that Friedman concealed information about the pump, hid medical records of Hamel that should have been produced in discovery, and tried to alter Hamel's medical records.  A $9 million judgment was rendered.  Friedman insisted that the case be appealed, and in 1998, it was affirmed.  At that point, Norcal paid its policy limits on its 1993 policy of $1 million.

Before the appeal was final and before settlement of that lawsuit, Hamel learned that Friedman had entered the surgery during her operation and assisted in trying to stop the bleeding from her vagina.  In 1996, Hamel sued Friedman for battery, sexual battery and invasion of privacy, based upon the claim that he should not have been in the operating room and should not have touched her.  Norcal defended Friedman for that case.  However, after the policy limits on the 1993 policy were paid, Norcal withdrew from the defense of the second lawsuit against Friedman.  Friedman took over his own defense and settled the second lawsuit.  He then sued Norcal for bad faith.  He argued that his 1996 policy which Norcal had issued should have provided a defense to the second lawsuit.

The trial court ruled that Norcal had a duty to defend under its 1996 policy and thus acted in bad faith in withdrawing the defense.  Friedman recovered a judgment of approximately $900,000.  Norcal appealed.

The Court of Appeal reversed.  It noted that the Norcal policy in both 1993 and 1996 defined an "occurrence" as a "single act or omission or series of related acts or omissions involving direct patient treatment."  Both policies were claims made and covered not only actual claims, but also potential claims as within the definition of "occurrence."

The Court first noted that the two claims could be related without being subject to a res judicata defense.  A res judicata defense is one that states a second claim is barred if a first claim has been resolved involving the same claim as the second claim.  The Court noted that most jurisdictions use the "same transaction" criteria to hold that claims arising out of the same transaction are subject to the res judicata doctrine.  California, however, adopts a "primary right" test.  The primary right test turns on the concept of what harm was suffered.  Here, there were two harms:  one was medical malpractice resulting in bodily injury, and the second was sexual battery and invasion of privacy, which was a harm to the dignity and privacy interests of Hamel.  Thus, res judicata did not apply, and two lawsuits could be brought.

However, this did not mean that the suits did not arise from related claims.  In California, the test of whether claims are related is whether the claims have a logical and causal connection.  In this case, both claims were causally related to the malpractice claim.  Here, the sexual battery claim was a potential claim that related to the original malpractice claim.  They thus both arose in the 1993 policy period and were covered by it.  The 1996 policy did not apply.

Once the policy limits under the 1993 policy were paid, there was no possibility of coverage for the second suit.  Norcal's decision to discontinue its defense after it paid its limits was within its rights under the policy.  It was thus error for the trial court to rule there was a breach of contract.  The judgment was reversed, with directions to enter a judgment in favor of Norcal.

COMMENT

This is a very interesting case to read both for its discussion of res judicata and for its discussion of when claims are related.  The Court was cognizant of a very practical consideration; namely, the goal of keeping all related claims within the coverage of a single year in order to make sure that insureds can continue to find claims made coverage in subsequent years.

____
To order a printed version of this analysis, or change your subscription information, reply to this transmission.  Information regarding this and other WEEKLY LAW RESUME TM articles is available from Raymond Coates at (650) 366-4000, [email protected] or at WWW.LOWBALL.COM.  The WEEKLY LAW RESUME TM is published fifty-two times a year, and is a complimentary publication of LOW, BALL & LYNCH, Attorneys at Law, a Professional Corporation, with offices in San Francisco, Redwood City and Monterey, California.