A Curious Case of Non-Reporting

Hospital and Physician are sued for medical malpractice.  The Med Mal case is as big as they come...a brain damaged baby case.  How it ends up in Civil Court is an interesting story.  In Gonzalez v Flushing Hosp. Med. Ctr.  2014 NY Slip Op 51226(U)  Decided on August 12, 2014
Civil Court Of The City Of New York, Queens County  Buggs, J.the Hospital must have been providing its own insurance, because when it filed Bankruptcy, everything stopped.  The hospital had been defending the Physician, but after the Bankruptcy filing, that ended.  What happened to the Physician?

"On March 3, 1994, Laura Gonzalez gave birth to plaintiff Gonzalez at Flushing Hospital Medical Center ("FHMC"). Due to hypoxia [FN1] which occurred during labor and delivery, plaintiff Gonzalez suffered severe brain damage as well as extensive mental and physical impairments. In June 1995, Gonzalez, by her mother as natural guardian, and both parents individually, filed a medical malpractice case against FHMC alleging negligence in failing to timely respond to signs of fetal distress or to confirm such fetal distress during Laura Gonzalez' labor, and of failing to perform a timely cesarean section which would have prevented the resulting injuries to plaintiff Gonzalez. In August 1996, Gonzalez filed a second malpractice action, this time against Bey, who was the on-call physician at the time of the delivery, and another physician, Jonathan Cha. Both actions were consolidated for joint trial in July 1997.

In August 1996, FHMC retained defendant law firm Breitner & Hoffman, P.C. ("B & H") to defend the action. B & H represented and filed answers on behalf of all defendants, including Bey. However, in June 1998, FHMC filed for Chapter 11 bankruptcy relief in the United States Bankruptcy Court for the Eastern District of New York. The malpractice actions were subsequently stayed pursuant to §362(a) of the United States Bankruptcy Code.In 2000, the law firm of Garbarini & Scher ("G & S") was appointed to represent the bankruptcy Trustee in the mediation of the medical malpractice claims. In 2002, the Court approved a settlement in Gonzalez's case against FHMC and other defendants for two million dollars ($2,000,000); however, Bey was excluded from this settlement because he was deemed to be an independent contractor. The malpractice action against Bey, therefore, continued.

Bey brought this action against FHMC and B & H in 2005. The action was ultimately discontinued as against FHMC, as was a third-party action B & H brought against G & S. The claims against B & H were that it committed legal malpractice in that the firm failed to protect his interests in the Gonzalez lawsuit, particularly in what Bey claimed was its duty to investigate sources of insurance to protect him against a potentially large exposure, and in failing to advise him to notify Medical Liability Mutual Insurance Company ("MLMIC"), his personal medical malpractice insurance carrier. Bey submitted the claim to MLMIC in February 2004, approximately seven and a half years after Gonzalez brought her action against him; the insurance company denied the claim as untimely.

On September 27, 2006, while being represented by another attorney, Bey executed a $1 million confession of judgment in favor of Gonzalez in a "so ordered" stipulation of settlement in Supreme Court, Queens County; in November of the same year, he assigned his rights in the within malpractice action to Gonzalez. After the assignment, B & H filed a motion for summary judgment in 2007 on the theory that "...Bey is no longer a real party in interest as a result of the settlement with Gonzalez, to wit, he has not suffered any pecuniary damages and, thus, cannot establish that B & H proximately caused him to sustain actual damages" (Gonzalez' Affirmation in Opposition, Exhibit E; Geddis Abel Bey v Flushing Hospital Center, and Breitner & Hoffman, P.C., Sup Ct, Queens County, December 7, 2007, Satterfield, J., index No. 23476/2005). The motion was denied. (Exhibit E, supra at 2-3).

Therefore, notwithstanding any duty Gonzalez contends B & H owed to Bey as his attorneys, at the outset, responsibility for notifying the insurance company of any claim or potential claim belonged to Bey, the policyholder. In fact, when Bey finally submitted a claim in 2004, it was [*3]denied for his failure to comply with the policy terms requiring notice to the insurance company of a lawsuit (Gonzalez' Affirmation in Opposition, Exhibit B; Denial letter from MLMIC to Geddis Abel-Bey, M.D., dated May 4, 2004). There is nothing in the language of the policy providing any exception to the notice requirement—not even, as in this case, Bey's belief that he would be represented in all stages of the action by B & H, attorneys retained by FHMC. Bey's duty was not only required by the terms of the policy, but was supported by case law holding that failure to satisfy the timely notice requirement of an insurance policy constitutes valid grounds for denial of a claim. See Security Mut. Ins. Co. of NY v Acker-Fitzsimmons Corp., 31 NY2d 436 (1972); Safer v Government Employees Ins Co., 254 AD2d 344 (2d Dept 1998)

Further, assuming arguendo, that B & H did have such an obligation to Bey and breached it, Gonzalez has also failed to show that such breach was the proximate cause of Bey's damages. "Proximate cause is established by showing that the plaintiff would have succeeded in the underlying action or would not have incurred damages but for the attorney's negligence" (Soliman v O'Connor, McGuiness, Conte, Doyle & Oleson, 118 AD3d 866 [2d Dept 2014] [internal citations omitted]). While Haber posits that B & H's "failure" was a proximate cause of Bey being faced with a large financial exposure in the medical malpractice case, that argument ignores that Bey himself was responsible for notifying his carrier, and further [*4]disregards FHMC's bankruptcy filing as an intervening cause. B & H was not a participant in the Bankruptcy Court proceedings, and the medical malpractice actions for which it had been retained had been stayed. Moreover, the ultimate Bankruptcy Court settlement of the medical malpractice matter as to all parties except Bey—leaving Bey with a large financial exposure—was not a direct or foreseeable consequence of any act or act of omission by B & H. It was in the Bankruptcy Court that Bey was deemed not to be an employee of FHMC, leading to his exclusion from the settlement."

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