Arbitration Agreements

Didn’t Sign It, Didn’t Even Know About It, What do you Mean I’m Bound to It?

BINDING NON-SIGNATORIES IN MEDICAL ARBITRATION AGREEMENTS

 WELDON E. HAVINS, M.D.

COMMENTS EDITOR: REBECCA SMITH

FACULTY ADVISOR: PROFESSOR JAMES DALESSIO

MARCH 10, 1997
A mother, pregnant with her second child, arrives at the hospital delivery suite in an advanced stage of labor. Before the baby can be delivered, the mother’s uterus ruptures causing an uncontrolled loss of blood. In a desperate effort to save the fetus, an emergency caesarian section surgery immediately ensues, yielding a flaccid, but alive, baby. Tragically, moments later, the mother expires on the operating room table.   A few months later, the infant’s pediatrician informs the father that the infant suffers from cerebral palsy caused by a brain hemorrhage induced by the traumatic delivery. In an action alleging wrongful death of the mother, is the father bound to arbitration under the terms of the mother’s arbitration agreement?   Is the infant bound to arbitrate his or her claim alleging medical malpractice as the proximate cause of his or her cerebral palsy?   Does it matter whether the mother received her health care through a group health plan? If she did, does it matter whether she signed, or was even aware of, the arbitration agreement? Is the on-call physician, who provided the relevant medical services for the mother’s vacationing obstetrician, bound to arbitrate under the terms of the mother’s arbitration agreement? This Comment describes and analyzes the conflicting appellate court decisions addressing answers to these questions.

This Comment concludes recommending the California Supreme Court find medical arbitration agreements binding on all claims arising out of health services rendered the signatory, assuming a valid arbitration contract.

Twenty three years ago the people of California were threatened with the lack of readily available medical care. Medical liability insurance premiums had risen to levels so high that many physicians could not afford or chose not to purchase this insurance.   Some injured patients could not be compensated because their physician did not purchase professional liability insurance.   A significant number of physicians stopped seeing non-emergency patients, declaring they were on strike in protest to the increasingly expensive liability insurance and demanding that something ameliorative be done. The citizens of California responded through their elected representatives who enacted, in a special legislative session, the Medical Injury Compensation Reform Act (MICRA) of 1975. One, rather minor, legislative provision specifically facilitated resolution of medical negligence disputes using arbitration contracts.   This Comment analyzes conflicting appellate court interpretations of the applicability of this provision to bind non-signatories to arbitration.   Section I reviews the political controversy surrounding the enactment of MICRA, identifies the major provisions of MICRA, and describes the statutory details of the contractual arbitration provision, California Code of Civil Procedure section 1295. Sections II discusses the rationale for binding non-signatories to arbitration under the contract. Sections III through VII describe specific issues within the law where appellate courts have rendered conflicting decisions and interpretations.   Section VIII concentrates on the public policy significance of section 1295, then discusses and analyzes the splits of authority among the appellate courts. Section IX concludes by suggesting the California Supreme Court resolve the conflicting law by interpreting section 1295 to provide for binding arbitration in all causes of action based on medical care rendered to a signatory patient (or to a minor who contracts through an authorized representative).

1. BACKGROUND

In 1975, California’s citizens and physicians faced a crisis threatening the availability of affordable medical professional liability insurance.^[1]   California’s Governor Edmund G. (Pat) Brown declared that this crisis endangered the health of the people and threatened the closure of many hospitals.^[2]   The lack of affordable medical malpractice insurance forced many California physicians to practice medicine without the benefit of malpractice insurance.^[3]   Some doctors restricted their medical practice to areas of their speciality in which there were fewer risks.^[4]   Others simply moved out of California to practice where insurance was less prohibitive.^[5]   These events all contributed toward a decreasing availability of quality medical care to the citizens of California.

The cause of the crisis was the subject of much debate and conjecture in 1975, and for many years thereafter.^[6]   On the one hand, many attorneys blamed the crisis on insurance company investment incompetence or imprudence.^[7]   On the other hand, insurance companies complained that at least fifty percent of their payout for medical malpractice occurred more than five years after the negligent event, making premium estimation increasingly difficult in the face of rising awards. Thus, the insurance companies insisted their premium increases were justified.^[8]   Finally, physicians and some legislators blamed the crisis on a surge in the incidence of medical malpractice cases.^[9]

Whatever the cause, the result was that some negligently injured patients were unable to collect on judgments awarded in court litigation because some doctors were practicing medicine without medical liability insurance.^[10]   The decreasing supply of physicians and the self-imposed limitations on medical practice had the effect of reducing the supply of some types of medical care to practical unavailability in a few geographical areas.^[11]

The governor responded to the crisis by convening a special session of the Legislature to solve the problem.^[12]   The Legislature found a major health care crisis in the state of California attributable to skyrocketing malpractice premium costs and resulting in a potential breakdown of the health care delivery system, severe hardships for the medically indigent, a denial of access for the economically marginal, and depletion of physicians such as to substantially worsen the quality of health care available to citizens of this State.^[13]

In September of 1975, Governor Brown signed A.B. 1xx, the first bill introduced in the Extraordinary Session of the Legislature to deal with the malpractice insurance crisis, and the only bill to pass out of the Legislature in this special Session.^[14]   This legislation, henceforth known as the Medical Injury Compensation Reform Act (MICRA) of 1975, made regulatory and nominal changes to the Medical Board of California,^[15] changed insurance company reporting requirements, and substantively changed statutory codes affecting physicians and attorneys, all in an attempt to stem the rising costs of medical malpractice insurance.^[16]

MICRA increased the total number of medical board members,   proportionally increased public membership representation on the board, changed insurance industry reporting requirements, and added the following provisions to the California statutory codes:

Business and Professions Code section 6146;^[17]

Civil Code section 3333.1;^[18]

Civil Code section 3333.2;^[19]