D.C. appeals court upholds $18 million award against malpractice insurer

October 23, 2008

The District of Columbia Court of Appeals upheld October 2 a jury award of over $18 million in a lawsuit brought by a defunct hospital claiming a malpractice insurance company tortiously interfered with the hospital's business relationship with its attending physicians and therefore forced it to close down.

This material originally appeared in the October 17, 2008, issue of Health Lawyers Weekly, a publication of the American Health Lawyers Association (www.healthlawyers.org).

The District of Columbia Court of Appeals upheld October 2 a jury award of over $18 million in a lawsuit brought by a defunct hospital claiming a malpractice insurance company tortiously interfered with the hospital’s business relationship with its attending physicians and therefore forced it to close down.

In so holding, the D.C. high court rejected the arguments of plaintiff NCRIC Inc., formerly the National Capital Reciprocal Insurance Company, that the trial court had given the jury erroneous instructions, committed other errors during the trial, and improperly refused to reduce the jury’s award in favor of the hospital.

The underlying litigation began in October 2000, when NCRIC, a provider of medical malpractice insurance to D.C. physicians, sued the Columbia Hospital for Women Medical Center Inc. (Columbia) for breach of their insurance contract. NCRIC alleged that Columbia owed it over $1.9 million in additional premiums under that contract, which expired in 2000.

Columbia asserted counterclaims for breach of contract and tortious interference, along with several other counterclaims that were dismissed prior to trial.

At trial, Columbia presented evidence and witness testimony supporting its allegations that, over a long period of negotiations and disputes between NCRIC and the hospital regarding the applicable terms and obligations of their recently expired malpractice insurance contract, NCRIC attempted to induce attending physicians at Columbia to leave the hospital, according to the appeals court.

In addition, NCRIC allegedly encouraged these physicians to keep their insurance policies with NCRIC once they had relocated to other hospitals.

“Over thirty attending physicians - forty percent of the medical staff - left Columbia in the summer and fall of 2000,” the appeals court noted. “Many of them went to other hospitals where NCRIC provided them with equivalent insurance coverage at reduced rates.”

The appeals court also noted that, during the time when NCRIC was allegedly encouraging physicians to leave Columbia, the hospital was already experiencing financial struggles following its February 1998 declaration of bankruptcy and its adherence to a February 1999 court-approved plan of reorganization.

Beginning in September 2000, the appeals court explained, all of Columbia’s financial indicators (i.e., births, admissions, surgeries, in-patient days, referrals, etc.) dropped dramatically, and revenues fell by approximately $10 million per year.

“Witnesses at trial attributed the plunge to the departure of so many members of the hospital’s medical staff,” the appeals court noted.

Thus, in May 2002, “after fruitlessly exploring merger possibilities with three other non-profit institutions, Columbia ceased operations and closed its doors,” the appeals court said.

After the two-week trial, the jury returned a verdict in favor of Columbia, and awarded the hospital $220,002 on its breach of contract claim, and $18 million in damages on its claim of tortious interference with business relations.

The trial court subsequently denied NCRIC’s motions for judgment as a matter of law, and in the alternative, for a new trial or a remittitur of damages.

NCRIC argued on appeal that the trial court erred in failing to instruct the jury that, in order to impose liability for tortious interference, it had to find NCRIC’s actions “wrongful,” in addition to being intentionally disruptive of Columbia’s business relationships.

The appeals court concluded that the lower court did not err in rejecting NCRIC’s request for such an instruction.

“Wrongful conduct is not an element of a prima facie case of tortious interference under District of Columbia law,” the appeals court said. “Rather, the burden was on NCRIC to establish that its intentional interference was legally justified or privileged.”

While “NCRIC might have been entitled to an affirmative defense instruction to that effect, . . . it never requested one,” the appeals court. “The trial court was under no duty to craft such an instruction for NCRIC sua sponte.”

The appeals court next summarily rejected NCRIC’s argument that the trial court erred by allowing the jury to award $18 million in tort damages based on “speculative and logically incoherent damages evidence.” 

“On its face, Columbia’s evidence of its damages was sufficient to support the award,” the appeals court said. “The jury’s award will be upheld as long as it is a ‘just and reasonable estimate based on the relevant data,’ even if it is not proven with mathematical precision.”

The appeals court also concluded that NCRIC had failed to preserve for appeal certain of its objections regarding the sufficiency of the evidence in support of the $18 million damages award, and that the lower court did not err in refusing NCRIC’s motion requesting a new trial or a remittitur.

NCRIC Inc. v. Columbia Hosp. for Women Med. Ctr.,  No. 05-CV-1269 (D.C. Oct. 2, 2008).