                            STATE OF MICHIGAN

                             COURT OF APPEALS

In re Estate of JOHN A. DOYLE.


MARIANNE K. DOYLE, Individually and as                               UNPUBLISHED
Personal Representative of the ESTATE OF JOHN                        March 3, 2016
A. DOYLE,

                 Plaintiff-Appellant,

v                                                                    No. 324337
                                                                     Saginaw Circuit Court
COVENANT MEDICAL CENTER, INC.,                                       LC No. 12-016476-NH
MICHIGAN CARDIOVASCULAR INSTITUTE,
P.C., and CHRISTOPHER GENCO, M.D.,

                 Defendants-Appellees.


Before: O’CONNELL, P.J., and OWENS and BECKERING, JJ.

PER CURIAM.

        In this medical malpractice action, plaintiff Marianne K. Doyle, individually and as
personal representative of the estate of John A. Doyle1, appeals as of right the trial court’s order
granting summary disposition pursuant to MCR 2.116(C)(7) in favor of defendants, Covenant
Medical Center, Inc. (Covenant), Michigan Cardiovascular Institute, P.C. (MCVI), and
Christopher Genco, M.D., on the ground that the complaint was untimely under MCL
600.5838a(2) based on the statute of repose. Plaintiff also challenges the trial court’s rulings
with regard to the privileged status of a Covenant incident or improvement report and the
admissibility of factual statements contained in an offer of settlement letter. We reverse in part,
affirm in part, and remand for further proceedings.




1
    Mr. Doyle died during the pendency of this appeal.


                                                -1-
                   I. PERTINENT FACTS AND PROCEDURAL HISTORY

       On September 12, 2003, John A. Doyle underwent cardiac bypass surgery at Covenant,
performed by Dr. Genco. It is undisputed that Dr. Genco, of MCVI, and his surgical staff left a
sponge inside Mr. Doyle’s body at the time of the surgery. The sponge measured 4 inches long
by 4 inches wide. Being an open-heart cardiac bypass surgery, Mr. Doyle’s operating team left
the sponge right next to his heart. It is also undisputed that defendants knew that a sponge was
missing and could not be found. Per protocol, they counted the number of sponges placed inside
Mr. Doyle’s body during surgery. There were 40, and the accuracy of this count has never been
disputed. Per protocol, they conducted multiple sponge counts in order to ensure that all sponges
were removed before completing the surgery. But those counts yielded a return of only 39
sponges. One sponge was missing.

        Peter Sulfridge, a circulating nurse at Mr. Doyle’s surgery, testified in his deposition that
sponge counts are conducted out loud at different intervals during the surgery. The first
intraoperative count is done after the patient comes off the bypass pump. The first count in this
case was “incorrect,” meaning that one sponge was missing. According to Sulfridge, when there
is an incorrect count, all sponges are laid out and another count is taken. The entire room is
searched, including trash bins, the floor, and the bottoms of shoes. A second count is performed
when the surgeon is ready to begin putting in sternal wires. If this count remains incorrect, the
surgeon will request an intraoperative x-ray and, if the count remains unresolved, the surgeon
will search the operative field for the missing sponge.

        Jennifer Cornell, a surgical technician at Mr. Doyle’s surgery, and Deborah Tanner, a
relief nurse involved in the surgery, testified at deposition that the second count taken in this case
was also incorrect, i.e., there was one sponge they still could not find. Tanner and Cornell, along
with first assistant surgical technician Julie Weiss, testified that when the sponge counts are
incorrect, the surgeon—in this case Dr. Genco—is notified of the discrepancy. According to
Tanner, protocol requires an intraoperative x-ray if the second sponge count is incorrect.

        Mr. Doyle’s medical records indicate that an intraoperative x-ray was ordered. The x-ray
image itself was apparently lost and is unavailable, but a written report exists. Dr. Scott Cheney,
a radiologist, documented in the report the existence of an “[a]bnormal instrument count, missing
sponge during open-heart surgery,” but noted that there was “[n]o evidence of [a] retained
sponge” on the x-ray. Members of Mr. Doyle’s surgical team testified that sponges used in
surgery have a radio opaque string woven through each one in order to enable its detection by x-
ray. Dr. Genco testified in his deposition that a retained sponge should be detectable in an
intraoperative x-ray. However, he also testified that the density of Mr. Doyle’s heart and his
large physique could have contributed to the inability of the x-ray to detect the missing sponge.
Dr. Cheney testified similarly at his deposition, opining that a patient with a large bone structure,
when placed in the supine position—the position in which Mr. Doyle would have been—could
limit the ability of an x-ray to detect a missing sponge, even though it remains in the patient’s
body.

      Dr. Genco could not specifically recall Mr. Doyle’s case. He testified, however, that
when there exists the possibility of a retained sponge during an operation, typically an x-ray is

                                                 -2-
ordered, he conducts “a thorough search of the operative field,” and he then reviews the
intraoperative x-ray. He believed that in Mr. Doyle’s case, he would have looked at the
intraoperative x-ray and performed a search of the operative field.

         With regard to the standard of care, Dr. Genco testified that it is the surgeon’s
responsibility to search the operative field for the sponge when there is an inaccurate sponge
count. An intraoperative x-ray is also required in a situation where there is an unresolved sponge
count. If the x-ray and search of the operative field do not reveal a retained sponge, Dr. Genco
testified that it “is the surgeon’s obligation to move along” and finish the surgery. Dr. Genco
testified that he believes he complied with the applicable standard of care. Although he could
not specifically recall Mr. Doyle’s case, Dr. Genco testified that “[a]t no point did I believe there
was any retained sponge.”

        It is undisputed that no one informed Mr. Doyle, his family, his primary care doctor, or
any other subsequent treating physician about the unresolved sponge count. Dr. Genco’s
operative report makes no mention of the two inaccurate sponge counts, whether he searched the
operative field, that there was an intraoperative x-ray, or that the missing sponge was never
found.2 Further, Dr. Genco’s discharge summary does not mention the inaccurate sponge count
or the possibility of a retained sponge.

        In Mr. Doyle’s medical chart at Covenant, a nurse’s operative report exists, which notes
by way of checkmarks in boxes that two counts revealed an “incorrect” sponge count, and that
the issue remained “unresolved” following an intraoperative x-ray. In addition, Dr. Cheney’s
radiology report reveals the fact that a sponge was missing and not seen on the x-ray. However,
neither of these two documents were provided to Mr. Doyle, and they were not sent to his
primary care doctor or other treating physicians. None of the documents that were given to Mr.
Doyle and his treating physicians after surgery revealed the possibility of a missing sponge or
noted the incorrect sponge counts.

       According to plaintiff, following the 2003 surgery Mr. Doyle suffered from unexplained
shortness of breath, fatigue, sweating, and pain for years, which eluded diagnosis. Plaintiff
claims that because defendants did not tell Mr. Doyle or his doctors about the missing sponge,
they had no way of suspecting or discovering its presence or understanding why he was suffering
from resulting health problems.

        On July 6, 2011, Mr. Doyle underwent an echocardiogram, which revealed the presence
of a massive left atrial tumor/mass. Mr. Doyle underwent a sternotomy, dissection, and was
placed on cardiopulmonary bypass in order to dissect around the inferior aspect of the heart to
get at the mass. The surgery was performed by Dr. Genco. The mass turned out to be the


2
  Dr. Genco testified that he typically does not note sponge counts—correct or incorrect—in his
operative reports. He testified that he had “no reason to discuss or put in a note the possibility
that something could have been retained if I felt absolutely that there was no retained sponge.”




                                                -3-
missing sponge, which was surrounded by “green foul fluid.” The sponge abutted Mr. Doyle’s
left atrium. It was infected when removed, and Mr. Doyle required further medical care to treat
the infection, including home nursing care and the administration of antibiotics through an IV
port.

        On June 6, 2012, plaintiff filed the present action alleging medical negligence as a result
of the retained sponge. Plaintiff alleged that defendants were negligent in a number of ways,
including by failing to search the operative field and account for all sponges, failing to remove
all sponges utilized in the surgery, and in the face of a missing sponge, failing to inform Mr.
Doyle and his treating doctors of the possibility of a retained sponge so they would know in the
event complications ensued and doctors could monitor and treat their patient accordingly.
Pursuant to MCL 600.2912d, plaintiff filed an affidavit of merit (AOM) from Michael D.
Crittenden, M.D., a board-certified thoracic surgeon, supporting plaintiff’s claims regarding the
standard of care and its alleged breach.

        Defendants moved for summary disposition under MCR 2.116(C)(7), asserting that
plaintiff’s claims were time-barred under MCL 600.5838a(2) because they were not filed within
the six-year statute of repose, and that plaintiff failed to sufficiently plead affirmative acts or
misrepresentations designed to conceal the existence of a cause of action for purposes of
invoking the fraudulent conduct exception set forth in MCL 600.5838a(2)(a). Defendants
attached to their motion a copy of Mr. Doyle’s medical records, including the nurse’s report,
which indicated that the sponge count was incorrect and unresolved and that Dr. Genco had been
notified, as well as the intraoperative x-ray report, which noted that there was an issue of a
potentially missing sponge, but concluded that there was no retained sponge seen. The trial court
found that plaintiff had pleaded sufficient factual allegations of fraudulent conduct, but deferred
the question of whether plaintiff had factual support for those allegations until the close of
discovery and until the court ruled on the discoverability of an incident or improvement report
(hereinafter improvement report)—discussed in more detail below—filed by a nurse following
the 2003 surgery.

        After the close of discovery, and after finding that the improvement report was protected
by the peer review privilege, MCL 333.21515 and MCL 333.20175, the trial court granted
summary disposition to defendants, finding that MCL 600.5838a(2) barred plaintiff’s claims.
The court found no evidence of affirmative fraudulent conduct in this case. The trial court
recognized that there is an exception to the affirmative-act rule when the defendant has a
fiduciary relationship with the plaintiff, wherein there is an affirmative duty to disclose known
malpractice, but that plaintiff had not produced evidence to establish that defendants knew they
had committed malpractice. The court concluded that “a discrepancy in the [sponge] count does
not equate to knowledge of a retained sponge” in light of the search of the surgical field and the
radiologist’s findings of “no evidence of a retained sponge.” The trial court dismissed plaintiff’s
attendant claim of loss of consortium, concluding that such a claim was derivative of the
dismissed medical malpractice claim. The court further held that dismissal of the medical
malpractice claim against Dr. Genco also served as a dismissal of any claim against MCVI for
Dr. Genco’s actions and rendered moot the vicarious liability claims against Covenant.




                                                -4-
                                          II. ANALYSIS

       On appeal, plaintiff challenges the trial court’s rulings that she failed to prove fraudulent
concealment for purposes of establishing an exception to the statute of repose, that Covenant’s
improvement report was not discoverable, and that the facts contained in Covenant’s offer of
settlement to Mr. Doyle and his wife were not admissible as evidence. We agree in part and
disagree in part.

                                      A. MCL 600.5838a(2)

        Plaintiff first argues that the trial court erred by granting summary disposition in this
medical malpractice action on the ground that the lawsuit was untimely. MCR 2.116(C)(7)
permits summary disposition where the claim is barred by the limitations period or the statute of
repose. In reviewing a motion under subrule (C)(7), a court accepts as true the plaintiff’s well-
pleaded allegations of fact, construing them in the plaintiff’s favor. Hanley v Mazda Motor
Corp, 239 Mich App 596, 600; 609 NW2d 203 (2000). The Court must consider affidavits,
pleadings, depositions, admissions, and any other documentary evidence submitted by the
parties, to determine whether a genuine issue of material fact exists. Id. These materials are
considered only to the extent that they are admissible in evidence. In re Miltenberger Estate,
275 Mich App 47, 51; 737 NW2d 513 (2007). “If no facts are in dispute, and if reasonable
minds could not differ regarding the legal effect of those facts, the question whether the claim is
barred is an issue of law for the court.” Dextrom v Wexford Co, 287 Mich App 406, 429; 789
NW2d 211 (2010). “However, if a question of fact exists to the extent that factual development
could provide a basis for recovery, dismissal is inappropriate.” Id.

       The trial court granted summary disposition to defendants after concluding that plaintiff’s
claim was barred by MCL 600.5838a(2). The statute provides, in pertinent part:

               Except as otherwise provided in this subsection, an action involving a
       claim based on medical malpractice may be commenced at any time within the
       applicable period prescribed in section 5805 or sections 5851 to 5856, or within 6
       months after the plaintiff discovers or should have discovered the existence of the
       claim, whichever is later. However, except as otherwise provided in section
       5851(7) or (8), the claim shall not be commenced later than 6 years after the date
       of the act or omission that is the basis for the claim. The burden of proving that
       the plaintiff, as a result of physical discomfort, appearance, condition, or
       otherwise, neither discovered nor should have discovered the existence of the
       claim at least 6 months before the expiration of the period otherwise applicable to
       the claim is on the plaintiff. A medical malpractice action that is not commenced
       within the time prescribed by this subsection is barred. [MCL 600.5838a(2).]

The acts giving rise to plaintiff’s claim occurred in 2003. Plaintiff’s complaint, filed in June
2012, was well beyond the six-year repose period set forth in MCL 600.5838a(2). Thus, plaintiff
had to rely on one of the statutory exceptions. Plaintiff’s complaint pled fraudulent conduct on
the part of defendants, pursuant to MCL 600.5838a(2)(a), which provides that the statute of
repose does not bar a claim


                                                -5-
             If discovery of the existence of the claim was prevented by the fraudulent
       conduct of the health care professional against whom the claim is made or a
       named employee or agent of the health professional against whom the claim is
       made, or of the health facility against whom the claim is made or a named
       employee or agent of a health facility against whom the claim is made.[3]

       Thus, the pivotal issue in this case is whether, pursuant to MCL 600.5838a(2)(a), plaintiff
was prevented from discovering the existence of the claim by fraudulent conduct. In defining the
term “fraudulent conduct” as used in § 5838a(2)(a), this Court in Sills v Oakland Gen Hosp, 220
Mich App 303, 309-310; 559 NW2d 348 (1996), looked to caselaw developed under MCL
600.5805:

               This Court has not yet interpreted “fraudulent conduct” as it is used in
       MCL 600.5838a(2)(a); MSA 27A.5838(1)(2). To define fraudulent conduct, we
       look to cases involving the limitation period and fraudulent concealment under
       MCL 600.5855; MSA 27A.5855. Courts consider together statutes that have the
       same general purpose when ascertaining the intent of the Legislature. In re Miller
       Estate, 359 Mich 167, 172; 101 NW2d 381 (1960). Additionally, statutes that
       affect similar policies should be interpreted in a like manner. Swantek v
       Automobile Club of Mich Ins Group, 118 Mich App 807, 810; 325 NW2d 588
       (1982).

               Under MCL 600.5855; MSA 27A.5855, the statute of limitation is tolled
       when a party conceals the fact that the plaintiff has a cause of action. Smith v
       Sinai Hosp of Detroit, 152 Mich App 716, 727; 394 NW2d 82 (1986). The
       plaintiff must plead in the complaint the acts or misrepresentations that comprised
       the fraudulent concealment. In re Farris Estate, 160 Mich App 14, 18; 408
       NW2d 92 (1987). The plaintiff must prove that the defendant committed
       affirmative acts or misrepresentations that were designed to prevent subsequent
       discovery. Mere silence is insufficient. Buszek v Harper Hosp, 116 Mich App
       650, 654; 323 NW2d 330 (1982). [Footnote omitted.]

        We agree with the trial court that plaintiff has not shown affirmative acts or
misrepresentations by defendants designed to prevent plaintiff’s discovery of a claim. However,
that does not end the analysis. As the trial court noted, there is an exception to the affirmative-
act rule when the defendant has a fiduciary relationship with the plaintiff. In Brownell v Garber,
199 Mich App 519, 527; 503 NW2d 81 (1993) (citations and quotations marks omitted), a case
involving legal malpractice, this Court held that an exception to the “affirmative act” rule exists


3
  If, as a result of fraudulent conduct, a plaintiff is prevented from discovering the existence of a
claim, the plaintiff has additional time, pursuant to MCL 600.5838a(3) to file his or her claim.
Here, there is no dispute that, if fraudulent conduct exists, plaintiff’s complaint was within the
extended time period set forth in MCL 600.5838a(3). The only dispute concerns whether there
was fraudulent conduct.


                                                -6-
when there is a fiduciary relationship between the plaintiff and the defendant. A fiduciary
relationship is often marked by some measure of inequality in the relationship, such as when one
places his or her trust in another because of the other’s superior knowledge. In re Estate of
Karmey, 468 Mich 68, 74 n 3; 658 NW2d 796 (2003). In such situation, “there is an affirmative
duty to disclose. . . .” Brownell, 199 Mich App at 527. See also Dillard v Schlussel, 308 Mich
App       429,      443;     865     NW2d        648       (2014)     (“Absent      a      fiduciary
relationship, fraudulent concealment extends the applicable limitations period only when the
defendant has made an affirmative act or representation.”). The existence of fraudulent
concealment in such circumstances can be shown when plaintiff alleges facts that indicate
defendant did so (failed to disclose) intentionally so as to mislead plaintiff, Brownell, 199 Mich
App at 531, which would allow the period of limitations to potentially expire before plaintiff
realized he or she had a claim.

        Our courts have recognized a physician/patient relationship as a fiduciary relationship.
Eschenbacher v Hier, 363 Mich 676, 679-680; 110 NW2d 731 (1961); Melynchenko v Clay, 152
Mich App 193, 197; 393 NW2d 589 (1986); Portage Aluminum Co v Kentwood Nat’l Bank, 106
Mich App 290, 294; 307 NW2d 761 (1981). We agree with the above-cited authorities that such
a relationship exists in the context of a physician and a patient. See Eschenbacher, 363 Mich at
680. “When a fiduciary relationship exists, the fiduciary has a duty to act for the benefit of the
principal regarding matters within the scope of the relationship.” The Meyer & Anna Prentis
Family Foundation v Barbara Ann Karmanos Cancer Institute, 266 Mich App 39, 43; 698
NW2d 900 (2005).

       While there was a fiduciary relationship between Mr. Doyle and Dr. Genco, the issue
remains: what must the fiduciary refrain from disclosing in order for the plaintiff to show
fraudulent conduct that will postpone the running of a limitations period?

        As an initial matter, it is clear that the fiduciary must have knowledge of that which was
not disclosed. See Brownell, 199 Mich App at 528-529 (explaining that a fiduciary does not
have a duty to disclose malpractice of which he was unaware). The trial court held that a
fiduciary has a duty to disclose known malpractice and, because Dr. Genco claims he did not
know he committed malpractice in this case, there was no duty to disclose; hence, plaintiff could
not plead a lack of disclosure that would extend the statute in this case.

         We do not agree with the trial court’s interpretation and application of the fraudulent
conduct exception in this case. Although a fiduciary cannot be expected to disclose information
about which he or she is unaware (e.g. inadvertently perforating a nearby organ without realizing
it) or to disclose a breach when he or she failed to appreciate that his or her conduct breached
the standard of care (e.g. misdiagnosing a patient’s presenting condition), a fiduciary cannot
shirk his or her duty to disclose by pleading ignorance to the fact that it was malpractice despite
knowing what happened (e.g. realizing that a nearby organ was inadvertently perforated but
claiming not to realize it was malpractice, and thus, not telling the patient, or realizing the
patient’s condition was wrongly diagnosed but claiming such misdiagnosis was not malpractice,
and thus, not telling the patient). Allowing a defendant to plead ignorance in the presence of
known and undisputed facts that implicate malpractice would promote self-serving defenses that
would thwart the viability of the fraudulent concealment exception in fiduciary matters.


                                                -7-
        Consistent with the purpose of the fraudulent-concealment exception to MCL 600.5838a,
the intentional failure to disclose known, pertinent information, in order to deprive plaintiff of
the ability to realize that he or she has a potential cause of action constitutes fraudulent
concealment. See Dillard, 308 Mich App at 443. See also The Reserve at Heritage Village
Ass’n v Warren Fin Acquisition, LLC, 305 Mich App 92, 122; 850 NW2d 649 (2014)
(“Fraudulent concealment means employment of artifice, planned to prevent inquiry or escape
investigation, and mislead or hinder acquirement of information disclosing a right of action.”)
(citation and quotation omitted; emphasis added). Fraudulent conduct refers to acts taken—or in
the case of an affirmative duty to disclose, the intentional failure to act—so as to prevent the
plaintiff from discovering the existence of a possible cause of action. The trial court’s narrow
reading of Brownell—which defendants urge us to adopt—is inconsistent with the purpose of the
fraudulent conduct exception set forth in MCL 600.5838a.

        In the case at bar, the failure to disclose the clearly known fact that there was a missing
sponge not only deprived Mr. Doyle of an opportunity to timely treat ensuing complications in
the event the sponge was left in his body—and it was—it deprived plaintiff of knowledge of the
facts underlying the claim for malpractice, i.e., it deprived plaintiff of the ability to discover the
existence of a potential cause of action. Although Dr. Genco contends he reasonably concluded
that the sponge was not inside Mr. Doyle’s body, and thus, no further action or discussion was
required, he admittedly knew that its whereabouts were never determined and the intraoperative
x-ray was not dispositive. That the sponge was not found is undisputed and is of paramount
importance to this case. It is axiomatic that the sponge did not spontaneously combust or crawl
away on its own. Within the four walls of the operating suite, the sponge had to be somewhere.4
Thus, there existed an undeniable possibility that the sponge was still inside Mr. Doyle—near his
heart, the situs of the operation—following his bypass surgery. According to the evidence
gleaned during discovery, it was undisputed that Dr. Genco knew5 about the missing sponge and
chose not to document anything about it in Mr. Doyle’s medical records, not to discuss it with
Mr. Doyle or his family, and not to tell Mr. Doyle’s primary care doctor or any subsequent
treating physicians. Although the sponge could hypothetically have been somewhere else in the
operating suite, we find that there is enough evidence to conclude that Dr. Genco owed Mr.
Doyle a fiduciary duty to disclose the fact that there was a missing sponge, and the intentional
failure to do so constitutes fraudulent concealment under the circumstances presented. Knowing
about the missing sponge, regardless of its whereabouts, would have put Mr. Doyle—and, by
extension, plaintiff—on notice of a potential cause of action, wherein the burden was on plaintiff




4
 Again, defendants do not take issue with the fact that 40 sponges were placed in Mr. Doyle’s
body and only 39 were found.
5
  All of the evidence presented reveals that Dr. Genco was informed that the sponge could not be
accounted for despite several attempts to locate it. Dr. Genco testified that he would have been
involved in the process of ordering the x-ray to look for the missing sponge, and he would have
been involved in any search of the operative site.


                                                 -8-
to further investigate and pursue a claim should he find one to exist.6 Because Dr. Genco did not
tell Mr. Doyle what happened in that operating room, his silence is what allowed a sponge to
remain inside Mr. Doyle’s body for eight years and it is the very reason Mr. Doyle was not able
to timely file his malpractice action. Under the circumstances, it was incumbent upon the
fiduciary, Dr. Genco, to disclose the problem that arose during surgery to Mr. Doyle in the face
of the known risk that the sponge could in fact still be inside his body.7

        In light of the undisputed facts, we find that plaintiff established a failure to disclose on
the part of Dr. Genco that amounted to fraudulent conduct, which was sufficient to invoke the
exception found in MCL 600.5838a(2)(a).8




6
  “[T]he standard under the discovery rule is not that the plaintiff knows of a ‘likely’ cause of
action. Instead, a plaintiff need only discover that he has a ‘possible’ cause of action.” Gebhardt
v O’Rourke, 444 Mich 535, 544; 510 NW2d 900 (1994). Plaintiff did not need to know the full
extent of his damages, Seebacher v Fitzgerald, Hodgman, Cawthorne & King, PC, 181 Mich
App 642, 647; 449 NW2d 673 (1989).
7
  Contrary to the argument made by the dissent, plaintiff is not required to provide direct proof
that Dr. Genco knew he had committed malpractice—extracting that evidence would necessarily
require a confession or a witness to a confession. Such a requirement would make a mockery of
the fiduciary duty law and place the keys to the outcome in the hands of a defendant. Rather, the
plaintiff must prove that Dr. Genco knew certain facts, and that his knowledge of those facts
gave rise to a fiduciary duty to disclose them to Mr. Doyle as they pertained to a potential cause
of action. Given plaintiff’s production of undisputed evidence that Dr. Genco knew the sponge
was still missing and was not found—despite search efforts—anywhere within the four walls of
the operating suite, it was undeniable, as Dr. Genco conceded, that the sponge could still be in
Mr. Doyle’s body, even though Dr. Genco proclaims that he did not think it actually was. We
find that the known, undisputed facts gave rise to an affirmative duty to disclose the situation to
Mr. Doyle, who was entirely reliant upon and necessarily trusted Dr. Genco to share all pertinent
information with him, and that Dr. Genco’s knowing decision not to do so constituted fraudulent
concealment.
8
  We are careful to point out that whether Dr. Genco had a duty to disclose, as part of his
fiduciary relationship with Mr. Doyle, is distinct from the question of whether malpractice
occurred. The duty to disclose involves a fiduciary’s duty to disclose a potential cause of action.
Here, the possibility of a 4-inch by 4-inch sponge near Mr. Doyle’s heart should have given him
knowledge that he had a potential cause of action against defendants. Whether leaving the
sponge in his body or the failing to disclose that there was a missing sponge amounted to
malpractice, on the other hand, requires evaluation of the standard of care and whether, under the
circumstances, Dr. Genco breached that standard of care. In other words, whether malpractice
occurred involves the issue of whether the failure to disclose the incorrect sponge count, in light
of the subsequent actions taken, violated the standard of care. That is a question to be resolved
on remand.


                                                -9-
                              B. THE IMPROVEMENT REPORT

        Because we are remanding for further proceedings, we address the remainder of
plaintiff’s issues raised on appeal. The first such issue concerns the improvement report. During
his deposition testimony, Sulfridge testified that he prepared the improvement report and gave it
to his supervisor, and that this was the standard procedure when there is a possibility of a
retained instrument during surgery. Plaintiff sought production of the report. Covenant refused
to produce the report, arguing that the document was subject to the peer review privilege under
MCL 333.21515 and MCL 333.20175. Plaintiff claimed that the report was not prepared for
peer review purposes. Following a hearing at which Rebecca Schultz, Covenant’s Director of
Risk Management, testified, the trial court found that the improvement report was protected by
the statutory peer review privilege. Although a trial court’s order regarding discovery is
ordinarily reviewed for an abuse of discretion, whether production of evidence is barred by a
statute is a question of law and is therefore reviewed de novo. Ligouri v Wyandotte Hosp & Med
Ctr, 253 Mich App 372, 375; 655 NW2d 592 (2002). Application of the peer review privilege is
an issue of law reviewed de novo. Dye v St John Hosp & Med Ctr, 230 Mich App 661, 665-666;
584 NW2d 747 (1998).

        Under the Public Health Code, “hospitals are required to review their professional
practices and procedures to improve the quality of patient care and reduce morbidity and
mortality.” Gallagher v Detroit-Macomb Hosp Ass’n, 171 Mich App 761, 768; 431 NW2d 90
(1988). Therefore, “[t]o encourage and implement productive peer review procedures, the
Legislature had provided that the information and records developed and compiled by peer
review committees be confidential and not subject to court subpoena.” Attorney General v
Bruce, 422 Mich 157, 161; 369 NW2d 826 (1985). Specifically, two statutes govern the
confidentiality of records, reports, and other information collected or used by peer review
committees in furtherance of their duties. MCL 333.20175(8) provides:

               The records, data, and knowledge collected for or by individuals or
       committees assigned a professional review function in a health facility or agency,
       or an institution of higher education in this state that has colleges of osteopathic
       and human medicine, are confidential, shall be used only for the purposes
       provided in this article, are not public records, and are not subject to court
       subpoena.

And, MCL 333.21515 provides:

              The records, data, and knowledge collected for or by individuals or
       committees assigned a review function described in this article are confidential
       and shall be used only for the purposes provided in this article, shall not be public
       records, and shall not be available for court subpoena.

        The privilege may only be invoked for records, data, and knowledge collected for or by
an individual or committee assigned a review function. Marchand v Henry Ford Hosp, 398
Mich 163, 167; 247 NW2d 280 (1976). In determining whether the information or record is
privileged, the court should consider the hospital’s bylaws, internal rules and regulations and
whether the committee’s function is that of retrospective review for purposes of improvement
                                               -10-
and self-analysis and thereby protected, or part of current patient care. Monty v Warren Hosp
Corp, 422 Mich 138, 147; 366 NW2d 198 (1985).

        In Dorris v Detroit Osteopathic Hosp, 460 Mich 26, 28-29; 594 NW2d 455 (1999), the
Court reviewed the trial court’s order that the defendant hospital provide the plaintiff with any
investigative reports relative to an incident involving the assault and battery of the plaintiff while
she was a patient at the defendant hospital, any statements made by any person with respect to
the incident, and any notes, memoranda, records, and reports related to the incident. After a
discussion of Gallagher, 171 Mich App 761, and Monty, 422 Mich 138, the Court noted with
respect to incident reports the following:

               Hospital personnel are expected to give their honest assessment and
       reviews of the performance of other hospital staff in incidents such as the one in
       the present case. Absent the assurance of confidentiality provided by §§ 21515
       and 20175(8), the willingness of hospital staff to provide their candid assessment
       will be greatly diminished. This will have a direct effect on the hospital’s ability
       to monitor, investigate, and respond to trends and incidents that affects patient
       care, morbidity, and mortality. [Dorris, 460 Mich at 42.]

Dorris held, however, that a plaintiff must be afforded the opportunity to challenge a defendant’s
evidence and assertion that the information sought was collected for a privileged purpose. Id. at
43.

        The trial court afforded plaintiff the opportunity for an evidentiary hearing to test
Covenant’s claim of peer review privilege. At the hearing, Schultz produced Covenant’s
“Incident and Improvement Reporting” policy, which identified the objective of the policy as:
“To report all incidents and opportunities for improvement within Covenant HealthCare System.
These reports will be tracked and trended for the purposes of developing safety prevention, loss
control and peer review programs which will benefit all patients and users of Covenant
HealthCare System’s facilities and services.” The policy provides that “[i]nformation about the
incident will be completely documented on the approved Improvement Report Form.” The
policy further provides that “[t]he information documented in the Improvement Report Form or
collected during the investigation of the incident is protected by Michigan Peer Review
Statutes.” Schultz’s testimony revealed that Covenant’s policy requires staff to fill out a report if
an incident occurs,9 and the report is forwarded to the employee’s manager for an assessment and
determination of whether improvement measures should be taken. Depending on the situation,
further action for patient safety or process improvement measures may be recommended. The
report is then forwarded on to the risk management department, where a staff member will
determine whether any further action need be taken.




9
 Schultz testified that the reporting policy was substantially the same as that which existed in
2003.


                                                -11-
        As in Gallagher, 171 Mich App 761, where this Court found an incident report prepared
regarding the plaintiff’s slip and fall while a patient at South Macomb Hospital privileged, the
improvement report here is completed for unusual incidents, is done to assist in improving the
hospital’s facilities and services, and is initially routed to a supervisor for review. Like the report
in Gallagher, which would then ultimately be forwarded to that hospital’s legal affairs
department, the reports here are then routed by the supervisor to risk management for additional
review. The information in the report is similarly tabulated to identify trends and routed to
various quality committees. We conclude that the incident and improvement policy fulfills the
protected review functions and that the improvement report was privileged as a peer review
record.

        To the extent that plaintiff argues that the objective facts within the improvement report
are discoverable, this argument is without merit in light of Krusac v Covenant Med Ctr, Inc, 497
Mich 251, 253, 259; 865 NW2d 908 (2015), wherein the Court held that §§ 20175(8) and 21515
do not contain an exception to the peer review privilege for objective facts.

                                  C. OFFER OF SETTLEMENT

       Plaintiff next asserts as error the trial court’s decision on Covenant’s motion to exclude a
2011 letter from Schultz to Mr. Doyle regarding an alleged settlement proposal. In the letter,
Schultz stated the following:

               I hope this letter finds you at home recovering well from your recent
       surgery. It was a pleasure to meet with you at St. Mary’s Hospital and then again
       with you and your wife at Covenant Transitional Care Unit; I only wish it could
       have been under different circumstances. The purpose of this letter is to briefly
       outline in writing what we discussed.

               I informed you that I reviewed your medical record from your September
       2003 open heart surgery at Covenant HealthCare. It revealed that at the end of
       your surgery the sponge count was incorrect, the surgeon was made aware and x-
       rays were taken to determine if the missing sponge was retained. Unfortunately,
       the x-ray did not verify the sponge that we now know was left in the operative
       area. Based upon the negative x-ray findings, the surgeon made the decision not
       to re-open your chest to look for the missing sponge.

               I shared with you that I contacted St. Mary’s, Mobile Medical Response
       (MMR), Covenant HealthCare Transitional Care Unit, and the Visiting Nurses
       Association to inform them that all bills for the care and treatment you have
       received and continue to receive associated with the retained sponge should be
       sent directly to my attention at Covenant HealthCare for payment and not your
       insurance carriers. If by chance you receive any bills related to this care, please
       do not pay them, forward them to my attention.

                I also informed you that I would reimburse you for Maryann’s [sic] travel
       expenses back and forth to see you during your hospitalization. Kindly submit a
       list of dates and I will have a check sent to you upon receipt.

                                                 -12-
                Maryann [sic] stated that she was disappointed with Covenant because no
       one from Covenant had contacted either of you. Therefore, she sought the advice
       of legal counsel. As you will recall, my response to her concerns was that of
       surprise because I had been in contact with both of you. As the Covenant
       HealthCare representative, I helped facilitate your transfer and admission to
       Covenant HealthCare TCU, which included the transportation to TCU from St.
       Mary’s for both of you. When you decided you wanted to be at home, I helped to
       facilitate the home care arrangements with VNA to provide you the care and
       treatment necessary as well as transportation home via MMR. I had also shared
       with you in person and on the phone that Covenant HealthCare would be
       responsible for all costs associated with this incident. Nonetheless, although I
       know we could have reached some resolution without attorneys, I respect your
       decision to retain legal counsel and would be more than happy to work with your
       attorney if need be.

               I can only begin to imagine what you and Mary Ann [sic] have gone
       through because of the retained sponge. Words cannot express how extremely
       sorry I am for all the additional pain, suffering, and medical care and treatment
       you have had to experience. I wish I could go back in time and change the events
       that occurred during your September 2003 surgery; regrettably that is not possible
       and all I can do is take care of the costs associated with your most recent
       hospitalization and recovery. When you have recovered, I will work with you (or
       your attorney if you choose) to fairly compensate you for what you have
       experienced. . . .

        Defendants asserted below that this letter constituted an offer to compromise that was
inadmissible to prove liability for the claim under MRE 408 and MRE 409. MRE 408 provides,
in pertinent part:

               Evidence of (1) furnishing or offering or promising to furnish, or (2)
       accepting or offering or promising to accept, a valuable consideration in
       compromising or attempting to compromise a claim which was disputed as to
       either validity or amount, is not admissible to prove liability for or invalidity of
       the claim or its amount. Evidence of conduct or statements made in compromise
       negotiations is likewise not admissible. This rule does not require the exclusion
       of any evidence otherwise discoverable merely because it is presented in the
       course of compromise negotiations.

The rule “does not require exclusion when the evidence is offered for another purpose, such as
proving bias or prejudice of a witness, negativing a contention of undue delay, or proving an
effort to obstruct a criminal investigation or prosecution.” MRE 408.

        MRE 409 provides, “Evidence of furnishing or offering or promising to pay medical,
hospital, or similar expenses occasioned by an injury is not admissible to prove liability for the
injury.” The rule requires exclusion of evidence of compromise particularly because
“settlements may be motivated by a great many possible considerations unrelated to the


                                              -13-
substantive merits of a claim.” Chouman v Home Owners Ins Co, 293 Mich App 434, 438; 810
NW2d 88 (2011).

         The trial court granted defendants’ motion in limine to exclude the letter. Plaintiff does
not dispute that the offer to pay medical expenses or to compromise the claim as set forth in the
letter may be excluded under MRE 408 and 409. Rather, plaintiff argues that certain factual
statements within the letter are admissible under MRE 801(d)(2) as the admissions of a party
opponent. Specifically, plaintiff argues that Schultz’s statement, “Based upon the negative x-ray
findings, the surgeon made the decision not to re-open your chest to look for the missing
sponge,” is admissible as an admission of a party opponent because Schultz is an agent of
Covenant. We disagree with plaintiff’s position. The crux of plaintiff’s argument shows that
plaintiff wishes to use the statement to demonstrate that Dr. Genco closed Mr. Doyle’s chest
cavity before looking for the missing sponge. This is an attempt to use the statement to establish
liability, i.e., showing that Dr. Genco did not search the operative field for the sponge and was
negligent for failing to do so, and is prohibited by MRE 408. The trial court’s exclusion of this
letter—including the statements plaintiff wishes to pluck from the letter—was not an abuse of
discretion.10

                                       V. CONCLUSION

       Because we find that the trial court erred when it granted summary disposition to
defendants pursuant to MCR 2.116(C)(7), we reverse the grant of summary disposition and
remand for further proceedings consistent with this opinion. In regard to the trial court’s rulings
on the production of the improvement report and on the motion to exclude Schultz’s letter to Mr.
Doyle, we affirm the trial court.

        Reversed in part, affirmed in part, and remanded for further proceedings. We do not
retain jurisdiction.



                                                            /s/ Donald S. Owens
                                                            /s/ Jane M. Beckering




10
   We note, however, that MRE 408 “does not require the exclusion of any evidence otherwise
discoverable merely because it was presented in the course of compromise negotiations.”
(Emphasis added). As such, plaintiff was free pursue the source of Schultz’s factual information
and submit that evidence in an admissible form with a proper foundation.


                                               -14-
