Ball v. Florida Podiatrist Trust

• Citation: 620 So.2d 1018
• Decision Date: 07 May 1993
• Docket Number: No. 91-4001,91-4001
• Parties: 18 Fla. L. Week. D1179 Michael J. BALL, D.P.M., Seymour Z. Beiser, D.P.M., Jeffrey L. Breslaw, D.P.M., Martin J. Diamond, D.P.M., Peppy H. Eisenfeld, D.P.M., Brian D. Finke, D.P.M., Theodore R. Friedman, D.P.M., James A. Green, D.P.M., Sanford M. Green, D.P.M., Arthur Carl Haspel, D.P.M., Richard Hochman, D.P.M., Howard M. Imanuel, D.P.M., Lawrence J. Kales, D.P.M., Robert T. Kirschenbaum, D.P.M., Jeffrey L. Kravat, D.P.M., Frank L. Levy, D.P.M., Owen P. Macken, D.P.M., Stuart A. Marcus, D.P.M., John W. Mina, D.P.M., Ivan I. Prager, D.P.M., Barrett E. Sachs, D.P.M., Henry Sapenoff, D.P.M., Martin Shank, D.P.M., Warren L. Simmonds, D.P.M., Steven J. Sinert, D.P.M., Robert D. Siwicki, D.P.M., Robert D. Teitelbaum, D.P.M., Robert S. Wane, D.P.M., Sidney R. Weinberg, D.P.M., and Howard E. Zucker, D.P.M., Appellants/Cross Appellees, v. FLORIDA PODIATRIST TRUST, and Rogers-Atkins Insurance, Inc., Appellees/Cross Appellants.
• Court: Court of Appeal of Florida (US)

Page 1018

620 So.2d 1018

18 Fla. L. Week. D1179

Michael J. BALL, D.P.M., Seymour Z. Beiser, D.P.M., Jeffrey L. Breslaw, D.P.M., Martin J. Diamond, D.P.M., Peppy H Eisenfeld, D.P.M., Brian D. Finke, D.P.M., Theodore R Friedman, D.P.M., James A. Green, D.P.M., Sanford M. Green D.P.M., Arthur Carl Haspel, D.P.M., Richard Hochman, D.P.M Howard M. Imanuel, D.P.M., Lawrence J. Kales, D.P.M., Robert T. Kirschenbaum, D.P.M., Jeffrey L. Kravat, D.P.M., Frank L. Levy, D.P.M., Owen P. Macken, D.P.M., Stuart A. Marcus, D.P.M., John W. Mina, D.P.M., Ivan I. Prager, D.P.M., Barrett E. Sachs, D.P.M., Henry Sapenoff, D.P.M., Martin Shank, D.P.M., Warren L. Simmonds, D.P.M., Steven J. Sinert, D.P.M., Robert D. Siwicki, D.P.M., Robert D. Teitelbaum, D.P.M., Robert S. Wane, D.P.M., Sidney R. Weinberg, D.P.M., and Howard E. Zucker, D.P.M., Appellants/Cross Appellees, v. FLORIDA PODIATRIST TRUST, and Rogers-Atkins Insurance, Inc., Appellees/Cross Appellants.

No. 91-4001.

District Court of Appeal of Florida, First District.

May 7, 1993.

Rehearings Denied July 21, 1993.

Judy D. Shapiro, Miami, for appellants Ball, Beiser, Breslaw, Haspel, Imanuel, Kales, Kravat, Levy, Macken, Mina, Prager, Sachs, Sapenoff, Shank, Simmonds, Sinert, Wane and Zucker.

Donald G. Korman of Korman, Schorr & Wagenheim, Bruce Culpepper and Darren A. Schwartz of Haben, Culpepper, Dunbar & French, P.A., Tallahassee, for appellants Diamond, Eisenfeld, Finke, Friedman, J. Green, S. Green, Hochman, Kirschenbaum, Marcus, Siwicki, Teitelbaum, and Weinberg.

John Beranek, Harry O. Thomas, and Jeffrey L. Frehn of Aurell, Radey, Hinkle, Thomas & Beranek, Tallahassee, for appellees.

WOLF, Judge.

Appellants, who were plaintiffs in the trial court, seek relief from entry of a summary judgment which determined the issue of liability in favor of the appellees, who were the defendants in the trial court. Appellants are podiatrists and former policyholders in the Florida Podiatrist Medical Malpractice Insurance Trust (FPT), a self-insurance trust providing liability coverage to its policyholders. Appellees are FPT and its administrator Rogers-Atkins Insurance, Inc. Appellants assert on appeal that the trial court erred in holding that the trustees of the FPT could make distributions from the self-insurance trust and limit the distribution to those members who were paying premiums at the time the trustees determined to make the distribution. ¹ We find nothing in Florida law or the trust documents presented to the trial court which would prohibit the trustees from exercising their discretion in this manner. The decision of the trial court is affirmed.

FPT is a self-insurance trust fund established in 1976 to provide medical malpractice insurance for its members. The trust was created by the Florida Podiatric Medical Association to provide an alternative to the commercial insurance market for the podiatrists of Florida. The governing documents of the trust are a trust agreement and an indemnity agreement. These documents were amended extensively in 1986 and all parties agreed in the trial court that the legal relationship among the parties at the time of the dispute was controlled by the 1986 amended versions. ²

The trust was also governed by section 627.357, Florida Statutes (1991), and rules adopted by the Department of Insurance (department). The pertinent rule is section 39.005(2), Florida Administrative Code, which allowed the trust to issue dividends when approved by the department.

FPT is managed by a board of trustees composed of members. Each trustee is a current policyholder in the fund and is elected from certain geographic areas to implement the management responsibility. The trust agreement gives the trustees the "exclusive and absolute power, control and authority over the Fund ..." This authority includes, but is not limited to, the power

[T]o set premiums and other charges for service to the members ...

[T]o do all acts and things as in their sole judgment and discretion are necessary, incidental to, or desirable for the conducting and perpetuating the purposes of the fund ... [and]

[T]o promulgate rules and regulations governing membership and participation in the trust ... as the trustees may determine in the exercise of prudent business judgment will serve the best interests of the trust, the fund and the members thereof ...

The trust agreement requires the trustee-managers to prepare and make available to the members an annual report on FPT's operations disclosing the trust's "receipts, disbursements, earnings and the assets and conditions of the Fund."

The 1986 indemnity agreement also governs the rights and duties of FPT and its members. This indemnity agreement states in relevant part as follows:

The Members intend this agreement as a mutual covenant of assumption and not as a partnership.

* * * * * *

The Administrator shall deposit to the account of the Trustees ... all charges as and when collected, and said monies shall be disbursed only as provided by (1) the rules, regulations and by-laws of the Trustees, (2) the Agreement between the Trustees and the Administrator and (3) the Rules of the Department pertaining to self-insurers.

* * * * * *

Liability of the Trust to the Member is specifically limited to such obligations as are set forth in the latest revision of the insurance policy pertaining to the Members.

* * * * * *

Coverage by the Trust ... shall expire and be cancelled automatically for nonpayment of premium, and a Member may be expelled and dropped from the Trust upon ten (10) days written notice by the Trustees ... to the Member stating when, no less than ten (10) days thereafter, cancellation shall be effective.

* * * * * *

Application for continuing membership, when approved in writing by the Trustees or their designee, shall constitute a continuing contract for each succeeding fiscal period unless cancelled by the Department or the Trust, or unless the Member shall have resigned or withdrawn from said Trust by written notice.

Each appellant had paid premiums and been a policyholder prior to September 1, 1989. All appellants had ceased making premium payments prior to that time.

FPT issued "claims made" insurance policies to members, meaning that FPT was only liable for malpractice claims or suits brought against the plaintiffs while their policies were in force. The policies incorporate the trust agreement and indemnity agreement and state that by accepting the policy, the insured agrees that the insurance policy embodies "all agreements" between the insured and FPT. Neither the insurance policy nor the documents incorporated therein purport to require the trustees to distribute to former policyholders surplus that accumulated while they were policyholders. The policy also provided for a limited right of assessment. An assessment cannot be made unless the reserves accumulated in the policy year and prior years are insufficient to pay claims, and an assessment can only be made to cover losses incurred in the year that the member was a policyholder. ³ Conversely, past policyholders may receive a benefit from premiums collected in the future in that these amounts may be utilized to cover deficiencies in past years.

On February 25, 1989, the trustees received a report that there was an actuarial surplus in the fund (excess dollars received as a result of premiums and investments that would not be needed to pay projected losses). The trustees voted at that meeting to "request authorization from the Florida Department of Insurance ... to distribute a dividend of $6 million, or such lesser amount as the Department may approve following negotiations." The department later indicated that they would not approve a full $6 million dividend.

On July 25, 1989, FPT's actuary rendered an opinion stating that financial data supported transferring $3 million from FPT's reserves to surplus and distributing this money as a dividend. Thereupon at their September 22, 1989, meeting, the trustees transferred $3 million from reserves to surplus and declared a $3 million dividend, subject only to the department's approval, which was later secured. This was the first dividend ever paid. At their September 22, 1990, meeting, the trustees declared a second dividend in the amount of $2 million which the department also approved.

The dividend distribution plans specified that the dividends were to be paid only to current policyholders. The trust's rationale for not paying appellants was stated in the minutes as follows:

The decision to exclude prior policyholders was based on the following considerations: first, there is no clear legal basis which would permit the transfer of FPT assets to prior policyholders, even if the Trustees thought such a transfer desirable; second, some former policyholders have ceased being such by [sic] even if some former policyholders were thought to be deserving of participation, a case-by-case analysis of all such former policyholders would be needed using criteria which no one was able to articulate; and fourth [sic], it is simply not customary to pay a dividend to a former policyholder, unless the dividend was declared prior to cancellation but paid afterwards.

Additionally, the trustees excluded former policyholders from participation in the dividends because they believed that paying dividends to former insureds would not benefit the trust.

The distribution of dividends to current policyholders was also done in part to encourage policyholders to remain with FPT, ensuring FPT's financial stability through the continued receipt of premiums.

Inquiries made to the Department of Insurance concerning the legality of the distribution formula adopted by FPT received the following responses:

As I understand it, your complaint is based on the fact that the Trust recently distributed a dividend to insured members of the Trust who were members on September 1, 1989, and that you and approximately 50 other...