Bell v. Simon, 63845

• Decision Date: 13 April 1990
• Docket Number: No. 63845,63845
• Parties: Fletcher BELL, Commissioner of Insurance, as Administrator of the Kansas Health Care Stabilization Fund, et al., Appellants, v. Jessica M. SIMON, a Minor, Hattie Fillenwarth, and Stephen J. Bazzano, D.O., Appellees.
• Court: Kansas Supreme Court

Page 925

790 P.2d 925

246 Kan. 473

Fletcher BELL, Commissioner of Insurance, as Administrator of the Kansas Health Care Stabilization Fund, et al., Appellants, v. Jessica M. SIMON, a Minor, Hattie Fillenwarth, and Stephen J. Bazzano, D.O., Appellees.

No. 63845.

Supreme Court of Kansas.

April 13, 1990.

Syllabus by the Court

1. General principles of statutory construction are stated and applied.

2. Where a policy of insurance is issued to an insured in compliance with the requirement of a statute, the pertinent provisions of the statute must be read into the policy, and no provisions of the policy in contravention of the statute can be given effect.

3. The provisions of K.S.A. 40-3402(a) apply to resident and nonresident health care providers and to admitted and nonadmitted insurers.

4. The failure of a nonresident health care provider to pay the surcharge required by K.S.A. 40-3404 does not relieve the Kansas Health Care Stabilization Fund of excess coverage liability if the basic coverage required by the statutes remains in effect.

Paul Hasty, Jr. of Wallace, Saunders, Austin, Brown & Enochs, Chartered, Overland Park, argued the cause, and Bradley S. Russell, of the same firm, was with him on the briefs for appellants.

Patrick C. Smith of Fisher, Heck & Cavanaugh, P.A., Topeka, argued the cause and Stephen W. Cavanaugh, of Fisher, Heck & Cavanaugh, P.A., was on the briefs for appellee, Stephen J. Bazzano, D.O.

Timothy A. Short of Spigarelli, McLane & Short, Pittsburg, argued the cause, and Fred Spigarelli, of the same firm, was with him on the briefs for appellees Jessica M. Simon, a minor, and Hattie Fillenwarth.

Jack Peggs of Law Office of Jack Peggs, Wichita, and Mark Sachse of Callen, Sexton & Shelor, Kansas City, were on the brief for amicus curiae Kansas Trial Lawyers Ass'n.

HOLMES, Justice:

Fletcher Bell, Commissioner of Insurance, as Administrator of the Kansas Health Care Stabilization Fund (Commissioner), the State of Kansas, as Trustee for the Kansas Health Care Stabilization Fund, and The Kansas Health Care Stabilization Fund (Fund), plaintiffs, appeal from an adverse judgment of the Shawnee County District Court in a declaratory judgment action. The district court granted summary judgment to the defendants and held that the Fund provided defendant Stephen J. Bazzano, D.O., excess coverage in the pending malpractice claims of the defendants Jessica M. Simon and Hattie Fillenwarth. We affirm.

The facts pertinent to this appeal are essentially undisputed. The defendant, Dr. Bazzano, is a resident of Missouri and a doctor of osteopathic medicine who is licensed to practice in both Kansas and Missouri. Defendant conducts his Kansas practice from a clinic in Galena, Cherokee County, Kansas. From 1976 to April 1, 1986, Dr. Bazzano maintained individual malpractice insurance with Professional Mutual Insurance Company (PMIC), in the form of an "occurrence" policy. The policy was renewed annually, with the last renewal for the period from April 1, 1985 to April 1, 1986. While the policy was in effect, PMIC filed a "Notice of Basic Coverage," collected the annual premium surcharge from Dr. Bazzano, and sent the surcharge and other relevant information to the Fund. The Commissioner and the Fund apparently made no objection to the type of policy, or the method of reporting and payment of the surcharge by PMIC and Dr. Bazzano, during the ten years the policy was in effect.

Dr. Bazzano admits he practiced in Kansas from April 1, 1986, to July 16, 1987, without obtaining a malpractice insurance policy that complied with the mandatory provisions of the Health Care Provider Insurance Availability Act (Act), K.S.A. 40-3401 et seq. Effective July 16, 1987, Dr. Bazzano obtained a "claims made" policy from Professional Mutual Insurance Company Risk Retention Group and paid the annual premium surcharge to the Fund.

The issues in this case arise from a malpractice suit filed in Cherokee County, Kansas, on July 16, 1987, by Jessica M. Simon, a minor, and her mother, Hattie Fillenwarth, both of whom are joined as defendants in this case. The suit was based primarily upon Dr. Bazzano's alleged failure to run laboratory tests and correctly diagnose and treat 3-month-old Jessica on March 28, 1986, which resulted in the child having temporary and permanent disability. Dr. Bazzano was first notified of the potential claim for malpractice by the attorneys for Simon and Fillenwarth on June 5, 1987.

On November 3, 1988, Commissioner Bell filed a petition in Shawnee County District Court for declaratory judgment against Dr. Bazzano, Simon, and Fillenwarth, contending that Dr. Bazzano had no excess liability coverage from the Fund from April 1, 1986, to July 16, 1987, "because he did not maintain professional liability insurance coverage as required by the Health Care Provider Insurance Availability Act." Dr. Bazzano denied the allegation in his answer, filed December 6, 1988, and in addition asserted the affirmative defenses of waiver and estoppel. On April 3, 1989, Dr. Bazzano and the defendants Simon and Fillenwarth filed separate motions for summary judgment asserting there was excess liability coverage. On April 4, 1989, the plaintiffs filed a counter motion for summary judgment asserting the Fund had no liability.

On May 10, 1989, the district court granted Dr. Bazzano's motion for summary judgment and denied the motion filed by plaintiffs. The court held that PMIC's issuance of an occurrence policy rather than a claims made policy did not relieve the Fund of liability under Missouri Medical Ins. Co. v. Wong, 234 Kan. 811, 676 P.2d 113 (1984). In Wong, the court held that under the Act a medical malpractice "policy which insures a health care provider practicing in Kansas must be construed to provide claims made coverage, notwithstanding the policy, as written, is an occurrence form policy." Syl. p 3. The court here also found that the Fund was not relieved of liability because the Fund's coverage continues when basic coverage continues, and the basic coverage continued by operation of law due to the insurer's failure to give a cancellation notice to the Commissioner (K.S.A. 40-3402). The plaintiffs have appealed.

Plaintiffs state the issue on appeal as being whether "[t]he court erred in granting defendants' motions for summary judgment and denying plaintiffs' motion for summary judgment since Dr. Bazzano did not have the mandatory professional liability insurance required by the Health Care Stablization Act [sic ], K.S.A. 40-3401, et seq." The resolution of this issue involves the following:

a) Whether defendant Dr. Bazzano had basic coverage as required under the Act when the parties' malpractice claim was made.

b) If basic coverage existed, whether Dr. Bazzano's failure to pay the annual premium surcharge relieves the Fund of liability.

c) Whether plaintiffs are estopped from asserting Dr. Bazzano's noncompliance with the surcharge payment requirements.

The issue and arguments raised by the plaintiffs require the interpretation and application of certain provisions of the Act. Before addressing the arguments asserted, we deem it appropriate to reiterate certain general principles applicable to statutory construction.

"The fundamental rule of statutory construction is that the purpose and intent of the legislature governs when the intent can be ascertained from the statute. In construing statutes, the legislative intention is to be determined from a general consideration of the entire act. Effect must be given, if possible, to the entire act and every part thereof. To this end, it is the duty of the court, as far as practicable, to reconcile the different provisions so as to make them consistent, harmonious, and sensible." Harris Enterprises, Inc. v. Moore, 241 Kan. 59, Syl. p 1, 734 P.2d 1083 (1987).

"In determining legislative intent, courts are not bound to an examination of the language alone but may properly look into the causes which impel the statute's adoption, the objective sought to be attained, the statute's historical background and the effect the statute may have under the various constructions suggested." In re Petition of City of Moran, 238 Kan. 513, Syl. p 2, 713 P.2d 451 (1986).

"When a statute is plain and unambiguous the court must give effect to the intention of the legislature as expressed, rather than determine what the law should or should not be." Randall v. Seemann, 228 Kan. 395, Syl. p 1, 613 P.2d 1376 (1980).

"Interpretation of a statute is a question of law, and it is the function of the court to interpret a statute to give it the effect intended by the legislature." Director of Taxation v. Kansas Krude Oil Reclaiming Co., 236 Kan. 450, 455, 691 P.2d 1303 (1984).

The plaintiffs first contend that Dr. Bazzano is not covered by the Fund because he had no basic coverage pursuant to the Act at the time the claim was made on June 5, 1987. It appears to be conceded that Dr. Bazzano had basic coverage during the PMIC policy period from April 1, 1985, to April 1, 1986. Even though the policy issued was an "occurrence" policy rather than a "claims made" policy as specified by K.S.A. 40-3402(a), the Act provides that the policy is deemed and construed to include the statutory basic coverage. In the instant case the alleged malpractice occurred March 28, 1986, at a time when all parties agree Dr. Bazzano had the required basic coverage under the PMIC policy.

The statutes pertinent to basic coverage begin with K.S.A. 40-3401(b), which provides:

"(b) 'Basic coverage' means a policy of professional liability insurance required to be maintained by each health care provider pursuant to the provisions of subsection (a) or (b) of K.S.A. 40-3402 and amendments thereto."

K.S.A. 40-3402 provides in part:

"(a) A policy of professional liability insurance approved by the commissioner and issued by an insurer duly authorized to transact business in this state in which the limit...