Kansas Malpractice Victims Coalition v. Bell

Citation243 Kan. 333,757 P.2d 251
Decision Date03 June 1988
Docket NumberNo. 61945,61945
Parties, 56 USLW 2713 KANSAS MALPRACTICE VICTIMS COALITION and the Members, Named and Unnamed, Thereof; Clayton Trevor Nygaard, a minor, by his father and next friend, Terrence W. Nygaard; Eric Theodore Nygaard, a minor, by his father and next friend, Terrence W. Nygaard; Brent William Olsen, a minor, by his father and next friend, Robert A. Olsen; and Mary Duncan, Guardian and Conservator of Ellen Banister, a disabled person, Plaintiffs-Appellees. v. Fletcher BELL, Defendant-Appellant, and Kansas Medical Society, Kansas Hospital Association and Attorney General Robert T. Stephan, Intervenors-Appellants.
CourtUnited States State Supreme Court of Kansas

Syllabus by the Court

On appeal in an action for a declaratory judgment challenging the constitutionality of K.S.A. 1987 Supp. 60-3407, K.S.A. 1987 Supp. 60-3409, and K.S.A. 1987 Supp. 60-3411 (Sections 13, 15, and 28 of H.B. 2661, L. 1986, ch. 229), which set caps on the amount of the recovery and require an annuity for payment of future economic loss in all medical malpractice cases, it is held that those sections are unconstitutional on the grounds that they contravene Section 5 and Section 18 of the Bill of Rights of the Kansas Constitution, all as more particularly set forth in the opinion.

Wayne T. Stratton, of Goodell, Stratton, Edmonds & Palmer, Topeka, argued the cause, and Charles R. Hay, and Michael W. Merriam, of the same firm, were with him on the brief for intervenors-appellants Kansas Medical Soc. and Kansas Hosp. Associations.

Thomas L. Theis, of Sloan, Listrom, Eisenbarth, Sloan & Glassman, Topeka, argued the cause, and Pamela Sjoholm Scott, Chief Atty., Kansas Dept. of Ins., and Sp. Asst. Atty. Gen., was with him on the briefs for defendant-appellant Fletcher Bell.

Thomas E. Sullivan, of Thomas E. Sullivan, P.A., Overland Park, and Lynn R. Johnson, of Shamberg, Johnson, Bergman & Goldman, Chartered, Overland Park, argued the cause, and G. Gordon Atcheson, of Shamberg, Johnson, Bergman & Goldman, Chartered, Overland Park, Sidney A. Shapiro, of Lawrence, and Jerry R. Palmer, of Palmer, Marquardt & Snyder, P.A., Topeka, were with them on the brief, for plaintiffs-appellees.

Robert T. Stephan, Atty. Gen., and Nancy L. Ulrich, Asst. Atty. Gen., were on the brief for intervenor-appellant Robert T. Stephan.

[243 Kan. 334] Jeffrey Robert White, Washington, D.C., and Leonard D. Fisher, of Schroer, Rice, P.A., Topeka, were on the amicus curiae brief for the Ass'n of Trial Lawyers of America, Distresses Parents Together Foundation, and Consumer Federation of America.

John B. Runnels, M.D., Topeka, was on the amicus curiae brief pro se.

PRAGER, Chief Justice:

This is a declaratory judgment action brought by the Kansas Malpractice Victims Coalition (plaintiffs/appellees), a group of named and unnamed medical malpractice victims, against Insurance Commissioner Fletcher Bell (defendant/appellant) in his capacity as administrator of the Health Care Stabilization Fund (Fund). Plaintiffs seek to prevent enforcement of 1986 House Bill 2661, a bill containing a variety of tort reforms and limiting the recovery allowed in medical malpractice actions. (K.S.A. 40-3401 et seq. and K.S.A. 1987 Supp. 60-3401 et seq.) The trial court granted summary judgment for the plaintiffs, ruling that certain new laws violated several constitutional provisions.

At the district court level, the Kansas Medical Society, the Kansas Hospital Association, and Attorney General Robert T. Stephan intervened on behalf of the defendant. On appeal, the Association of Trial Lawyers of America, the Distressed Parents Together Foundation, and the Consumer Federation of America appear as amici curiae. John B. Runnels, M.D., appears pro se, also as amicus curiae.

FACTS

H.B. 2661 was enacted in 1986 following a lengthy interim study and protracted debate in both houses of the Kansas Legislature. The bill was designed to reduce the cost of medical malpractice insurance coverage for Kansas doctors. To achieve that end, the bill capped total recovery in medical malpractice actions at $1,000,000 and also limited recovery for noneconomic loss to $250,000. In addition, the bill required that any recovery for future loss be invested in an annuity with regular payments to the plaintiff over a number of years. The annuity is to be owned not by the injured person, but by the Fund.

Plaintiffs first filed suit in Johnson County, alleging in their petition that H.B. 2661 impaired their rights to full recovery for [243 Kan. 335] their injuries and that any action by defendant to implement the bill was unconstitutional. The defendant immediately moved for a change of venue, which was granted. The action was then transferred and argued in Shawnee County pursuant to K.S.A. 60-602(2).

The parties entered the entire legislative history of H.B. 2661 into the court file. That history included hundreds of pages of testimony and stacks of statistics. Based on the information contained in the record, plaintiffs moved for summary judgment. Judge Franklin R. Theis reviewed the arguments and concluded that H.B. 2661 violated various sections of the Kansas Constitution. He granted summary judgment for plaintiffs, and defendant and intervenors appealed directly to this court under K.S.A. 1987 Supp. 60-2101(b).

ISSUES TO BE DETERMINED

I. Whether the cap and annuity provisions of H.B. 2661 violate Section 5 of the Bill of Rights of the Kansas Constitution.

II. Whether the cap and annuity provisions of H.B. 2661 violate Section 18 of the Bill of Rights of the Kansas Constitution.

III. Whether the cap and annuity provisions of H.B. 2661 violate Section 1 of the Bill of Rights of the Kansas Constitution.

IV. Whether the trial court erred in severing various provisions of H.B. 2661 and in refusing to sever other provisions.

HISTORY AND ANALYSIS OF LEGISLATION

The statutes presented here for review do not represent the legislature's first attempt to regulate litigation in the medical malpractice area. In the early 1970s, insurers, who had previously underwritten medical malpractice insurance policies, abandoned the market in response to increasing claims and decreasing profits. Comment, Caps, "Crisis," and Constitutionality--Evaluating the 1986 Kansas Medical Malpractice Legislation, 35 Kan.L.Rev. 763, 765 (1987). As a result, health care providers found it difficult to obtain insurance.

In 1976, the Kansas Legislature responded to this "availability crisis" by enacting the Health Care Provider Insurance Availability Act. K.S.A. 40-3401 et seq. This act required all health care [243 Kan. 336] providers to carry medical malpractice insurance as a condition precedent to practicing in Kansas. K.S.A. 40-3402. Under K.S.A. 1987 Supp. 40-3401, "health care providers" is defined to include not only physicians but also persons engaged in certain medical training programs, hospitals, medical care facilities, optometrists, podiatrists, pharmacists, nurse anesthetists, dentists, physical therapists, and others. If a provider could not procure malpractice insurance on the outside market, he could apply for and receive insurance from the state-created Joint Underwriting Association (JUA). Every provider would then have primary coverage of $100,000 per occurrence and $300,000 annual aggregate. (These amounts were raised in 1984 to $200,000 and $600,000, respectively. [K.S.A. 40-3402] ) Doctors insured by the JUA pay 20% more for their coverage than doctors covered by market insurance groups. The JUA is funded through the Fund, a state-run insurance company designed to provide additional insurance coverage above the primary coverage limits to all health care providers.

The Fund and the JUA are closely related, and to understand the so-called 1985 "crisis" in medical malpractice insurance, it is vital to understand the interworkings of the two. The Fund is administered by the Kansas Insurance Commissioner and is funded through surcharges based on premiums paid by health care providers for their primary coverage. For example, if a physician pays $5,000 for his primary coverage and the Fund surcharge is 50%, he will pay $7,500 for total insurance coverage. ($5,000 + [.5 X $5,000] = $5,000 + $2,500 = $7,500.) The surcharge is determined on a yearly basis and is designed to maintain an adequate balance in the Fund. Enabling legislation required that a surcharge be levied until the Fund had a $10,000,000 balance. This limit was reached in four years, and no surcharge was then levied from 1981 to 1983. This meant that all doctors in Kansas had free, unlimited coverage above the primary coverage for three years. More than $27,000,000 in settlements and awards were incurred during this time period. By 1986, the Fund was insolvent and doctors were assessed a 110% surcharge, a third of which was designed to make up for losses incurred during the three "free" years. In 1984, liability of the Fund was capped at $3,000,000. L.1984, ch. 178, § 1.

[243 Kan. 337] Fund losses were further aggravated by the JUA. Because the JUA insures doctors who cannot procure insurance in the free market, it, in effect, insures uninsurable risks. In 1985, 250 health care providers were insured by the JUA. The Fund pays out every dollar assessed in claims against these providers, while, for other doctors, the primary carrier pays out the first $200,000 of any award. According to the administrator of the JUA, a small number of JUA-insured doctors were responsible for a large percentage of the losses incurred by the Fund.

Apparently, the mere existence of the Fund created problems. Insurers refused to enter a market where the State was

involved, because this reduced competition. The Fund also monopolized the highly profitable excess insurance market, thus reducing the incentive for insurance companies to enter Kansas

Thus, while the Health Care Provider Insurance Availability Act guaranteed the availability of insurance to all...

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