Marshall v. Kansas Med. Mut. Ins. Co.

• Decision Date: 18 July 2003
• Docket Number: No. 88,366.,88,366.
• Citation: 276 Kan. 97,73 P.3d 120
• Parties: GEORGE W. MARSHALL, M.D., and KRISTI J. WEISS and MARK G. WEISS, Individually and as the Natural Parents and Next Friends of JOSEPH C. WEISS, Appellees, v. KANSAS MEDICAL MUTUAL INSURANCE COMPANY, Appellant.
• Court: Kansas Supreme Court

276 Kan. 97

73 P.3d 120

GEORGE W. MARSHALL, M.D., and KRISTI J. WEISS and MARK G. WEISS, Individually and as the Natural Parents and Next Friends of JOSEPH C. WEISS, Appellees, v. KANSAS MEDICAL MUTUAL INSURANCE COMPANY, Appellant.

No. 88,366.

Supreme Court of Kansas.

Opinion filed July 18, 2003.

Curtis O. Roggow, of Sanders Conkright & Warren, LLP, of Kansas City, Missouri, argued the cause, and Roger W. Warren, of the same firm, was with him on the briefs for appellant.

Victor A. Bergman, of Shamberg, Johnson & Bergman, Chtd., of Kansas City, Missouri, argued the cause, and Anne E. Popper, of the same firm, and Michael D. Strohbehn and Kip D. Richards, of Walters, Bender, Strohbehn & Vaughn, P.C., of Kansas City, Missouri, were with him on the brief for appellees.

Steve A. Schwarm, of Goodell, Stratton, Edmonds & Palmer, L.L.P., of Topeka, was on the brief for amicus curiae Kansas Health Care Stabilization Fund.

The opinion of the court was delivered by

GERNON, J.:

This appeal by the Kansas Medical Mutual Insurance Company (KaMMCO) challenges the district court's interpretation of a professional liability (medical malpractice) insurance policy.

Collateral issues involve: (1) Interpretation of the Kansas Health Care Provider Insurance Act (HCPIA), K.S.A. 40-3401 et seq.; (2) whether the excess limits liability coverage here violates public policy; (3) whether the insurance policy was ambiguous; and (4) whether it was permissible for the district court to reform the insurance policy, given the facts in the record.

This case was transferred to this court pursuant to K.S.A. 20-3018(c).

In November 1997, Dr. George W. Marshall delivered a baby who has irreversible damage to his brain and central nervous system. The child's parents are Kristi J. Weiss and Mark G. Weiss. In October 1998, the Weisses' attorney requested copies of Dr. Marshall's medical records regarding Kristi Weiss. The Weisses sued Dr. Marshall in August 1999, alleging negligence.

Dr. Marshall was insured by KaMMCO at the time the Weisses' lawsuit was filed and had been insured by KaMMCO since 1989. In 1999, Dr. Marshall carried professional liability coverage of $200,000 per claim, with a $600,000 aggregate as required by the HCPIA. See K.S.A. 40-3402(a). Dr. Marshall also carried separate liability coverage from the Kansas Health Care Stabilization Fund (Fund) in the amount of $800,000 per claim and $2,400,000 annual aggregate. See K.S.A. 2002 Supp. 40-3403(a) and (1)(3).

In December 1998, after receiving the Weisses' records request, Dr. Marshall applied to KaMMCO for an excess limits endorsement to his policy in the amount of $1,000,000 per claim and $1,000,000 annual aggregate. According to its terms, this coverage applied after the limits of his basic liability coverage and his additional Fund coverage were exhausted. Dr. Marshall then demanded that KaMMCO provide the $1,000,000 excess limits coverage for the Weisses' litigation. KaMMCO denied coverage on the excess limits liability endorsement, contending that the alleged negligence in the Weisses' lawsuit predated the retroactive date and there was no retroactive coverage.

Dr. Marshall filed a declaratory judgment action to force KaMMCO to pay the excess limits coverage. Agreeing with Dr. Marshall's position, the Weisses intervened. All parties stipulated that there were no material facts at issue, and each party filed a motion for summary judgment. KaMMCO appealed after the trial court granted the motions for summary judgment on behalf of Dr. Marshall and the Weisses.

(1) Does Kansas Law Mandate Claims Made Coverage for Excess Limits Insurance?

Dr. Marshall and the Weisses argue that the HCPIA includes excess limits coverage in the mandatory coverage language of K.S.A. 40-3402(a). KaMMCO, not surprisingly, argues that the statute does not mandate such coverage.

Our first task, therefore, is to examine the statutory scheme of the HCPIA. The interpretation of a statute is a question of law over which this court has de novo review. See Bell v. Simon, 246 Kan. 473, 476, 790 P.2d 925 (1990).

When construing a statute, the court must give the statute the effect intended by the legislature. The legislative intent is to be determined from considering the entire act and every part thereof. If the statute is plain and unambiguous, the court must give effect to the language of the statute as written by the legislature. Courts, however, are not limited to examining the language of the statute alone. Courts may also consider the causes that impel the statute's adoption, the statute's objective, its historical background, and the effect of the statute under various constructions. Bell, 246 Kan. at 476.

K.S.A. 40-3402(a) provides:

"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 of the insurer's liability is not less than $200,000 per claim, subject to not less than a $600,000 annual aggregate for all claims made during the policy period, shall be maintained in effect by each resident health care provider as a condition to rendering professional service as a health care provider in this state, unless such health care provider is a self-insurer. . . . Such policy shall provide as a minimum coverage for claims made during the term of the policy which were incurred during the term of such policy or during the prior term of a similar policy." (Emphasis added.)

It is useful to distinguish the common types of liability insurance available for health care providers. With an occurrence policy, the coverage becomes effective if the negligent or omitted act occurs during the term of the policy. Essentially, the peril insured against by an occurrence policy is the act or omission itself, regardless of when the claim against the policy is made. With a claims made policy, the coverage becomes effective if the claim is discovered or made during the effective term of the policy, so the peril insured against is the claim itself. In a pure claims made policy, the effectiveness of the policy is not dependant on when the negligent act or omission occurred.

KaMMCO agrees that K.S.A. 40-3402(a) requires health care providers to maintain a claims made liability policy but argues that the statute only applies to its basic coverage and not to its excess limits coverage.

The relevant language of K.S.A. 40-3402(a), which has been a part of the statute since it was first enacted in 1976, states: "Such policy shall provide as a minimum coverage for claims made during the term of the policy which were incurred during the term of such policy or during the prior term of a similar policy." (Emphasis added.)

When the statute was first enacted in 1976, there was no need for excess limits insurance because the Fund's liability was unlimited. Therefore, excess limits insurance was not contemplated by the legislature; since the relevant language in K.S.A. 40-3402(a) has gone unchanged, we conclude that no excess limits liability coverage should be read into the statute.

Furthermore, the plain language of K.S.A. 40-3402(a) refers to the claims made policy as a "minimum coverage" and not as "any and all" coverage. If the legislature had intended for insurers to provide any and all professional liability insurance with claims made policies, the legislature would have used the words "any and all" rather than "minimum coverage."

KaMMCO's argument that the HCPIA applies only to its basic liability coverage is further supported by K.S.A. 2002 Supp. 40-3401(a), which defines "basic coverage" as "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." Thus, by definition, K.S.A. 40-3402(a) establishes the minimum "basic coverage" and does not address excess limits insurance. Although the HCPIA refers to "basic coverage" in several statutes, see K.S.A. 2002 Supp. 40-3401, K.S.A. 40-3402, K.S.A. 2002 Supp. 40-3403, K.S.A. 2002 Supp. 40-3404, K.S.A. 40-3413, K.S.A. 2002 Supp. 40-3414, K.S.A. 40-3420, the Act neither requires excess limits coverage nor prohibits insurers from offering excess limits liability insurance.

Focusing on the language in K.S.A. 40-3402 that refers to claims incurred "during the prior term of a similar policy," Dr. Marshall and the Weisses argue that the excess limits insurance must be pure claims made insurance because Dr. Marshall's alleged negligence occurred during the prior term of a similar policy. The word "similar" means "[n]early corresponding; resembling in many respects." Black's Law Dictionary 1383 (6th ed. 1990). Although both the statutory basic coverage (primary) and excess limits coverage (secondary) are similar in that they both provide professional liability insurance, the similarities end at that point.

In any review of insurance coverages, we must always be guided by the language of the insurance contract. Here, by the terms of KaMMCO's insurance contract, the basic coverage and the excess limits coverage do not apply at the same time or under the same circumstances. Thus, the coverages are not similar, and the statutory requirement of claims made minimum liability coverage in K.S.A. 40-3402 does not extend to excess limits coverage.

Dr. Marshall and the Weisses' reliance on Missouri Medical Ins. Co. v. Wong, 234 Kan. 811, 676 P.2d 113 (1984), is misplaced. Dr. Wong did not have excess limits coverage; his primary coverage limit was $1,000,000 per claim, with a $1,000,000 annual aggregate. K.S.A. 40-3408 requires the payment of all insurance amounts that would have been applicable in the absence of the HCPIA before the Fund coverage becomes effective. Because Dr. Wong only purchased a policy with one coverage limit rather than purchasing a policy with both basic and excess limits liability coverages, K.S.A. 40-3408...