Southeast Volusia Hosp. Dist. v. State, Dept. of Ins.

• Decision Date: 17 May 1983
• Docket Number: AN-367,Nos. AN-412,s. AN-412
• Citation: 432 So.2d 592
• Parties: SOUTHEAST VOLUSIA HOSPITAL DISTRICT, et al., Appellants, v. STATE of Florida, DEPARTMENT OF INSURANCE, and Florida Patient's Compensation Fund, Appellees. HIGHLANDS COUNTY HOSPITAL DISTRICT, et al., Appellants, v. STATE of Florida, DEPARTMENT OF INSURANCE, and Florida Patient's Compensation Fund, Appellees.
• Court: Florida District Court of Appeals

Page 592

432 So.2d 592

SOUTHEAST VOLUSIA HOSPITAL DISTRICT, et al., Appellants, v. STATE of Florida, DEPARTMENT OF INSURANCE, and Florida

Patient's Compensation Fund, Appellees.

HIGHLANDS COUNTY HOSPITAL DISTRICT, et al., Appellants, v. STATE of Florida, DEPARTMENT OF INSURANCE, and Florida

Patient's Compensation Fund, Appellees.

Nos. AN-412, AN-367.

District Court of Appeal of Florida First District.

May 17, 1983.

Rehearing Denied May 27, 1983.

Ben H. Wilkinson, Neil H. Butler, and Cathi C. O'Halloran of Pennington, Wilkinson, Gary & Dunlap, Tallahassee, and Adams, Hill & Fulford, Orlando, for appellants Southeast Volusia Hosp. Dist., et al.

Peter J. Winders and Jacob D. Varn of Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., and John D. Buchanan, Jr., of Henry, Buchanan, Mick & English, Tallahassee, and Adams, Ward, Hunter, Angones & Adams, Miami, for appellants Highlands County Hosp. Dist., et al.

Richard B. Collins and Sam R. Neel, III, of Perkins & Collins, Tallahassee, and Talbot D'Alemberte and Jeffrey B. Crockett of Steel, Hector & Davis, Miami, for appellee Florida Patient's Compensation Fund.

David A. Yon, Tallahassee, for appellee Dept. of Ins.

ERVIN, Judge.

In these consolidated appeals from a final order of the Department of Insurance (Department) levying $17,046,190.00 in assessments against participants in the Florida Patient's Compensation Fund (Fund), appellants contend, inter alia, that Section 768.54(3)(c), Florida Statutes (1981), ¹ is unconstitutional in that it amounts to an unlawful delegation of legislative power. We agree and reverse on that point without passing on the other issues raised. ²

In response to what has been described as a medical malpractice insurance crisis, the Florida legislature enacted the "Medical Malpractice Reform Act of 1975" ³ which, in part, created the "Florida Patient's Compensation Fund", the purpose of which was to limit participants' liability in malpractice actions to $100,000.00 per claim and $500,000.00 per occurrence, while providing that the balance of awards would be paid by the Fund. See Chapter 75-9, Laws of Florida. The Act permits all health care providers, other than hospitals, i.e., physicians, osteopaths, podiatrists, health maintenance organizations (HMO), ambulatory surgical centers and other medical facilities, to participate in the fund if they so choose, but hospitals are required to join unless they can demonstrate financial responsibility for malpractice claims, in which case they may be exempt from participation. Such exemption carries with it the consequence that the hospital be barred from the limited liability provided by the Fund.

The Fund is to be financed by three sources of monies: (1) base fees of $1,000.00 per individual and $300.00 per hospital bed during the first year of participation and, for later years, $500.00 per individual and $300.00 per hospital bed; (2) additional fees; and (3) assessments. When it became evident, in 1976, that the threat of a medical malpractice crisis still loomed, the legislature amended section 768.54(3)(c) to offer greater protection for physicians ⁴ by providing that assessments for Fund participants, other than hospitals, could not exceed "an amount equal to the fees or assessments originally paid by such health care provider for participation in the fund for the year giving rise to such deficit assessment." Chapter 76-260, § 6, Laws of Florida. ⁵

Although the Fund commenced operation in 1975, it was not until 1978, when deficits were first anticipated, that additional fees ranging from $1,749.00 to $12,619.00 were recommended by the Fund. ⁶ A public hearing was held by the Department to consider the issue of additional fees, but, after all those present, with the sole exception of the Fund, spoke out against additional fees, the Department concluded that no change in the existing fee schedule was appropriate at that time. ⁷ Finally, in October 1981, the Fund certified to the Department deficiencies for the fund years 1977-78 and 1978-79 totaling some $17,000,000.00, ⁸ and the Department levied assessments against Fund participants to make up the deficiency. The dispute, which is the subject of this appeal, arose not over the total deficiency certified by the Fund, but over the Department's allocation of the deficiency among the Fund participants. The Department, using an indicated rate method, first determined the assessments due from each of the eight categories of health care providers as defined by section 768.54(1)(b)1.-8., then interpreted section 768.54(3)(c) as precluding assessments against physicians, osteopaths, podiatrists and professional associations which would exceed the amount of fees paid by those individuals for participation in the Fund for the year found to be deficient. The Department further construed the statute as providing for unlimited assessment liability for all other health care providers. As a result, $10,500,000.00 in additional assessments for claims stemming from charges of physician malpractice was assessed against the hospitals, HMO's, ambulatory surgical centers and other medical facilities participating in the Fund, rather than against the physicians.

Appellants contend, and we agree, that section 768.54(3)(c) amounts to an unlawful delegation of legislative power due to insufficient standards and guidelines establishing the method of assessments. Before addressing the merits of this argument, we must, however, dispose of two preliminary issues raised by the Fund in contesting the appellants' right to challenge the constitutionality of this statute. The Fund first asserts that because appellants voluntarily elected to participate in the Fund, they are therefore estopped from now challenging the constitutionality of a statute from which they have benefited. We agree that the doctrine of equitable estoppel may be applied in appropriate cases to bar a constitutional challenge to a statute or ordinance. See 759 Riverside Avenue, Inc. v. Marvin, 109 Fla. 473, 147 So. 848 (1933) (corporation, accepting charter from state, must do so subject to conditions prescribed by law and may not later challenge constitutionality thereof); McNulty v. Blackburn, 42 So.2d 445 (Fla.1949) (petitioner who voluntarily accepted pension benefits for six years was estopped to challenge constitutionality of pension act); State ex rel. Watson v. Gray, 48 So.2d 84 (Fla.1950) (candidate who accepted benefits of election law estopped from challenging that law after losing election); Baker v. State Road Department, 79 So.2d 511 (Fla.1955) (citizens who failed to intervene in bond validation proceedings were estopped from later seeking to enjoin sale of bonds); State ex rel. Bankers Life & Casualty Company v. Village of North Palm Beach, 138 So.2d 378 (Fla. 2d DCA 1962) (landowner who accepted benefits from village for three years estopped from challenging act creating village). Nevertheless, while it is generally recognized that one who invokes the provisions of a law or partakes of advantages thereunder may not then be heard to challenge the constitutionality thereof, see Bon Ton Cleaners & Dyers, Inc. v. Cleaning, Dyeing & Pressing Board, 128 Fla. 533, 176 So. 55 (1937); 10 Fla.Jur.2d Constitutional Law § 68 (1979), there are two recognized exceptions to this rule: First, "[t]he rule is well settled in this country that when one accepts the general benefits of an act he is not estopped to challenge the constitutionality of any separable portion thereof under which he has not given or accepted benefits." Lollie v. General American Tank Storage Terminals, 160 Fla. 208, 34 So.2d 306, 308 (1948) (e.s.) (employer not estopped from challenging constitutionality of section of worker's compensation act despite acceptance of general benefits of act). See also Mojave River Irrigation District v. Superior Court, 202 Cal. 717, 262 P. 724 (Cal.1927); City of Los Angeles v. Los Angeles City Water Company, 177 U.S. 558, 20 S.Ct. 736, 44 L.Ed. 886 (1900); 10 Fla.Jur.2d Constitutional Law § 68 (1979). Second, the "acceptance of the benefits of an act under compulsion will not preclude an attack upon the statute." Hialeah Race Course, Inc. v. Gulfstream Park Racing Ass'n., Inc., 245 So.2d 625, 629 (Fla.1971) (e.s.) (Gulfstream's acceptance of benefits of statute for twenty years did not estop it from challenging constitutionality of statute). See also 16 Am.Jur.2d Constitutional Law § 211 (1979); 10 Fla.Jur.2d Constitutional Law § 68 (1979). We find that both exceptions apply in this case to preclude application of the doctrine of estoppel. There can be little doubt that appellants have generally benefited from the operation of section 768.54. Section 768.54(3)(c) is, however, a separable portion of that statute dealing only with the mechanics of financing the Fund, and, as such, may be challenged despite appellants' utilization of the general provisions of the statute.

Although the Fund contends that appellants voluntarily elected to participate in the Fund, we also find that their participation was made virtually compulsory by section 768.54(2)(a), which, while authorizing voluntary participation for all health care providers other than hospitals, made participation mandatory for all hospitals in Florida ⁹ unless they could qualify for exemption by demonstrating financial responsibility for claims through one of the following means:

1. Post bond in an amount equivalent to $10,000 per claim for each hospital bed in said hospital, not to exceed a $2,500,000 annual aggregate;

2. Prove financial responsibility in an amount equivalent to $10,000 per claim for each hospital bed in said hospital, not to exceed a $2,500,000 annual aggregate, to the satisfaction of the board of governors of the fund, through the establishment of an appropriate escrow account;

3. Obtain professional liability coverage in an amount equivalent to $10,000 or more per claim for each bed in said...