Wis. Med. Soc'y Inc v. Morgan, 2009AP728.
| Decision Date | 20 July 2010 |
| Docket Number | No. 2009AP728.,2009AP728. |
| Citation | 2010 WI 94,787 N.W.2d 22 |
| Parties | WISCONSIN MEDICAL SOCIETY, INC. and David M. Hoffmann, M.D., Plaintiffs-Appellants,v.Michael L. MORGAN, Defendant-Respondent. |
| Court | Wisconsin Supreme Court |
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For the plaintiffs-appellants there were briefs (in the court of appeals) and a brief in the supreme court by Cynthia L. Buchko, Thomas M. Pyper, and Whyte Hirschboeck Dudek, S.C., Madison, and oral argument by Thomas M. Pyper.
For the defendant-respondent the cause was argued by Charlotte Gibson, assistant attorney general, and Christopher J. Blythe, assistant attorney general was on the brief (in the court of appeals) and a brief in the supreme court, with whom on the briefs was J.B. Van Hollen, attorney general.
An amicus curiae brief was filed by Peter L. Gardon, Jessica Hutson Polakowski, and Reinhart Boerner Van Deuren S.C., Madison, on behalf of the Wisconsin Academy of Family Physicians, the American Academy of Family Physicians, the Wisconsin Chapter of the American College of Physicians, the Milwaukee District Association of Osteopathic Physicians and Surgeons, and the American Medical Association.
An amicus curiae brief was filed by Anne Berleman Kearney and Appellate Consulting Group, Milwaukee, on behalf of the Wisconsin Hospital Association.
An amicus curiae brief was filed by William L. Shenkenberg, Michael Marx, Sean Lanphier, and Mallory & Zimmerman, S.C., Milwaukee, on behalf of the Medical College of Wisconsin.
An amicus curiae brief was filed by Michael B. Van Sicklen, Bree Grossi Wilde, and Foley & Lardner LLP, Madison, on behalf of Dean Health Systems, Inc., Marshfield Clinic and Gunderson Lutheran Health System, Inc.
An amicus curiae brief was filed by Lester A. Pines and Cullen, Weston, Pines & Bach LLP, Madison, on behalf of the Advocates for Medicaid Patients.
An amicus curiae brief was filed by Lynn R. Laufenberg and the Laufenberg Law Group, S.C., Milwaukee and by Dana J. Weis and Habush, Habush & Rottier, S.C., Rhinelander, on behalf of the Wisconsin Association for Justice, and oral argument by Dana J. Weis.
ON CERTIFICATION FROM THE COURT OF APPEALS
¶ 1 This case is before the court on certification from the court of appeals pursuant to Wis. Stat. § (Rule) 809.61 (2007-08).1 As part of the 2007-2009 state budget, 2007 Wis. Act 20 (the Act), the legislature transferred $200 million from the Injured Patients and Families Compensation Fund (the Fund) to the Medical Assistance Trust Fund (MATF). 2007 Wis. Act 20, § 9225. To implement the Act, the Department of Administration, under the supervision and direction of Secretary Michael L. Morgan (Secretary Morgan), subsequently made two transfers of $71.5 million and $128.5 million from the Fund.
¶ 2 The Wisconsin Medical Society (the Medical Society) and Dr. David Hoffmann, M.D. (Dr. Hoffmann) brought this suit, claiming that Secretary Morgan took private property without just compensation. The circuit court dismissed the suit on grounds that the Medical Society lacked a property interest in the Fund.
¶ 3 The Medical Society appealed, and the court of appeals certified the matter to this court. We granted certification on the following two questions:
¶ 4 We conclude that the health care providers have a constitutionally protected property interest in the Fund. Wisconsin Stat. § 655.27(6) defines the Fund as an irrevocable trust, and the structure and purpose of the Fund satisfy all the elements necessary to establish a formal trust. Because the health care providers are specifically named as beneficiaries of the trust, they have equitable title to the assets of the Fund.
¶ 5 From their equitable title in the Fund, the health care providers have at least three corresponding rights. First, they have a right to the security and integrity of the entire Fund. Second, they have a right to realize the Fund's investment earnings to moderate, perhaps even lower, their assessments. Third, health care providers and the proper claimants have the right to have excess judgments paid to the proper claimants. Any transfer of money from the Fund for an improper purpose infringes upon these three rights.
¶ 6 Because health care providers have protected property interests in the Fund, we conclude that § 9225 of 2007 Wis. Act 20 is unconstitutional because it authorizes an unconstitutional taking of private property without just compensation.
¶ 7 Accordingly, we reverse the circuit court's order granting summary judgment and dismissing the Medical Society's suit. We remand with directions that the circuit court issue (1) an order requiring Secretary Morgan to replace the money removed from the Fund, together with lost earnings and interest that has been charged to the Fund; and (2) a permanent injunction prohibiting Secretary Morgan from transferring money out of the Fund pursuant to § 9225 of 2007 Wis. Act 20.
¶ 8 A full appreciation of the issues in this case requires a detailed examination of the Fund itself. Accordingly, we begin this section by examining the history of the Fund and the current statutory structure. We then examine 2007 Wis. Act 20 and the transfer of money from the Fund to the MATF. Finally, we set out the procedural history of this case.
¶ 9 The Fund was established by the legislature in 1975 in response to the rising cost of professional liability insurance coverage for health care providers, which was leading to increased health care costs and decreased availability of health care services. § 1, ch. 37, Laws of 1975. The stated purpose of the Fund is “to curb the rising costs of health care by financing part of the liability incurred by health care providers as a result of medical malpractice claims and to ensure that proper claims are satisfied.” Wis. Stat. § 655.27(6).
¶ 10 The Fund operates as part of a broad legislative scheme set out in Wis. Stat. ch. 655. Chapter 655 “provide[s] the exclusive procedure for a person to pursue a malpractice claim against a health care provider.” Rouse v. Theda Clark Med. Ctr., Inc., 2007 WI 87, ¶ 35, 302 Wis.2d 358, 735 N.W.2d 30 (citing State ex rel. Strykowski v. Wilkie, 81 Wis.2d 491, 499, 261 N.W.2d 434 (1978)). The provisions of ch. 655 are applicable to nearly all health care providers practicing in Wisconsin who are not state, county, or municipal employees, or federal employees.2
¶ 11 Under ch. 655, each health care provider is required to maintain health care liability insurance or qualify as a self-insurer. Wis. Stat. § 655.23(3)(a). As of July 1, 1997, each health care provider is required to maintain liability coverage of at least $1,000,000 for each claim or occurrence and $3,000,000 for all claims or occurrences in any one policy year. Wis. Stat. § 655.23(4)(b)2.a., b. As long as a health care provider has an insurance policy in force and complies with the requirements of ch. 655, the liability of the health care provider and his or her insurer is limited to the required amount of liability insurance or the maximum limit of the health care provider's liability insurance policy, whichever is greater. Wis. Stat. § 655.23(5).3
¶ 12 Each health care provider who is subject to the provisions of ch. 655 also is required to participate in the Fund by paying an annual assessment. Wis. Stat. § 655.27(3)(a). For health care providers complying with the requirements of ch. 655, the Fund pays out that portion of any medical malpractice claim in excess of the amount of insurance that the health care provider is required to maintain, or the maximum liability of the health care provider's insurance, whichever is greater. Wis. Stat. § 655.27(1). In other words, the Fund is liable for payments “after a health care provider's statutorily mandated liability coverage limits are exceeded.” Wis. Patients Comp. Fund v. Wis. Health Care Liability Ins. Plan, 200 Wis.2d 599, 613, 547 N.W.2d 578 (1996) (hereinafter WHCLIP ).
¶ 13 Wisconsin Stat. § 655.23(6) provides that a health care provider who fails to participate in the Fund is subject to the broad enforcement authority of the Commissioner of Insurance (the commissioner) under Wis. Stat. § 601.64.4 Furthermore, a health care provider who does not participate in the Fund may not exercise any of the rights or privileges of his health care license. Wis. Stat. § 655.23(7). The board that granted the health care provider his or her license may suspend or refuse to issue or renew the license if the health care provider does not participate in the Fund. Id.
¶ 14 When the Fund was initially created, the legislature specified that it “shall be held in trust for the benefit of insureds and other proper claimants,” and that “[t]he fund may not be used for purposes other than those of this chapter.” § 10, ch. 37, Laws of 1975. In 2003 this language was expanded to specify:
The fund is established to curb the rising costs of health care by financing part of the liability incurred by health care providers as a result of medical malpractice claims and to ensure that proper claims are satisfied. The fund, including any net worth of the fund, is held in irrevocable trust for the sole benefit of health care providers participating in the fund and proper claimants. Moneys in the fund may not be used for any other purpose of the state.
Wis. Stat. § 655.27(6) (emphasis added).
¶ 15 The Fund is managed by a board of governors (the board). Wis. Stat. § 655.27(2). The board also oversees the WHCLIP, a risk-sharing plan to insure health care providers unable to obtain private coverage. Wis. Stat. § 619.04(3); WHCLIP, 200 Wis.2d at 607-08, 547 N.W.2d 578. The board consists of 13 members representing different...
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