Yussen v. Med. Care Availability & Reduction of Error Fund

• Decision Date: 30 May 2012
• Citation: 46 A.3d 685
• Parties: Phillip S. YUSSEN, M.D., Appellant v. MEDICAL CARE AVAILABILITY AND REDUCTION OF ERROR FUND, Appellee.
• Court: Pennsylvania Supreme Court

46 A.3d 685

Phillip S. YUSSEN, M.D., Appellant

v.MEDICAL CARE AVAILABILITY AND REDUCTION OF ERROR FUND, Appellee.

Supreme Court of Pennsylvania.

Argued Nov. 29, 2011.

Decided May 30, 2012.

Stephanie Lynn Hersperger, Paul Richard Walker, Thomas, Thomas & Hafer, L.L.P., Harrisburg, for Phillip S. Yussen.

Amy Griffith Daubert, Harrisburg, Tawny Kay Mummah, Medical Care Availability & Reduction of Error Fund, Cindy Elaine Sheaffer, Enola, for Medical Care Availability & Reduction of Error Fund.

BEFORE: CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, ORIE MELVIN, JJ.

OPINION

Justice SAYLOR.

At issue in this direct appeal is a statutory prerequisite to the obligation of the Insurance Department to defend certain medical professional liability actions asserted against health care providers, and to the requirement for payment of claims asserted in such actions from the Medical Care Availability and Reduction of Error Fund. Specifically, resolution of the appeal turns on when, under the governing statute, a “claim” is “made” outside a specified four-year time period.

Appellee, the Commonwealth of Pennsylvania, Medical Care Availability and Reduction of Error (“MCARE”) Fund, is a special fund established within the State Treasury and administered by the Insurance Department per the MCARE Act, ¹ embodying Pennsylvania's framework governing professional liability insurance for health care providers. See generally Fletcher v. Pa. Prop. & Cas. Ins. Guar. Ass'n, 603 Pa. 452, 472–75, 985 A.2d 678, 691–92 (2009). Appellant, Phillip S. Yussen, M.D., is a licensed physician and participating health care provider, per the statutory scheme.

Pursuant to the MCARE Act, surcharges are collected from Pennsylvania health care providers, which are reposited in the Fund and used to supplement the primary (or basic) professional liability coverage required under the enactment. See generally40 P.S. §§ 1303.711–1303.712. Ordinarily, private carriers serve in the role of primary insurers with initial indemnity and defense obligations, see id. § 1303.711, and the Fund serves, in essence, to provide a layer of excess coverage, see id. § 1303.712. Under Section 715 of the enactment, however, where more than four years have passed between the events giving rise to liability on the part of a health care provider and the making of a claim against it, the Insurance Department and the Fund may be required also to assume central obligations of the primary insurer. See id.§ 1303.715. The duties and liabilities of the Department and the Fund, in this respect, include the provision of initial indemnification and funding the defense of the underlying civil action, which the parties term “first-dollar indemnity and cost of defense” or “Section 715 status.” ²

The material prescription of Section 715 is as follows:

(a) General Rule.—If a medical professional liability claim ... is made more than four years after the breach of contract or tort occurred ... the claim shall be defended by the department....

(b) Payment.—If a health care provider is found liable for a claim defended by the department in accordance with subsection (a), the claim shall be paid by the fund.

Id.§ 1303.715(a)-(b). The apparent purpose underlying these directives is to afford private insurance companies providing the basic coverage greater certainty in terms of fixing reserves against possible claims, particularly in light of Pennsylvania's discovery rule exception to statutory periods of limitations pertaining to the commencement of civil actions. See Pa. Med. Soc'y Liab. Ins. Co. v. Commonwealth, 577 Pa. 87, 90 n. 2, 842 A.2d 379, 380 n. 2 (2004)

On June 4, 2007, Joanna Ziv filed a praecipe for a writ of summons naming Appellant and other medical providers as defendants. A complaint was filed on August 2, 2007, alleging medical negligence last occurring on July 7, 2003. Appellant's primary insurer, Pennsylvania Healthcare Providers Insurance Exchange (“PaHPIX”), requested that the claim be accorded Section 715 status by the Insurance Department. The Department denied such request, however, on the basis that the claim had been made less than four years after the alleged malpractice. See40 P.S. § 1303.715(a). In this regard, the Department reasoned that the date of alleged malpractice was July 7, 2003, and the claim was first “made” upon the filing of the praecipe for a writ of summons on June 4, 2007. Appellant initially challenged this determination in the administrative setting, and a hearing ensued.

At the hearing, Appellant presented as a witness a senior claims examiner for PaHPIX, who attested to the above facts (most of which also were the subject of a stipulation). The claims examiner added that Appellant and PaHPIX first received notice of the writ on July 23, 2007, over four years after the asserted medical negligence. According to his testimony, this date is significant to Appellant's primary coverage, since the policy was written on a claims-made basis, pursuant to which coverage is provided for claims received by an insured and reported to the insurer during the policy period. See N.T., May 29, 2008, at 17, 31; Exhibit 2 to Joint Stipulation of Facts, at 9 (reflecting the policy's definition of a claim, subsuming “[w]ritten notification received by an insured of a suit or receipt by an insured of any other request for compensation to which this insurance applies made by or on behalf of an injured party to which this insurance applies”).

While the matter was pending before the Insurance Commissioner, this Court issued a decision in Fletcher v. Pennsylvania Property & Casualty Insurance Guaranty Association, 603 Pa. 452, 985 A.2d 678 (2009), holding that original jurisdiction over claims asserted against the MCARE Fund premised on the requirements of the MCARE Act lies in the Commonwealth Court. See id. at 481, 985 A.2d at 697. Per Fletcher, the case was transferred there, and the court appointed a hearing examiner.

Before the examiner, Appellant argued that, consistent with the policy definition of a “claim,” the date on which a claim is made for purposes of Section 715 cannot precede the date on which notice is provided to the insured. Appellee, on the other hand, contended that a claim is made when it is first asserted, instituted, or comes into existence—including upon the tender of a demand or the commencement of a legal action—and that notice to the insured or insurer is not a necessary prerequisite. In this regard, Appellee highlighted that Section 715 does require “notice” of the claim to trigger the provider's obligation to report the claim to the Fund within 180 days, but the statute does not contain such an express notice component in delineating the four-year requirement. See40 P.S. § 1303.715(a).

The hearing examiner recommended reversal of the denial of Section 715 status, reasoning, in the first instance, that the governing statutory language is ambiguous. Observing that the statute provides no definition for either the term “claim” or “made,” the examiner explained:

In one sense, a claim is initiated (if it does not exist already) when a legal action is commenced. The section itself refers to the claim being filed within the statute of limitations, implying that a claim is made or previously exists when it is filed. In another sense, a claim is not made unless something is claimed. Without communicating a demand for something, nothing is claimed.... The plain language of Section 715 does not answer which is the operative event for determining when a claim is made.

Proposed Decision in Yussen v. MCARE Fund, No. 400 M.D.2010, slip op. at 10–11 (Pa.Cmwlth., Jan. 4, 2011).³

Given the noted ambiguity, the hearing examiner referenced various tools of statutory construction, including review of the object to be attained, the statute's history, the consequences of various interpretations, and administrative interpretations. See1 Pa.C.S. § 1921(c)(4), (5), (6), (8). In terms of the statute's purpose—that is, to afford insurance companies greater certainty in fixing reserves—the examiner highlighted that, absent notice, an insurer simply cannot achieve the intended certainty. See Proposed Decision in Yussen, No. 400 M.D.2010, slip op. at 12 (“If a filed but unserved writ of summons constitutes ‘making a claim,’ the carrier is unable to adjust its reserves accordingly.”).

As to the history, the hearing examiner recounted that that the first-dollar and costs of defense obligation originally was tied to whether a claim was “filed” after the four-year period. See40 P.S. § 1301.605 (repealed 2002). He reasoned that removal of such filing requirement evidenced a legislative intent that communication of the claim to the provider should control. See Proposed Decision in Yussen, No. 400 M.D.2010, slip op. at 13–14 (“Rewriting the section less than a year after its enactment to remove the filing requirement evidences an intent to make communication of the claim the operative event rather than filing.”).

On the subject of administrative interpretations, the hearing examiner discussed an adjudication by the Insurance Commissioner in In re: Kimberly S. Harnist, M.D., No. MM06–02–014, slip op. (Pa.Ins.Dep't, Oct. 10, 2006). There, the Commissioner determined that a claim was made via the filing of a writ of summons, assuming proper service was effectuated. See id. at 8–9. The hearing examiner found such interpretation to be consistent with his own position that a claim is made when it is communicated to the provider or carrier.See Proposed Decision in Yussen, No. 400 M.D.2010, slip op. at 14–15.⁴

The Commonwealth Court sustained exceptions to the hearing examiner's recommendation lodged by Appellee and entered judgment in its favor. See Yussen v. MCARE Fund, 17 A.3d 422 (Pa.Cmwlth.2011). At the outset, the court differed with the hearing examiner's reading of the Harnist adjudication, indicating that “the Insurance Commissioner held in no uncertain terms...