IN THE COMMONWEALTH COURT OF PENNSYLVANIA
George P. Desjardins, Jr., M.D., :
:
Petitioner :
:
v. : No. 506 M.D. 2012
: Argued: December 10, 2019
Michael F. Consedine, in his :
official capacity as Insurance :
Commissioner of the :
Commonwealth of Pennsylvania, :
and the Pennsylvania Insurance :
Department Medical Care :
Availability and Reduction of Error :
Fund ("Mcare"), :
:
Respondents :
:
v. :
:
Team Health, Inc., Alliant Insurance :
Services, Inc., and Western :
Litigation, Inc., and Lexington :
Insurance Company, :
:
Additional Respondents :
BEFORE: HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE ELLEN CEISLER, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE WOJCIK FILED: January 6, 2020
Before the Court are the cross-applications for summary relief of
George P. Desjardins, Jr., M.D. (Doctor) and Michael F. Consedine, in his official
capacity as Insurance Commissioner of the Commonwealth of Pennsylvania,1 and
the Pennsylvania Insurance Department (Department) Medical Care Availability
and Reduction of Error Fund (collectively, Mcare)2 to the petition for review filed
by Doctor in our original jurisdiction seeking declaratory judgment and restitution.
We grant Mcare’s Cross-Application for Summary Relief; deny Doctor’s
Application for Summary Relief; and dismiss Doctor’s Petition for Review.
The relevant stipulated facts of this case are as follows. On December
1, 2008, Emergency Physician Associates of Pennsylvania, P.C., an affiliate of
TeamHealth, Inc. (TeamHealth) hired Doctor as a full-time independent contractor.
On that date, Doctor was added to TeamHealth’s professional liability insurance
policy, which Lexington Insurance Company (Lexington) underwrote (Lexington
policy). The policy was effective from June 1, 2009 through June 1, 2010, and
covered Doctor for “damages resulting from a medical incident arising out of
professional services . . . [where such] medical incident [took] place on or after the
1
We note that Michael F. Consedine is no longer the Insurance Commissioner of the
Commonwealth of Pennsylvania. However, Rule 503(c) of the Pennsylvania Rules of Appellate
Procedure allows for the automatic substitution of his successor, Jessica K. Altman, in this
matter.
2
The prior Health Care Services Malpractice Act, Act of October 15, 1975, P.L. 390, as
amended, formerly 40 P.S. §§1301.101-1301.1006, repealed by the Act of March 20, 2002, P.L.
154, established the Medical Professional Catastrophe Loss Fund (CAT Fund). The CAT Fund
was funded by a surcharge upon the premium the provider paid for primary coverage and was set
at 10% of the provider’s annual premium for the primary coverage, or $100, whichever was
greater. The Medical Care Availability and Reduction of Error Act (Mcare Act), Act of March
20, 2002, P.L. 154, as amended, 40 P.S. §§1303.101-1303.1115, replaced the Health Care
Services Malpractice Act and established the Mcare Fund. The Mcare Fund obtains funding
from an annual assessment levied on health care providers and is based on the prevailing primary
premium for each health care provider. Sections 1101 through 1115 of the Mcare Act were
repealed by the Act of October 9, 2009, P.L. 537. Thus, a “surcharge” and an “assessment” are
the same thing, depending upon the statute under which they were established.
2
retroactive date and before the end of the policy period.” Petition for Review at 4.
The retroactive date of the Lexington policy was December 1, 2008, the date on
which TeamHealth hired Doctor. Doctor’s coverage under the Lexington policy
was reported to Mcare on Form 216 and the required assessment was paid on July
9, 2009 and received by Mcare on July 24, 2009. Id.
At some point after July 24, 2009, Mcare provided a list of
outstanding problems to Alliant Insurance Services, Inc. (Alliant), TeamHealth’s
insurance broker, reporting, among other things, that the retroactive date of
Doctor’s coverage should have been reported as June 1, 2009. Petition for Review
at 5. In response, Alliant sent Mcare a corrective Form 216 identifying Doctor’s
retroactive date under the Lexington policy as June 1, 2009. Id. Notwithstanding
the corrective Form 216, the actual retroactive date set forth in the Lexington
policy remained December 1, 2008. Id.
On December 30, 2009, Doctor received notice of a lawsuit filed by
Shanna and Keith Hallman (Hallman lawsuit). The Hallmans initiated a
professional negligence claim against Doctor and others in federal court, alleging
that their son was improperly treated and released from a medical facility on
January 27, 2009, and died from asthma-related complications. Doctor
subsequently settled the Hallman lawsuit for $1,000,000.00, $500,000.00 for which
he claims that Mcare is responsible. Petition for Review at 7; Section 712 of the
Mcare Act, 40 P.S. §1303.712.3
3
The Mcare Fund is used to pay claims against health care providers for losses or
damages awarded in medical professional liability actions that exceed the provider’s basic
insurance coverage; this is known as “excess coverage.” 40 P.S. §1303.712.
3
On February 2, 2010, the Hallman lawsuit was reported to Mcare via
Form C-416, which requested that Mcare provide excess coverage for Doctor.
Petition for Review at 6. Mcare denied the request for excess coverage because its
records indicated that “the first date of reported Lexington basic insurance
coverage for which Mcare received a Remittance Advice and applicable
assessment for Mcare coverage for [Doctor] was June 1, 2009, after the reported
date of malpractice.” Id. According to Doctor, Mcare had no basis upon which to
deny excess coverage because the Lexington policy was in place at the time that
the Hallman claim was made and was reported to Mcare prior to the claim. Id.
On August 8, 2012, Doctor filed a petition for review in this Court’s
original jurisdiction setting forth a request for declaratory judgment, seeking an
order to the effect that Mcare had no legal basis upon which to deny Doctor’s
request for excess coverage. Doctor also seeks restitution against Mcare for its
unjustified and improper refusal to reimburse Doctor for the amounts he was
required to pay on Mcare’s behalf to settle the Hallman claim.
On October 10, 2012, Mcare filed a joinder petition for
review/complaint naming TeamHealth, Alliant, Western Litigation, Inc. (Western),
as Alliant’s third party administrator, and Lexington as additional respondents.
The joinder petition for review/complaint alleges that on July 24, 2009, Mcare
received Alliant’s Form 216 on behalf of a number of health care providers,
including Doctor, as well as payment of the Mcare assessment. The form reported
that Doctor had primary insurance coverage from June 1, 2009 through June 1,
2010, with a retroactive date of December 1, 2008. However, the assessment
remitted on behalf of Doctor covered only the period of June 1, 2009 through June
4
1, 2010; there was no proof of primary insurance coverage with Lexington for
Doctor prior to that period.
Mcare sent Alliant a list of requests for clarification, which included
Alliant’s report of coverage for Doctor for the period of June 1, 2009 through June
1, 2010. In response, Alliant changed Doctor’s retroactive date to June 1, 2009, for
the period of June 1, 2009 through June 1, 2010.
On August 2, 2010, Mcare received notice of the Hallman complaint
and the request for excess coverage on Doctor’s behalf. However, there was no
Mcare excess coverage for Doctor in effect on January 27, 2009, the date of the
alleged malpractice. Rather, the assessment for Doctor’s primary coverage for the
period of December 1, 2008 to June 1, 2009 was not remitted to Mcare until after
the Hallman claim had been reported. The joinder petition for review/complaint
seeks judgment in favor of Mcare against additional respondents for all or part of
the sums for which Mcare may be liable to Doctor, as well as attorneys’ fees, costs,
and any other relief that the Court deems appropriate. By order dated April 14,
2014, this Court acknowledged the praecipe to discontinue the joinder petition
filed against TeamHealth, Alliant, and Lexington4 and dismissed as moot their
pending motions.
On June 11, 2019, Doctor filed an Application for Summary Relief.
On June 25, 2019, Mcare filed a Cross-Application for Summary Relief, and the
cross-applications were submitted to this panel for disposition.5
4
The praecipe acknowledged that Western was already dismissed from the matter via a
prior agreement of counsel.
5
Pa. R.A.P. 1532(b) provides: “At any time after the filing of a petition for review in an
appellate or original jurisdiction matter[,] the court may on application enter judgment if the
right of the applicant thereto is clear.” “The standard for granting summary relief turns upon
(Footnote continued on next page…)
5
Doctor alleges that he is entitled to summary relief because to qualify
for Mcare coverage, a doctor must pay the required assessment and have the “basic
insurance coverage” required by the Mcare Act. See Sections 711(a) and 712(d) of
the Mcare Act, 40 P.S. §§1303.711(a), 1303.712(d); Section 242.17(b) and (c) of
the Department’s regulations, 31 Pa. Code §242.17(b) & (c) (providing that a
doctor who does not pay the assessment or procure basic coverage will not be
covered by the Mcare Fund). The basic insurance coverage required by the Mcare
Act is a first-dollar insurance policy or self-insurance coverage of $500,000.00.
Sections 702 and 711(d) of the Mcare Act, 40 P.S. §§1303.702, 1303.711(d);
Section 242.2 of the Department’s regulations, 31 Pa. Code §242.2. The basic
insurance coverage can be obtained through a policy written on either an
occurrence or a “claims-made” basis. See Section 742 of the Mcare Act, 40 P.S.
§1303.742; Sections 242.2 and 242.7(d) of the Department’s regulations, 31
Pa. Code §§242.2, 242.7(d) (requiring a provider who elects to purchase prior acts
coverage or its substantial equivalent rather than a reporting endorsement to report
that coverage to the Mcare Fund along with any required assessment). An
occurrence policy provides coverage for liability that arises while the policy is in
(continued…)
whether the applicant’s right to relief is clear. Summary relief on a petition for review is similar
to the relief provided by a grant of summary judgment. Pa. R.A.P. 1532, Official Note.”
Scarnati v. Wolf, 173 A.3d 1110, 1118 (Pa. 2017) (footnote omitted). “Summary judgment is
appropriate where, after the close of pleadings, ‘there is no genuine issue of any material fact as
to a necessary element of the cause of action or defense which could be established by additional
discovery or expert report.’” Id. (quoting Pa. R.C.P. No. 1035.2(a)). However, “[w]here there
are material issues of fact in dispute or if it is not clear that the applicant is entitled to judgment
as a matter of law, the application will be denied.” Sherman v. Kaiser, 664 A.2d 221, 225 (Pa.
Cmwlth. 1995). There are no material issues of fact in dispute herein because the parties have
stipulated to the relevant material facts.
6
effect. See, e.g., Pennsylvania Manufacturers’ Association Insurance Co. v.
Johnson Matthey, Inc., 160 A.3d 285, 290 (Pa. Cmwlth. 2017) (“An ‘occurrence’
policy provides insurance coverage for liabilities arising while the policy is in
effect, whereas a ‘claims made’ policy protects the insured with respect to claims
made against it during the policy period, regardless of when the liability arose.”)
(citation omitted).
Doctor notes that, in contrast, a “claims-made” policy “protects the
insured with respect to claims made against it during the policy period, regardless
of when the liability arose.” Id. See also Section 742 of the Mcare Act, 40 P.S.
§1303.742 (defining a “claims-made policy to include a “[m]edical professional
liability insurance [policy] that insures those claims made or reported during a
period which is insured”); Fletcher v. Pennsylvania Property & Casualty
Insurance Guaranty Association, 985 A.2d 678, 680 n.4 (Pa. 2009) (“A claims
made policy provides coverage for claims filed while the doctor holds the policy,
in contrast to an occurrence policy, which covers claims relating to any acts that
occurred while the doctor held the policy, regardless of when the claims were
filed.”).
The required coverage can be satisfied by having a claims-made
policy in place at the time of the underlying occurrence and securing an extended
reporting endorsement, i.e., “tail” coverage, or having it in place at the time of the
claim that includes retroactive or “prior acts” coverage. See Section 742 of the
Mcare Act, 40 P.S. §1303.742; Sections 242.2 and 242.7(d) of the Department’s
regulations, 31 Pa. Code §§242.2, 242.7(d). The Mcare Act only requires that
basic coverage be in place and the assessment paid, whether coverage is through a
tail policy or a prior acts policy, prior to the filing of the claim that triggers the
7
basic insurance coverage. The Mcare Act provides that there is no Mcare Fund
coverage where the assessment has not been paid at the time of the claim. See
Section 242.71(b) and (c) of the Department’s regulations, 31 Pa. Code §242.71(b)
& (c); Dellenbaugh v. Commonwealth Medical Professional Liability Catastrophe
Loss Fund, 756 A.2d 1172, 1174-75 (Pa. 2000) (explaining that the doctor’s failure
to pay the surcharge within the statutory time limit precluded coverage by the CAT
Fund).
Doctor contends that in this case, the parties agree that the Lexington
policy, retroactive to December 1, 2008, was reported to Mcare on July 9, 2009,
before the Hallman lawsuit was filed against Doctor on February 1, 2010. Mcare
cannot claim that it did not receive an assessment for the coverage provided under
that policy, including the retroactive coverage period, because the Mcare Fund has
not charged an assessment for retroactive coverage for policies with a retroactive
date on or after January 1, 1997. See Fletcher v. Pennsylvania Property &
Casualty Insurance Guaranty Association, 27 A.3d 299, 306 n.11 (Pa. Cmwlth.
2011) (“Section 702 of the [A]ct provides that the basis for the surcharge is the
‘[p]revailing primary premium’ which is the ‘schedule of occurrence rates
approved by the Insurance Commissioner for the Joint Underwriting Association.’
40 P.S. §1303.702. As such, the surcharge is the same regardless of whether a
claims-made policy or an occurrence policy is purchased.”). Mcare stopped
charging an assessment for retroactive coverage when it stopped basing the
assessment on the primary carrier’s premium. As a result, in this case, the Mcare
Fund received the required assessment in connection with the only policy that
could have covered the Hallman lawsuit. See Fletcher, 27 A.3d at 308 (granting
partial summary judgment where the doctors in the underlying malpractice action
8
received automatic tail coverage when their claims-made policies lapsed and were
current on their Mcare assessments for the years in which their claims-made
policies were in effect). Doctor’s basic coverage policy in place to cover the
Hallman lawsuit was timely reported to Mcare, which was all that was required of
him to receive coverage from the Mcare Fund.
However, Mcare asserts that it is entitled to summary relief because to
participate in the Mcare Fund, a doctor must pay an assessment. Section 712(d) of
the Mcare Act, 40 P.S. §1303.712(d); Dellenbaugh. See also Gingerlowski v.
Medical Care Availability & Reduction of Error Fund, 961 A.2d 237, 245 (Pa.
Cmwlth. 2008) (“In addition to not purchasing tail coverage, Provider did not pay a
Fund surcharge since 1989. Here, Petitioners did not file their malpractice claim
against Provider until 1994. ‘A health care provider failing to pay the surcharge
. . . within the time limits prescribed will not be covered by the Fund in the event
of a loss.’ 31 Pa. Code §242.17(b).”). A doctor who fails to timely pay the
assessments may not participate in coverage by the Mcare Fund. Section
242.17(b) of the Department’s regulations. 31 Pa. Code §242.17(b); Dellenbaugh,
756 A.2d at 1174-75. Thus, a doctor is not eligible for coverage by the Mcare
Fund if his assessment is untimely and received after the claim is made. Lloyd v.
Medical Professional Liability Catastrophe Loss Fund, 821 A.2d 1230, 1236 (Pa.
2003).6
6
As the Pennsylvania Supreme Court explained:
To require the CAT Fund to cover a health care provider who fails
to pay a required surcharge on time would have the effect of
making the surcharge payment an option. It would be absurd to
allow health care providers to forego their surcharge payments
until a possible claim arises. The only way the CAT Fund is able
(Footnote continued on next page…)
9
In this case, Mcare received Doctor’s assessment more than 60 days
after the effective date of the policy period commencing December 1, 2008, and
after notice of the Hallman lawsuit in violation of Sections 242.6(a)(3) and
242.17(b) of the Department’s regulations, 31 Pa. Code §§242.6(a)(3)7 and
242.17(b). TeamHealth/Alliant was required to report Doctor’s insurance coverage
and to pay the appropriate assessment within 60 days of the start of his
employment and the policy on December 1, 2008, or by January 30, 2009. Section
242.6(a)(3) of the Department’s regulations, 31 Pa. Code §242.6(a)(3). Team
Health/Alliant did not report Doctor’s coverage and pay the assessment until
(continued…)
to operate is by collecting annual surcharge payments from all
health care providers. Lloyd has failed to provide this Court with
controlling authority requiring the CAT Fund to demonstrate
prejudice prior to denying coverage for failure to make a timely
surcharge payment. Even if we were to find the existence of such
a requirement, the CAT Fund would clearly suffer prejudice if it
were required to cover health care providers who remit their
surcharge payments only after a possible claim arises. See
generally Dellenbaugh.
Lloyd, 821 A.2d at 1236.
7
Section 242.6(a)(3) of the Department’s regulations states:
(3) Form 216—Remittance Advice. This form is to be used by
basic professional liability insurance carriers . . . for summarizing
surcharges collected, payable and refundable. The form,
accompanied by a check, should be received in the Director’s
Office within 60 days from the effective date of the policy. On
installment policies, the surcharge applicable to the full annual
policy period shall be collected and remitted to the Director at the
inception of the policy.
31 Pa. Code §242.6(a)(3).
10
August 11, 2010, after it had submitted its C-416 forms on July 7, 2010, and July
26, 2010, for excess coverage for the purported January 27, 2009 professional
malpractice.8 The assessment payment was 550 days too late. While TeamHealth
had a retroactive date of December 1, 2008, for Doctor under the Lexington policy,
it did not have that retroactive date on the Mcare layer of coverage due to its
failure to report the December 1, 2008, to June 1, 2009 coverage and pay the
required assessment until after the Hallman lawsuit was filed.
Moreover, Mcare contends, Doctor’s reliance on tail and prior acts
coverage is misplaced. Tail coverage extends the reporting period for claims that
are made after the policy ends, but only for acts occurring during the policy period.
Prior acts coverage is for claims for events that happened prior to the purchase of
insurance because it uses the retroactive date of a prior policy. Doctor was added
to the Lexington claims-made policy when he started on December 1, 2008. The
alleged malpractice took place on January 27, 2009, after the Lexington policy was
in effect. Thus, any discussion of how the Mcare Fund treats retroactive coverage,
or whether tail or prior acts coverage for the purpose of assessments is inapposite
and irrelevant to this coverage action, and Doctor’s reliance on Fletcher is
misplaced and inaccurate. The Mcare Fund charges for coverage back to the
retroactive date under a claims-made policy and TeamHealth/Alliant’s August 11,
2010 assessment payment for the period retroactive from December 1, 2008, to
June 1, 2009, belies Doctor’s arguments in this regard.
8
Section 242.6(a)(4) of the Department’s regulations states, “Form C[-]416—Insurance
Company Report. This completed form shall be submitted by the insurer . . . to the Director, as
notice to the Fund of claims reasonably believed to exceed the coverage of the insurer or the
retained limits of the self-insured.”
11
We agree with Mcare’s determination of the coverage of the Mcare
Fund applicable to the instant matter. Regardless of the period covered by the
Lexington policy, the assessment for Doctor’s primary coverage for the period of
December 1, 2008, to June 1, 2009, was not remitted to Mcare until after the
Hallman lawsuit had been filed and reported. Mcare Fund’s denial of coverage
was appropriate. Lloyd; Dellenbaugh. Further, as Mcare points out, Doctor will
not have to pay any funds for the $500,000.00 in excess coverage that TeamHealth
paid out in the settlement based on its policy. Doctor is merely the subrogor in this
action and any Mcare Fund monies would go to a recoupment by TeamHealth.
Accordingly, Mcare’s Cross-Application for Summary Relief is
granted; Doctor’s Application for Summary Relief is denied; and Doctor’s Petition
for Review is dismissed.
MICHAEL H. WOJCIK, Judge
12
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
George P. Desjardins, Jr., M.D., :
:
Petitioner :
:
v. : No. 506 M.D. 2012
:
Michael F. Consedine, in his :
official capacity as Insurance :
Commissioner of the :
Commonwealth of Pennsylvania, :
and the Pennsylvania Insurance :
Department Medical Care :
Availability and Reduction of Error :
Fund (“Mcare”), :
:
Respondents :
:
v. :
:
Team Health, Inc., Alliant Insurance :
Services, Inc., and Western :
Litigation, Inc., and Lexington :
Insurance Company, :
:
Additional Respondents :
ORDER
AND NOW, this 6th day of January, 2020, the Cross-Application for
Summary Relief of Respondents Michael F. Consedine, in his official capacity as
Insurance Commissioner of the Commonwealth of Pennsylvania, 1 and the
1
We note that Michael F. Consedine is no longer the Insurance Commissioner.
However, Rule 503(c) of the Pennsylvania Rules of Appellate Procedure allows for the
automatic substitution of his successor, Jessica K. Altman, in this matter.
Pennsylvania Insurance Department Medical Care Availability and Reduction of
Error Fund is GRANTED; the Application for Summary Relief of Petitioner
George P. Desjardins, Jr., M.D. is DENIED; and the Petition for Review is
DISMISSED.
__________________________________
MICHAEL H. WOJCIK, Judge