Here We Go Again: Another Day, Another Med Mal Insolvency
Last month, the NJ Attorney General filed a petition for a declaration of insolvency and liquidation on behalf of MIIX Insurance Company. Despite the "successful cooperation" which characterized the MIIX rehabilitation effort, the AG's office noted that at year end 2007, MIIX's outstanding claims had the potential to "break the bank." One purpose of the proposed order of liquidation was to allow MIIX's remaining claimants to recover from various state guaranty funds. Here in PA, that means The Pennsylvania Property, Casualty Insurance Gaurantee Association , fondly known as PPCIGA (pronounced pi - guh). Our PPCIGA statute is codified at 40 P.S. Section 991.1801 et. seq.
The Superior Court of NJ, Chancery Division, has at this point entered a stay order, which suspends activity on all litigation matters involving MIIX insured, "pending in NJ or elsewhere."
This is probably a good time to review the basic provisions of our PPCIGA statute.
Per the statute, PPCIGA provides $300,000 per claimant in coverage. However, in 2006, the Superior Court clarified that in cases involving multiple PPCIGA insureds, each insured must be given $300,000 in coverage, regardless of the number of claimants. In other words, you would not have a situation where three insured would have only one $300,000 policy between them because there was only one Plaintiff in the case. See: Valley Medical Facilities, Inc. v.
"Gap" issues can also arise in PPCIGA cases. This occurs when there is a gap between when the PPCIGA coverage of $300,000 ends and the point where the MCARE fund's exposure picks up. It is likely that most of the pending MIIX cases involve primaries of $500,000. Thus, because the MCARE fund does not "drop down" to fill a gap where a full tender is no longer available, the insured is bare for that $200,000 in the event of a verdict in excess of $300,000, or in a settlement context. These issues need to be addressed strategically as soon as possible in any pending litigation.
Another provision of the PPCIGA statute which has been the subject of much consternation is the definition of a "covered claim," which excludes "any first-party claim by an insured whose net worth exceeds twenty-five million ($25,000,000) dollars on December 31 of the year prior to the year in which the insurer becomes an insolvent insurer:.." The key part of this exclusion is the term "first party claim." A first party claim is a claim by an insured against their own insurer. A medical malpractice claim is a claim by a third party. Another section, 40 PS Section 991.1816(b)(1), gives PPCIGA the right to recover amounts paid for a covered claim on behalf of any insured whose net worth exceeded $50 million as of 12/31 the year preceding the insurer's insolvency. That means that when all was said and done, PPCIGA may , at their own option, seek indemnification from the insured for monies they paid on the insured's behalf.
Note, both of the above provisions received a lot of airplay at the time of the PHICO insolvency, probably because PHICO went down so fast and hard, leaving many hospital insured high and dry. However, according to a representative of the Hospital and Health System Association of Pennsylvania (HAP), even then, neither provision was, to HAP's knowledge, ever applied against any PA hospital. PPCIGA has, by report, confirmed that this will be its approach this time around as well.
Of course, another potentially problematic provision of the PPCIGA statute is the offset provision. This provision states that all monies paid by other insurers , for example, for medical bills, are to be offset, or minused from any verdict or settlement. At times, this provision has made it difficult to settle cases where the offset is more than the coverage itself. Some Plaintiffs attorneys worked around this by stipulating that they will not pursue those medical bills at trial; that essentially nullifies the offset. However, most of the current MIIX cases are probably post-MCARE, which means that Plaintiffs were barred from recovering medical bills paid by insurance anyhow. So this time around, offset issues may not be as prevalent.
The good news is that the MIIX rehabilitation did work out many of the claims, and a mere 500 claims are reportedly still in the pipeline, nationwide. Thus, the rehabilitation may have prevented the mayhem of prior insolvencies. So, another one bites the dust here in PA, but perhaps a bit more gently. Stay tuned!
