Here We Go Again: Another Day, Another Med Mal Insolvency

Posted on March 28, 2008 by Kathy Kravitz

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. Pennsylvania Property and Cas. Ins. Guar. Ass'n , 902 A.2d 547 (2006). 

"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!

 

Tags:

Skilled Cross-Examination Greatly Reduces Value of Wrongful-Death Claim

Posted on February 12, 2008 by Megan Ford

In a medical malpractice action, a crucial issue in any case is the value of damages to the plaintiff if liability is established. The Supreme Court of Pennsylvania recently issued an opinion clarifying that a defendant does not have to call a competing expert to respond to the plaintiff’s damages expert in order to avoid having the plaintiff’s expert’s figures considered “proven.” Rather, the defendant can rely on his attorney’s cross-examination skills. The ruling allows defendants the flexibility of deciding whether to call their own expert to challenge a plaintiff’s expert or whether to rely on cross-examination of the plaintiff’s expert. The latter is what the physician-defendant and his group did in Carroll v. Avallone.

Carroll involved a wrongful-death and survival-claim against Dr. Avallone and his medical group filed by the deceased patient’s husband, Mr. Carroll. At trial, Mr. Carroll’s expert damages witness, an actuarial economic consultant, testified that Mrs. Carroll’s lost earning capacity, fringe benefits, and past and future household services were between $832,498 and $1,486,713. 

Dr. Avallone and his group did not call their own damages expert to challenge the plaintiff’s expert. Instead, they relied on their attorney’s cross-examination of the plaintiff’s expert. During cross-examination, the defense attorney challenged the expert’s factual assumptions underlying his numbers, including the assumption that Mrs. Carroll, who was unemployed when she died, would have returned to work in the nursing field. (A valuation of damages in a wrongful-death claim requires the parties to present to the jury evidence about what the decedent would likely have done if he or she had survived. A crystal ball would be very helpful in that context, but the parties and their attorneys proceed without that useful tool.) The defense attorney challenged that assumption, pointing out through cross-examination facts inconsistent with the assumption. For example, she had no plans to return, she had long-term health problems, and she had illegal drugs in her body when she died.

The jury returned a verdict, splitting liability 50/50 between the parties and awarding Mr. Carroll $29,207 on the wrongful-death claim and nothing on the survival claim. The Superior Court of Pennsylvania remanded for a new trial on damages because it concluded that Mr. Carroll’s expert’s damages range was “uncontroverted” because the defense did not present an expert witness to challenge the opinion. Therefore, the appellate court found that the five-figure verdict was not reasonably related to the proven damages (in the range of six or seven figures).

The case went up to the Supreme Court of Pennsylvania upon the defendants’ appeal. That court reversed the Superior Court’s order. The Supreme Court of Pennsylvania explained that the defense attorney’s cross-examination of the expert was sufficient to challenge the evidence and to put it before the jury for consideration. Independent evidence by a separate witness is not required. It held that the Superior Court’s determination that “the failure to present affirmative evidence makes the other party’s opinion evidence uncontroverted, rendering it ‘proven damages’ that must be reflected in the jury’s verdict” was inconsistent with Pennsylvania law.

Tags:

Ready, Set, Go!

Posted on May 10, 2007 by Megan Ford

The race to the courthouse can be a defining moment. 

In Shon v. Karason, 2007 WL 901763 (Pa. Super. Mar. 27, 2007), a patient filed a medical malpractice claim against his podiatrist and the podiatrist's employer.  When a certificate of merit was not filed against the health-care providers within the timeframe required by the Pennsylvania Rules of Civil Procedure, the providers filed a praecipe for entry of judgment of non pros.  The praecipe was filed at 1:26p.m. on July 11, 2007.  At 3:39p.m. (2 hours and 13 minutes later), the plaintiff filed a certificate of merit as to the podiatrist.  Judgment of non pros was entered by the prothonotary upon the praecipe, but the prothy did not docket the praecipe until the next day, July 12.  This effectively put the plaintiff out of court at the trial level because the trial court denied the plaintiff's request to open the judgment.

The case went up on appeal to the Superior Court of Pennsylvania.  One of the arguments that the plaintiff made was that his certificate was timely because it was filed the day before the prothy docketed the praecipe.  The court rejected the argument, as the trial court also did.  It explained that  the prothy has no choice but to enter judgment upon a praecipe that is filed before a certificate of merit is filed (or a motion for more time to file a certificate).  Therefore, the pertinent time is when the praecipe was filed, not when the praecipe was docketed.

Tags:

The Cost of Care

Posted on April 16, 2007 by Eric Suter

Today, the SCOTUS hears argument in Long Island Care at Home v. Coke, No. 06-593.  Although the legal issue is one of administrative law, Coke implicates the Department of Labor's Fair Labor Standards Act exemption for in-home health care services.  Broadly speaking, the exemption at issue, which was struck down by the Second Circuit, excludes in-home health care services from various FLSA requirements, including minimum wage and overtime.  As crafted, the exemption was applicable not only to direct employment relationships between the cared-for and the caregiver, but also where the caregiver was employed by a third party company, such as Long Island Care at Home, the defendant in this action. 

SCOTUSBlog's preview is here.  The Workplace Prof has more.

Tags:

Supreme Court of Pennsylvania Addresses Certificates of Merit

Posted on February 5, 2007 by Megan Ford

The Pennsylvania Rules of Civil Procedure require a plaintiff to file a timely certificate of merit in any professional liability action, including a medical malpractice lawsuit, subject to dismissal of the action.  We have seen a number of procedural issues come up in this context, and the legal landscape is developing.

One argument plaintiffs raise with some frequency in trying to revive a dismissed lawsuit is that the application of the rules was inequitable under the circumstances.  The Supreme Court of Pennsylvania has weighed in on the issue and said that the certificate of merit rules are subject to equitable considerations so long as the rules' requirements are met.  See Womer v. Hilliker, 908 A.2d 269 (Pa. 2006) (Justices Baer's dissent is here).  At least substantial compliance is required, and where a plaintiff does nothing to comply with the rules, equitable considerations cannot save a claim.  The court also said that serving an expert report upon a defendant, in and of itself, is not substantial compliance with the rules.  Generally, we do not expect equitable considerations to save many dismissed lawsuits.

A plaintiff's compliance with the certificate of merit rules must be carefully evaluated.  We can offer valuable assistance to our healthcare clients in this regard.

Tags: ,