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Commonwealth Court Rules that MCARE Fund has No Annual Limit for Extended Claims

In a three judge panel’s opinion filed on December 21, 2010, the Commonwealth Court in West Penn Allegheny Health System d/b/a Allegheny General Hospital v. Medical Care Availability and Reduction of Error Fund (MCARE) and Kiana Townes, by Tamara Blanchard, Guardian, issued an order requiring MCARE to render an indemnity payment of up to $1,000,000 from the MCARE Fund for a plaintiff’s extended claim filed under Section 715 of the MCARE Act, without any reduction of amounts previously paid by the MCARE Fund to Allegheny General for the 1998 coverage year.

The underlying case at issue involved an incident of alleged medical malpractice in June 1998, wherein a minor plaintiff was born at Allegheny General Hospital by emergency cesarean section and thereafter suffered seizures and diagnosed with birth asphyxia and multi-organ dysfunction. In July 2008, Allegheny’s claims service company notified MCARE of a potential extended claim under Section 715 of the MCARE Act and requested that MCARE defend and indemnify Allegheny Hospital for the plaintiff’s claim. (Under the MCARE Act, an “extended claim” is a claim made against a health care provider who was required to participate in the Medical Professional Liability Catastrophic Loss Fund, is filed more than four years after the breach of contract or tort occurred, and is filed within the applicable statute of limitations.) MCARE responded that it would so indemnify Allegheny, but noted that “any exhaustion of aggregate limits may affect available coverage.” On March 26, 2010, the parties in the action settled for $1,100,000.

Prior to the settlement, Allegheny sought summary relief and filed for declaratory judgment that the MCARE Fund’s $1,000,000 per occurrence liability limit under Section 715(b) of the MCARE Act was not subject to the MCARE Fund’s annual aggregate liability limit. MCARE filed a cross-application for summary relief, alleging that Allegheny Hospital had eroded its coverage amount since 1998 and that given MCARE’s annual aggregate liability limit, only $394,917 was currently available to cover its claim. Allegheny argued that such an annual aggregate liability limit, which is detailed in other sections of the MCARE Act, did not apply to extended claims.

Turning to a statutory analysis of the MCARE Act, the Commonwealth Court noted that the duty of MCARE to defend and pay extended claims is an exception to its “role as an excess provider.” Given this statutory exception, the court held that there was a conclusive disparity between MCARE’s treatment of excess and extended claims, and as a result, the two types of claims may be treated differently under the Act.

Drawing on the Act’s provisions regarding extended claims, notably Sections 712 and 715, the court held that such provisions each encompassed a different per occurrence aggregate limit. Such differences thereby indicated that no “borrowing” of the limits from each respective provision was intended, particularly those from Section 712, which set forth annual aggregate limits for 2002 and subsequent coverage years. On the other hand, Section 715, unlike its counterpart, Section 712, bears no mention of annual aggregate limits. Thus, because such provisions were omitted from Section 715, the court concluded that the legislature intended them not to exist, and ultimately held that “MCARE Fund’s annual aggregate liability limit is not intended to apply to extended claims.” As such, Allegheny Hospital was deemed entitled to an indemnity payment of up to $1,000,000 from MCARE for the plaintiff’s extended claim under Section 715, without any reduction of amounts previously paid by MCARE for the 1998 coverage year.

The court rejected MCARE’s argument that a failure to adopt its own interpretation of the MCARE Act would lead to an increase in MCARE’s payment and assessment on participating health care providers. According to MCARE, such action would delay the gradual “phasing out” of the MCARE Fund originally intended by the Legislature. Notwithstanding these concerns, the court held that its own statutory construction would control over MCARE’s alleged public policy implications.

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