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Pennsylvania Supreme Court Holds that MCARE Must Cover Shortfall of Physicians’ Primary Insurance

In an opinion filed on April 28, 2011, the Pennsylvania Supreme Court held that the MCARE Fund was obligated to cover a shortfall in a plaintiff’s award in a case involving multiple joint tortfeasors who were held jointly and severally liable.

The underlying case at issue involved allegations of negligent care rendered by defendant physicians, to the plaintiff’s deceased wife from 1992 to 1996. Following a trial conduced in August 2000, a jury, attributing a substantial percentage of fault to the decedent, adjusted a verdict of over $1 million to $707,000, and thereafter apportioned the amount among the defendant physicians pursuant to joint and several liability.

During the time at issue, defendant physicians each maintained primary professional liability coverage in the amount of $200,000 per occurrence under a policy issued by a now-insolvent private insurer. Because of the insurer’s insolvency, the Pennsylvania Property and Casualty Association thereby took over the claims, but with a coverage limitation of only $300,000 per claim. Nonetheless, the primary insurer’s obligation to plaintiff exceeded this cap by $100,000, which ultimately, was attributed to one of the defendant physician’s share of the verdict. Thereafter, the MCARE Fund determined that it had no responsibility to redress this $100,000 shortfall, and as a result, plaintiff sought to execute against the assets of the physician’s practice group for the unpaid portion of his judgment. Upon reaching a settlement of $125,000, plaintiff then took the position that MCARE was liable to him for this amount.

The Commonwealth Court of Pennsylvania ruled in favor of plaintiff. Consequently, the Fund lodged an appeal to the Supreme Court, stating that, as a straightforward matter of statutory construction, MCARE is obligated to pay claims only when the health care provider’s liability exceeds basic coverage, even in cases of joint and several liability. Plaintiff, on the other hand, argued that the MCARE Act does not provide a method for calculating the Fund’s obligations with liability is apportioned among multiple tortfeasors, and that as a result, the doctrine of joint and several liability should prevail over the Fund’s construction of the MCARE Act.

Notwithstanding the “strong argument” propounded by the Fund, i.e. that Pennsylvania law does not authorize MCARE to compensate for a shortfall arising from an insurer’s insolvency undermining a health care provider's own line of primary coverage, the Court determined that a deficiency in the primary coverage of another health care provider, which ultimately is chargeable to the physician-claimant only on account of joint and several liability, is a novel issue.

As such, the Supreme Court noted that at the time plaintiff’s cause of action accrued, excess liability protection was provided to health care providers through a government-run contingency fund known as the Medical Professional Liability Catastrophe Loss Fund, a.k.a. the “CAT Fund.” In 2002, the CAT Fund’s statutory liabilities were transferred to the MCARE Fund. According to the Court, under the statutory scheme governing CAT Fund liabilities, the CAT Fund’s excess coverage responsibility to a health care provider was measured from the baseline of the provider’s own primary coverage.

Because the judgment in the underlying case was issued under the regime of the CAT Fund, the Court held that responsibility for this liability would ultimately now fall upon the MCARE Fund, which, as the Court noted, established a provider’s own primary coverage to be the boundary between what is primary and what is excess, relative to that provider. The Court therefore concluded that because the defendant physician’s $200,000 “basic coverage insurance” represented the baseline in the case at bar, the liability the physician bore for the shortfall in primary coverage fell within the CAT Fund’s excess coverage obligation, relative to the defendant physician. Accordingly, it was held that in order to satisfy the shortfall in coverage, the benefits of MCARE would remit to the defendant physician, and ultimately, to Plaintiff.

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