Maximize Your Coverage

Although most of our attention in handling medical malpractice cases must be focused on proving liability and damages, it is important that we not overlook the question of how much coverage might apply to the defendant’s conduct. That is particularly true since the relative value of coverage limits in Pennsylvania has been shrinking over time.

As everyone knows, each doctor or hospital in Pennsylvania has mandatory coverage limits of $1,000,000 (one million), that being composed of a $500,000 primary layer purchased in the private marketplace and an additional $500,000 layer which must be purchased from the M-CARE Fund. (While most hospitals will purchase excess coverage, individual physicians almost never do.) One million dollars may sound like a lot of coverage, but more and more, it is inadequate to cover our client’s damages. That is not surprising when you stop to consider that at the time the CAT Fund was first created in 1975, total coverage limits for an individual defendant were $1,200,000, and rather than being adjusted over time for inflation, the state legislature actually reduced those combined limits to $1,000,000 in 2002. Measured against the general inflation rate, the mandatory coverage of $1,000,000 put in place in 1975 dollars is now worth only $270,000.

Thus, more and more, we find ourselves in situations where the coverage available to a single defendant is not adequate to cover the plaintiff’s injuries, and, correspondingly, the incentive to find additional coverage has increased over time. One way to secure additional coverage, of course, is to sue more defendants, but suing marginally involved parties on the hope of getting additional coverage is a dangerous strategy. More times than not, liability is never established against the peripheral defendant, and in the course of trying, you damage your credibility and perhaps weaken the case against the primary defendant.

An alternative approach to “suing everybody,” is to first make sure that you have a clear understanding of all of the coverage that might apply to the target defendant. In that regard, you need to be aware of two appellate cases which have increased the coverage that may be available from PIGA or the M-CARE Fund.

Let’s talk first about PIGA. As everyone knows, when a private insurance carrier becomes insolvent, PIGA steps in with a layer of coverage up to $300,000 for that provider. When the insolvencies of two major carriers, PIC and PIE, occurred in the late 1990s, an important coverage question came to the forefront in many cases, e.g. “How much coverage is available if two doctors covered by an insolvent carrier are guilty of negligence?” For example, assume that there were two radiologists in separate practices who mis-read a mammogram in a breast cancer case. Is PIGA responsible for a maximum of $300,000 or $600,000? For years, PIGA took the position that, regardless of how many policies became insolvent or how many doctors were negligent, the most they could be liable for on the “claim” of any single plaintiff was $300,000. Certain plaintiff lawyers who read the PIGA statute closely often disagreed with this interpretation, but by and large few people raised the issue. More surprising was that the CAT Fund never objected given their stake in the issue. Take a case with two PIGA defendants that has a total value of $500,000. Under PIGA’s interpretation, they would pay $300,000 and the CAT Fund (assuming there are no “gap” issues for the coverage year in question) would pay the remaining $200,000. However, if each defendant had his own layer of PIGA coverage, the CAT Fund would pay nothing on the case because PIGA would have responsibility up to $600,000. Years ago, I raised this issue with members of the legal staff at the CAT Fund, but they expressed little interest in challenging PIGA’s interpretation.

Recently, however, the Superior Court has challenged PIGA and told them that their interpretation is wrong. In Valley Medical Facilities, Inc, 902 A.2d 547 (2006), the court ruled that a separate layer of PIGA coverage applies to each policy issued by an insolvent carrier. Thus, if there are three negligent defendants who were covered by PIC, there are three separate $300,000 layers of PIGA coverage, likewise, if a hospital purchased both a primary and an excess policy from say, PHICO, the hospital is entitled to two layers of coverage.

Valley Medical Services is an important decision for us to be aware of because it immediately puts additional coverage on the table, money that otherwise would not be there to compensate the plaintiff. Bear that in mind, the next time you have a case involving multiple PIGA defendants.

As far as M-CARE coverage is concerned, the main thing to be alert for in a case against an individual physician is the existence of an additional layer of coverage on his/her professional corporation. Thus, when an individual doctor is the culpable party and the damages are potentially in excess of $1,000,000, you must determine see if the physician practices within a professional corporation and, if so, name that entity as a party. Having done so, the next question is whether or not that corporation has a layer of coverage at M-CARE.

Professional corporations may purchase a layer of primary coverage, but unlike individual practitioners, they are not required to do so. How do you find out if the corporation has such coverage? Obviously, you can send an interrogatory to the corporation asking if it purchased such coverage, but it is also suggested that you contact the M-CARE Fund and ask what their records reveal. They keep a list of all corporations that have coverage, and they generally track that through the existence or non-existence of a document called a “remittance advice” that is sent along to the Fund by the primary insurance carriers for each corporation that has a primary policy.

In making that inquiry of the Fund or defense counsel, however, you need to be aware of the decision in Lewinski v. CAT Fund, 850 A.2d 1270 (2004), if you have an older case where the tort is prior to 1996. That case, among other issues, dealt with the incongruous situation in which a private carrier who sold policies to individual doctors would often times provide a separate policy to the doctor’s corporation for no additional premium. (For years, PIC and PMSLIC did this, and the CAT Fund was aware of it.) Prior to 1996, if there was no primary premium paid by the corporation, then there was no surcharge paid to the CAT Fund because the surcharge is based on a percentage of the primary premium. (After 1996, surcharges are calculated independent of the primary premium.) The Lewinski court held that the CAT Fund owed a separate layer of coverage on the corporation even though it did not pay a surcharge because the corporation was issued a separate policy by the primary carrier.

Although the practice of providing “free” corporate policies is likely over, the larger point is to make sure that you find out if the professional corporation purchased a separate policy. Even if you have just one negligent act, you may have two layers of coverage.

Remember, in these days of shrinking coverage limits, it is important to maximize the layers of coverage available to your client. Here is hoping that this message helps you do just that.