Liability Investigative Fund Effort, Inc. v. Massachusetts Medical Professional Insurance

636 N.E.2d 1317, 418 Mass. 436
CourtMassachusetts Supreme Judicial Court
DecidedJuly 21, 1994
StatusPublished
Cited by23 cases

This text of 636 N.E.2d 1317 (Liability Investigative Fund Effort, Inc. v. Massachusetts Medical Professional Insurance) is published on Counsel Stack Legal Research, covering Massachusetts Supreme Judicial Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Liability Investigative Fund Effort, Inc. v. Massachusetts Medical Professional Insurance, 636 N.E.2d 1317, 418 Mass. 436 (Mass. 1994).

Opinion

Greaney, J.

In these consolidated cases, the corporate plaintiff and the individual plaintiffs, on behalf of themselves and others similarly situated, bring constitutional challenges to two statutes relating to the provision of medical malpractice insurance by the Massachusetts Medical Professional Insurance Association (MMPIA). Both St. 1975, c. 362, § 6, as amended by St. 1980, c. 333, and St. 1986, c. 351, provide for payments by malpractice insureds for costs incurred by the MMPIA in providing malpractice insurance in past *438 years. The complaints sought declaratory and other relief to challenge the statutes' as violations of the contracts clause of the United States Constitution, Federal and State guarantees of procedural due process, and the separation of powers requirements of art. 30 of the Declaration of Rights to the Massachusetts Constitution. Both the plaintiffs and the defendants moved for summary judgment. See Mass. R. Civ. P. 56 (a), (b), 365 Mass. 824 (1974). A judge of the Superior Court denied the plaintiffs’ motion and granted the defendants’ motions in a well-reasoned memorandum of decision. We granted the plaintiffs’ application for direct appellate review and now affirm.

We first set forth the undisputed facts. In 1975, “to guarantee the continued availability of medical malpractice insurance” in the Commonwealth, the Legislature enacted St. 1975, c. 362, of which § 6 established the Medical Malpractice Joint Underwriting Association of Massachusetts, which is now the MMPIA. The MMPIA was authorized to issue malpractice insurance policies to physicians and hospitals that “[have] made a reasonable effort to obtain insurance and [have] been unable to obtain it.” St. 1975, c. 362, § 6, fifth par. The statute stated that the MMPIA’s purpose was to provide this insurance “on a self-supporting basis.” St. 1975, c. 362, § 6, second par. Toward that end, both the original statute creating the MMPIA and a later statute, St. 1986, c. 351, have provided for the collection by the MMPIA of funds for past, underfunded insurance periods. It is the validity of those two statutes that the plaintiffs challenge here.

Th¿ challenged portion of St. 1975, c. 362, § 6, which we will refer to as the deficit recoupment statute, provided as follows:

“Any deficit sustained by the association in any one year shall be recouped, pursuant to the plan of operation and the rating plan then in effect by [an assessment upon the policyholders, or] a rate increase applicable prospectively [, or both]; provided, however, that in no *439 event shall a deficit incurred by the association be charged, directly or indirectly, to any person other than the insured under a policy of medical malpractice insurance; and provided, further, that for purposes of this sentence, when deficits sustained on account of physician or hospital malpractice coverage are being recouped, the term ‘policyholders’ shall mean all those licensed physicians or hospitals insured under a policy of medical malpractice insurance, whether obtained through [MMPIA] or not.”

St. 1975, c. 362, § 6, seventh par. This paragraph was subsequently repealed and reenacted without the bracketed language. St. 1980, c. 333. During the first dozen years of its operation, the MMPIA did not seek to recoup any deficits under this statute.

In 1987, however, the MMPIA filed a request to begin recouping deficits that accrued in the years 1975-1982. A hearing officer of the Division of Insurance, and subsequently the Commissioner of Insurance (commissioner), determined that if recoupment were ordered, it would be made from all physicians and hospitals, regardless of whether they were insured by the MMPIA. That decision was challenged and affirmed in Risk Management Found. of Harvard Medical Insts., Inc. v. Commissioner of Ins., 407 Mass. 498, 503-505 (1990). Subsequently, on February 25, 1991, the parties to that case entered into a stipulation that no requests for recoupment would be made before April 1, 1993. To the present time, no specific determination has been made regarding the MMPIA’s deficits, and no rate increase has been established.

The second statute at issue is St. 1986, c. 351, which we will refer to as the deferred premium liability statute. This statute was the eventual result of the MMPIA’s recommendation of a 162.7 % increase in its premium rates for its 1983 rate year. The commissioner rejected that recommendation and instead allowed only a 42% increase. The MMPIA appealed, and we determined that the commissioner had misinterpreted the applicable statutes, so we ordered further *440 ratemaking proceedings. Medical Malpractice Joint Underwriting Ass’n of Mass. v. Commissioner of Ins., 395 Mass. 43 (1985). The Legislature then froze premium rates at the level of the commissioner’s overturned decision. St. 1985, c. 671, § 1. It later extended the freeze to July 1, 1986. St. 1986, c. 37.

On June 6, 1986, the commissioner issued a new decision, raising the 1983 rate 93.9% above the previous year’s rate, and raising the 1984 rate 10.9% above the 1983 rate. No appeal was taken from those rate decisions. Later that month the Legislature enacted the deferred premium liability statute as a means to allow the MMPIA to recover premiums it lost as a result of the legislative rate freeze. The operation of the statute was described as follows in a previous decision in this case:

“The statute established a ‘total deferred premium liability,’ which is a sum representing the difference between the rates set by the commissioner pursuant to c. 175A, § 5A, for the 1983-1985 rate years and the premiums actually paid for the period pursuant to the freeze. The statute provided for recovery of the total deferred premium liability over a five-year period from July 1, 1987, through June 30, 1992, by means of a ‘separate rate’ added to the normal rate for policies issued during that period. The separate rates were to be assessed and recovered in the same manner as rates established pursuant to c. 175A, § 5A. See St. 1986, c. 351, § 38. The statute did not refer to the deficit recoupment provision of St. 1975, c. 362, § 6, 7th par., discussed above.”

Liability Investigative Fund Effort, Inc. v. Medical Malpractice Joint Underwriting Ass’n of Mass., 409 Mass. 734, 738-739 (1991).

The plaintiffs challenge the deficit recoupment statute and the deferred premium liability statute on three grounds. First, they argue that the 1980 amendment of the deficit re *441 coupment statute violates the contracts clause of the United States Constitution. 4 Second, they contend that the provisions of both statutes for the recovery of funds for past policy periods violate both State and Federal guarantees of procedural due process. Third, they argue that some of the MMPIA’s actions under the statutes were taken without having in place the “plan of operation” provided for by St. 1975, c. 362, § 6, and that in the absence of such a plan those actions violate the separation of powers provisions of art. 30 of the Declaration of Rights. We address each of these arguments in turn.

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Bluebook (online)
636 N.E.2d 1317, 418 Mass. 436, Counsel Stack Legal Research, https://law.counselstack.com/opinion/liability-investigative-fund-effort-inc-v-massachusetts-medical-mass-1994.