Milton S. Hershey Medical Center v. Commonwealth of Pennsylvania Medical Professional Liability Catastrophe Loss Fund

821 A.2d 1205, 573 Pa. 74, 2003 Pa. LEXIS 671
CourtSupreme Court of Pennsylvania
DecidedApril 25, 2003
Docket172 MAP 2001
StatusPublished
Cited by23 cases

This text of 821 A.2d 1205 (Milton S. Hershey Medical Center v. Commonwealth of Pennsylvania Medical Professional Liability Catastrophe Loss Fund) is published on Counsel Stack Legal Research, covering Supreme Court of Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Milton S. Hershey Medical Center v. Commonwealth of Pennsylvania Medical Professional Liability Catastrophe Loss Fund, 821 A.2d 1205, 573 Pa. 74, 2003 Pa. LEXIS 671 (Pa. 2003).

Opinions

OPINION

JUSTICE NEWMAN.

The Milton S. Hershey Medical Center of the Pennsylvania State University (HMC) appeals the unanimous determination of the Commonwealth Court, which granted the summary [76]*76judgment motion of the Commonwealth of Pennsylvania Medical Professional Liability Catastrophe Loss Fund (the Fund). For the following reasons, we affirm the Order of the Commonwealth Court.

Facts and Procedural History

The issues in this case arose from the settlement of two medical malpractice actions, an obstetrical malpractice action and a pediatric cardiology action in which the plaintiffs claimed that physician employees of HMC were negligent and that HMC bore vicarious liability.1 We first discuss the obstetrical malpractice action and then we speak to the pediatric cardiology action.

The obstetrical malpractice action, commenced in July of 1996 in the Court of Common Pleas of Dauphin County. The plaintiffs (mother and child) alleged that a physician employee of HMC provided inappropriate obstetrical care to mother, which caused severe injuries to the child. Mother and child also alleged that HMC was vicariously hable for the harm they suffered. HMC agreed to settle the case. To finance the settlement, HMC tendered $200,000.00 of the physician’s primary coverage to the Fund. The tender triggered the Fund to provide the physician’s $1,000,000.00 statutory insurance coverage and authorized settlement for $1,200,000.00. The plaintiffs declined to settle for that amount. Notwithstanding that HMC had self-insured $8,000,000.00 of excess insurance for the physician and, in addition to that, a shared private excess layer of $25,000,000.00, it chose not to make payment from its self-insured excess layer. Instead, HMC attempted to tender its own $200,000.00 of primary coverage to the Fund with the apparent expectation that the Fund would then make another $1,000,000.00 available to finance the settlement. However, the Fund declined to make payment on the vicarious liability claims against HMC because it believed that its payment was not implicated until the insurance available to the primarily hable physician was exhausted.

[77]*77The second action, which is the pediatric cardiology action, was commenced in the Court of Common Pleas of Dauphin County in April of 1997. In that case, a child and his parents sued HMC and a pediatric cardiologist employed by HMC because the cardiologist performed a procedure on the child that allegedly caused the child injury. Similar to the obstetrical action, there was neither a claim that HMC committed any overtly negligent act, nor a claim that HMC failed to take action it should have taken. The plaintiffs alleged, instead, that HMC was subject to vicarious liability because the physician was an employee of HMC. To settle the casé, HMC tendered the physician’s $200,000.00 in primary coverage and the Fund, on behalf of the physician, made $1,000,000.00 in settlement monies available. The plaintiffs declined to settle for $1,200,000.00. Hence, HMC tendered its own $200,000.00 in primary insurance expecting that the Fund would contribute an additional $1,000,000.00. However, the Fund again declined to pay because it claimed that its coverage for HMC was not implicated until the available insurance of the primarily liable physician was exhausted. HMC then used its own funds to make up for the discrepancy between the physician’s $1,200,000.00 and the amount necessary to settle the case. It then sued the Fund in Commonwealth Court demanding that the Fund repay HMC the dollar amounts it claimed should have been paid by the Fund.2

After denying the Fund’s Motion for Judgment on the Pleadings, the Commonwealth Court resolved the issues in both cases on Motions for Summary Judgment and declared that the Fund’s coverage for HMC was not implicated where the primarily liable physicians had sufficient insurance to finance the settlements of both actions. In addition to the claim for declaratory relief, the Commonwealth Court also [78]*78dismissed seven other causes of action HMC asserted including: violation of the Act, indemnification, subrogation, estoppel, quasi contract, denial of due process and equal protection, and bad faith. The Commonwealth Court disposed of these claims as follows: “In light of the foregoing analysis in favor of the CAT Fund’s approach to priority of coverage, this Court need not address HMC’s alternate theories of recovery.” Hershey Med. Ctr. v. Commonwealth, Med. Prof'l Liab. Catastrophe Loss Fund, 778 A.2d 1071, 1079 n. 16 (Pa.Cmwlth.2001) {HMC IT). First, we address the request for declaratory relief and then we turn to the remaining claims of HMC to assess whether the resolution of the declaratory judgment claim required the dismissal of HMC’s other causes of action.

The Health Care Services Malpractice Act

As a matter of background in this statutory interpretation case, we now turn to a discussion of the Health Care Services Malpractice Act (the Act) and the Medical Professional Liability Catastrophe Loss Fund (the Fund). The General Assembly created the Health Care Services Malpractice Act to “make available professional liability insurance at a reasonable cost, and to establish a system through which a person who has sustained injury or death as a result of tort or breach of contract by a health care provider can obtain a prompt determination and adjudication of his claim and the determination of fair and reasonable compensation.” Section 102 of the Health Care Services Malpractice Act, Act of October 15, 1975, as amended, 40 P.S. § 1301.102.3 To implement these goals, the Act calls for the creation of the Medical Professional Liability Catastrophe Loss Fund. To participate in the Fund, the Act requires health care providers to purchase a minimum amount of primary professional liability insurance coverage. The parties agree that at the time the primary policies were issued in favor of the physicians and HMC, they were required to maintain $200,000.00 in primary insurance per occurrence each. 40 P.S. § 1301.701(a). The Fund pays “settlements ... against a health care provider ... to the extent such health [79]*79care provider’s share exceeds [this $200,000.00 in] basic coverage in effect at the time of occurrence.” 40 P.S. § 1301.701(d). To maintain the Fund, the General Assembly requires health care providers to pay an annual surcharge4 on the primary insurance premium.5 40 P.S. § 1301.701(e). All health care providers are required to contribute to the Fund. Indeed, health care providers who fail to contribute are subject to having their licenses revoked by the licensure board. 40 P.S. § 1301.701(f).

The Insurance of HMC and its Physicians

An understanding of the levels of insurance coverage HMC obtained for itself and its physician employees is also essential to this case. The best way to conceptualize the layers of insurance is to imagine two columns, each with four layers; the first column showing the insurance HMC obtained for its physicians and the second showing the apparently identical coverage it obtained on its own behalf. The bottom level of each column represents a $200,000.00 self-insured layer of basic coverage. The next level shows the $1,000,000.00 Fund limit of liability. The third layer is a self-insured excess layer of $3,000,000.00. The fourth represents a $25,000,000.00 layer of excess insurance.

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Bluebook (online)
821 A.2d 1205, 573 Pa. 74, 2003 Pa. LEXIS 671, Counsel Stack Legal Research, https://law.counselstack.com/opinion/milton-s-hershey-medical-center-v-commonwealth-of-pennsylvania-medical-pa-2003.