Lorraine PATERNASTER, Administratrix of the Estate of Damon Paternaster, Appellant, v. Dong P. LEE, M.D., and the Commonwealth of Pennsylvania Medical Professional Liability Catastrophe Loss Fund, Appellees.
Supreme Court of Pennsylvania.
Decided Dec. 22, 2004.
863 A.2d 487
Argued May 11, 2004.
Guy Anthony Donatelli, Maureen McBride, West Chester, for Com. of PA, Medical Professional Liability Catastrophe Loss Fund.
BEFORE: CAPPY, C.J., CASTILLE, NIGRO, NEWMAN, SAYLOR, EAKIN and BAER, JJ.
OPINION OF THE COURT
Justice NIGRO.
Appellant Lorraine Paternaster, as administratrix for the estate of Damon Paternaster, appeals from the order of the
In late 1986, Damon Paternaster visited Appellee Dong P. Lee, M.D., seeking medical treatment to gain weight. Dr. Lee prescribed Mr. Paternaster andrenocortical steroids, which he took until May 1997, when he allegedly stopped because he was experiencing negative side effects. Several years later, Mr. Paternaster apparently began suffering medical problems and he attributed those problems to his prior use of the steroids that Dr. Lee had prescribed.
Notably, when Dr. Lee treated Mr. Paternaster in 1986 and 1987, he was a licensed physician in Pennsylvania and carried a primary professional liability insurance policy in the amount required by the Health Care Services Malpractice Act (the “Act“), Act of October 15, 1975, P.L. 390, No. 111 (as amended
In early 1994, Dr. Lee moved to Korea. Shortly thereafter, on May 19, 1994, Mr. Paternaster filed a writ of summons against Dr. Lee. As Mr. Paternaster could not personally serve Dr. Lee in Korea, he ultimately served him by publication and mail in September 1994. On December 22, 1994, Mr. Paternaster wrote a letter to the CAT Fund, advising it that he had instituted an action against Dr. Lee based on Dr. Lee‘s treatment of him in 1986 and 1987, and requesting information about Dr. Lee‘s primary insurance coverage. In reply, the CAT Fund notified Mr. Paternaster that his claims were not covered by Dr. Lee‘s primary insurance policy or, for that matter, by the CAT Fund. On January 9, 1995, Mr. Paternaster wrote a second letter to the CAT Fund stating that he disagreed with its finding that it was not responsible for covering his claims against Dr. Lee. Furthermore, Mr. Paternaster demanded that the CAT Fund appoint counsel to defend Dr. Lee.
On April 26, 1995, Mr. Paternaster filed a complaint against Dr. Lee, alleging that Dr. Lee had committed medical malpractice while treating him. Dr. Lee did not respond to Mr. Paternaster‘s complaint, and therefore, on May 26, 1995, Mr. Paternaster sought a default judgment against Dr. Lee. The trial court subsequently entered the requested default judgment in the amount of $1,432,525 (the “Default Judgment“). Mr. Paternaster then filed a writ for execution on the Default Judgment against both Dr. Lee and the CAT Fund, as garnishee of the judgment, in the Erie County trial court. Mr. Paternaster also issued interrogatories in aid of execution to the CAT Fund.
The CAT Fund responded to Mr. Paternaster‘s writ of execution by filing both an election of optional venue in the
On April 4, 2002, based on a stipulation of the parties, the trial court transferred the case to the Commonwealth Court. Thereafter, both parties filed motions for summary judgment.5 In its motion, the CAT Fund reasserted the argument it made in its preliminary objections that it could not be held liable as a garnishee as well as the two arguments it raised in its new matter. Mr. Paternaster responded to these arguments in his motion, arguing that: (1) the CAT Fund was liable for the Default Judgment as a garnishee because it had a statutory duty to defend and indemnify Dr. Lee for the claim; (2) he had sufficiently notified the CAT Fund of its duty to defend and indemnify Dr. Lee in his December 1994 and January 1995 letters; and (3) the Act required the CAT Fund to provide occurrence-type coverage and therefore, where a health care provider, such as Dr. Lee, had primary policy in place at the time of an alleged wrongful act, the CAT Fund
On October 4, 2002, Senior Judge Warren G. Morgan of the Commonwealth Court granted the CAT Fund‘s summary judgment motion and denied Mr. Paternaster‘s motion. Specifically, Judge Morgan found that the CAT Fund was not responsible for covering claims against a health care provider, such as Dr. Lee, who had failed to obtain a tail policy to secure primary insurance to cover the claims. Judge Morgan explained that there was nothing in the Act which “expressly or impliedly authorize[d] the CAT Fund to pay toward a claim under these circumstances,” and further pointed out that
In her appeal to this Court, Appellant Lorraine Paternaster argues that the Commonwealth Court erred in finding that the CAT Fund was not responsible for indemnifying Dr. Lee with regard to the Default Judgment because according to the Act, the CAT Fund was required to provide coverage to a health
In 1975, the General Assembly passed the Act to respond to a national ” ‘medical malpractice crisis’ evidenced by precipitous increases in malpractice claims and awards, concurrent and equally precipitous increases in the cost of malpractice insurance and the threatened unavailability of such insurance at any cost.” McCoy, M.D. v. Bd. of Medical Education and Licensure, 37 Pa.Cmwlth. 530, 391 A.2d 723, 725 (1978). Specifically, to reduce the financial pressures that large jury awards placed on primary carriers and doctors, the Act created the CAT Fund, which was designed as:
a contingency fund for the purpose of paying all awards, judgments and settlements for loss or damages against a health care provider entitled to participate in the fund as a consequence of any claim for professional liability brought against such health care provider as a defendant or an additional defendant to the extent such health care provider‘s share exceeds its basic coverage insurance in effect at the time of the occurrence as provided in subsection (a)(1).
While there was nothing in the Act itself that explicitly required health care providers to obtain a specific type of primary policy, i.e., a claims policy or an occurrence policy, in order to qualify for CAT Fund coverage, section 1301.807 of the Act did require that insurers providing claims policies to health care providers guarantee that additional insurance protection be made available to those providers after their claims policies expire.7 See
Cancellation or renewal of claims made coverage resulting from the request of the insured or the cancellation or nonrenewal by the insurer without the purchase of the reporting endorsement, prior acts coverage or its substantial equivalent automatically releases the Fund from liability for claims for injuries or death from services which were rendered or which should have been rendered by the health care provider which occur or which are reported to the basic insurance carrier after the effective date of cancellation or nonrenewal.
Although Appellant recognizes that the above regulations indicate that the CAT Fund is not responsible for covering Mr. Paternaster‘s Default Judgment against Dr. Lee, Appellant asserts that those regulations are unenforceable because the director of the CAT Fund did not have the authority to enact such regulations. In the first instance, Appellant argues that the CAT Fund director lacked the authority to enact
As Appellant acknowledges, section 506 of the Administrative Code,
While we agree with Appellant that section 506 of the Administrative Code and section 702(a) of the Act did not vest the CAT Fund director with the power to adopt sections 242.2, 242.7(a)(2), and 242.17(d)(2), because sections 506 and 702(a) only authorize the CAT Fund director to adopt regulations addressing the internal administration of the fund and the procedure for reporting claims, we cannot agree that the CAT Fund director did not have the authority to adopt sections 242.2, 242.7(a)(2), and 242.17(d)(2) pursuant to section 701(e)(11) of the Act. As noted above, this section gave the CAT Fund director the power to adopt not only procedural regulations, but rather, any regulations “regarding the establishment and operation of the fund [,] including all procedures.”
Appellant also argues, however, that even if the CAT Fund director had the authority to issue regulations concerning certain substantive issues regarding the operation of the
As explained above, the General Assembly created the CAT Fund to serve as a contingency fund to pay “awards, judgments and settlements for loss or damages against a health care provider entitled to participate in the fund ... to the extent such health care provider‘s share exceeds its basic coverage insurance in effect at the time of the occurrence.”
While Appellant urges us to hold otherwise, we find that requiring the CAT Fund to pay excess coverage in the absence of any underlying primary coverage would fly in the face of the Act, which plainly sought to place the burden on health care providers to maintain a certain level of primary coverage in order to qualify for CAT Fund excess coverage. See
Appellant nevertheless emphasizes that section 701(d) of the Act stated that the CAT Fund would cover claims to the extent that such claims exceeded the provider‘s “basic coverage in effect at the time of occurrence,”
In sum, given the essential character of CAT Fund coverage as excess coverage over and above available primary coverage and the Act‘s explicit requirement that providers maintain a certain level of primary coverage, we conclude that the CAT Fund director‘s regulations, which require health care providers to obtain a tail or similar policy to maintain CAT Fund coverage, i.e.,
Thus, the Commonwealth Court‘s order is affirmed.
Justice SAYLOR files a concurring opinion.
Justice BAER files a dissenting opinion.
CONCURRING OPINION
Justice SAYLOR.
I concur in the majority disposition, because I believe that it comports with the Court‘s decision in Dellenbaugh v. CAT Fund, 562 Pa. 558, 756 A.2d 1172 (2000), which relieved the CAT Fund of its obligation in the nature of excess coverage in circumstances in which the health care provider had not paid the required surcharges.1 I joined the dissent in Dellenbaugh, however, which emphasized that the pertinent provisions of the Health Care Services Malpractice Act did not require the result that was directed by the Dellenbaugh majority, and that the majority‘s approach was in substantial tension with one prominent purpose of the enactment, namely, to protect the interests of those injured by tortious conduct of (or breach of contract by) their health care providers. See Dellenbaugh, 562 Pa. at 565-69, 756 A.2d at 1176-78 (Nigro, J., dissenting). I believe that those considerations apply similarly in the present situation and, in the absence of Dellenbaugh‘s effect (which I regard as controlling), I would also assume a dissenting posture here.
Justice BAER.
I concur with the Majority‘s summary of the facts and the relevant law. I further agree with the Majority‘s conclusion that Section 506 of the Administrative Code1 and Section 702(a) of the Health Care Services Malpractice Act (the “Act“)2 did not vest the CAT Fund director with the power to adopt the regulations found at
The purpose of the CAT Fund is set forth in
a contingency fund for the purpose of paying all awards, judgments and settlements for loss or damages against a health care provider entitled to participate in the fund ... to the extent such health care provider‘s share exceeds its basic coverage in effect at the time of occurrence ...
The director of the CAT Fund, however, promulgated several regulations which relieve the CAT Fund of responsibility for coverage of Appellant‘s default judgment against Dr. Lee. Specifically,
Cancellation or nonrenewal of claims made coverage ... without the purchase of the reporting endorsement, prior acts coverage or its substantial equivalent automatically releases the Fund from liability for claims for injuries or death from services which were rendered or which should have been rendered by the health care provider which occur or which are reported to the basic coverage insurance carrier after the effective date of cancellation or nonrenewal.
Id. at
if at the time of the occurrence the health care provider is insured on a claims made basis and thereafter fails to purchase the reporting endorsement, prior acts coverage or its substantial equivalent upon cancellation or nonrenewal of the claims made policy, and subsequently a claim is reported to the Fund under section 605 of the act (
40 P.S. § 1301.605 ), the Fund will be relieved of its responsibility to the health care provider to defend and indemnify the claim under section 605 of the act.
Accordingly, the propriety of the Commonwealth Court‘s grant of summary judgment in favor of the CAT Fund turns on whether the director had the authority to enact these regulations. The Majority wrongly finds such authority in
The director‘s mandate under Section 701(e)(11) is expressly limited to the promulgation of regulations “consistent with” the substantive portions of the statute. I do not view the director‘s regulations at Sections 242.2, 242.7(a)(2), and 242.17(d)(2) as being consistent with the Act. The legislature created the CAT Fund to pay “awards, judgments and settlements for loss or damages against a health care provider entitled to participate in the fund ... to the extent such health care provider‘s share exceeds its basic coverage insurance in effect at the time of the occurrence.”
Furthermore, even if the Act provided for the delegation of substantive rule making powers, such delegation would constitute an unlawful grant of authority. Administrative agencies have the power to promulgate regulations dealing only with procedural matters, not to create substantive rights and duties. The General Assembly may delegate to an administrative agency the authority:
to make rules and regulations to cover mere matters of detail for the implementation of a statute, but where the statute itself is lacking in essential substantive provisions the law does not permit a transfer of the power to supply
them, for the legislature cannot delegate its power to make a law.
Ruch v. Wilhelm, 352 Pa. 586, 43 A.2d 894, 897 (1945); Sullivan v. DOT, Bureau of Driver Licensing, 550 Pa. 639, 708 A.2d 481 (1998) (“[T]he Legislature may delegate policy making authority to an administrative agency, so long as the Legislature makes the ‘basic policy choices’ and establishes ‘adequate standards which will guide and restrain the exercise of the delegated administrative functions’ “).
Because I agree with Appellant that the CAT Fund may not exonerate itself from liability by adopting regulations which change the substantive rights of malpractice victims as adopted by the legislature, I would reverse the Commonwealth Court‘s grant of summary judgment in favor of the CAT Fund.