SENATE AMENDED

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY HARHAI, DeLUCA, BARBIN, BELFANTI, CALTAGIRONE, D. COSTA, P. COSTA, FABRIZIO, FRANKEL, GRUCELA, HALUSKA, HORNAMAN, JOSEPHS, KOTIK, MAHONEY, MELIO, OBERLANDER, PASHINSKI, READSHAW, SIPTROTH, SOLOBAY, YOUNGBLOOD, GEIST AND K. SMITH, MARCH 24, 2010

SENATOR CORMAN, APPROPRIATIONS, IN SENATE, RE-REPORTED AS AMENDED, SEPTEMBER 28, 2010   

AN ACT

Amending the act of May 17, 1921 (P.L.789, No.285), entitled, as

amended, "An act relating to insurance; establishing an

insurance department; and amending, revising, and

consolidating the law relating to the licensing,

qualification, regulation, examination, suspension, and

dissolution of insurance companies, Lloyds associations,

reciprocal and inter-insurance exchanges, and certain

societies and orders, the examination and regulation of fire

insurance rating bureaus, and the licensing and regulation of

insurance agents and brokers; the service of legal process

upon foreign insurance companies, associations or exchanges;

providing penalties, and repealing existing laws," further

providing for definitions; providing for medical professional

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liability insurance; and making a related repeal.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The definition of "company action level event" in

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section 501-B of the act of May 17, 1921 (P.L.789, No.285),

known as The Insurance Department Act of 1921, added June 22,

2000 (P.L.457, No.62), is amended to read:

Section 1.  The title of the act of May 17, 1921 (P.L.789,

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No.285), known as The Insurance Department Act of 1921, amended

April 27, 1927 (P.L.476, No.302), is amended to read:

AN ACT

Relating to insurance; establishing an insurance department; and

amending, revising, and consolidating the law relating to the

licensing, qualification, regulation, examination,

suspension, and dissolution of insurance companies, Lloyds

associations, reciprocal and inter-insurance exchanges, and

certain societies and orders, the examination and regulation

of fire insurance rating bureaus, and the licensing and

regulation of insurance agents and brokers; the service of

legal process upon foreign insurance companies, associations

or exchanges; regulating medical professional liability

insurance; providing penalties, and repealing existing laws.

Section 2.  The definition of "company action level event" in

section 501-B of the act, added June 22, 2000 (P.L.457, No.62),

is amended to read:

Section 501-B.  Definitions.--The following words and phrases

when used in this article shall have, unless the context clearly

indicates otherwise, the meanings given to them in this section:

* * *

"Company action level event" means any of the following

events:

(1)  Filing of an RBC report that indicates that the health

organization's total adjusted capital is greater than or equal

to its regulatory action level RBC but less than its company

action level RBC.

(1.1)  Filing of an RBC report that indicates the health

organization's total adjusted capital is greater than or equal

to its company action level RBC but less than the product of its

authorized control level RBC and 3.0 and the health

organization's trend test result triggers regulatory attention

as determined in accordance with the Trend Test Calculation

included in the RBC instructions.

(2)  Notification by the Insurance Department to a health

organization of an adjusted RBC report that indicates an event

under paragraph (1) or (1.1).

* * *

Section 3.  The act is amended by adding an article to read:

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ARTICLE XIII

MEDICAL PROFESSIONAL LIABILITY INSURANCE

SUBARTICLE A

PRELIMINARY PROVISIONS

Section 1301.  Scope.

This article relates to medical professional liability

insurance.

Section 1302.  Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Basic insurance coverage."  The limits of medical

professional liability insurance required under section 1311(d).

"Claimant."  A patient, including a patient's immediate

family, guardian, personal representative or estate.

"Claims made."  Medical professional liability insurance that

insures those claims made or reported during a period which is

insured and excludes coverage for a claim reported subsequent to

the period even if the claim resulted from an occurrence during

the period which was insured.

"Claims period."  The period from September 1 to the

following August 31.

"Commissioner."  The Insurance Commissioner of the

Commonwealth.

"Deficit."  A joint underwriting association loss which

exceeds the sum of earned premiums collected by the joint

underwriting association and investment income.

"Department."  The Insurance Department of the Commonwealth.

"Fund."  The Medical Care Availability and Reduction of Error

Fund established in section 1312.

"Fund coverage limits."  The coverage provided by the fund

under section 1312.

"Government."  The Government of the United States, any

state, any political subdivision of a state, any instrumentality

of one or more states or any agency, subdivision or department

of any such government, including any corporation or other

association organized by a government for the execution of a

government program and subject to control by a government or any

corporation or agency established under an interstate compact or

international treaty.

"Guardian."  A fiduciary who has the care and management of

the estate or person of a minor or an incapacitated person.

"Health care business or practice."  The number of patients

to whom health care services are rendered by a health care

provider within an annual period.

"Health care provider."  A participating health care provider

or nonparticipating health care provider.

"Hospital."  An entity licensed as a hospital under the act

of June 13, 1967 (P.L.31, No.21), known as the Public Welfare

Code, or the act of July 19, 1979 (P.L.130, No.48), known as the

Health Care Facilities Act

"Immediate family."  A parent, a spouse, a child or an adult

sibling residing in the same household.

"Joint underwriting association."  The Pennsylvania

Professional Liability Joint Underwriting Association

established in section 1331.

"Joint underwriting association loss."  The sum of the

administrative expenses, taxes, losses, loss adjustment

expenses, unearned premiums and reserves, including reserves for

losses incurred and losses incurred but not reported, of the

joint underwriting association.

"Licensure authority."  The State Board of Medicine, the

State Board of Osteopathic Medicine, the State Board of

Podiatry, the Department of Public Welfare and the Department of

Health.

"Medical professional liability action."  Any proceeding in

which a medical professional liability claim is asserted,

including an action in a court of law or an arbitration

proceeding.

"Medical professional liability claim."  Any claim seeking

the recovery of damages or loss from a health care provider

arising out of any tort or breach of contract causing injury or

death resulting from the furnishing of health care services

which were or should have been provided.

"Medical professional liability insurance."  Insurance

against liability on the part of a health care provider arising

out of any tort or breach of contract causing injury or death

resulting from the furnishing of medical services which were or

should have been provided.

"Nonparticipating health care provider."  A health care

provider as defined in section 103 of the act of March 20, 2002

(P.L.154, No.13), known as the Medical Care Availability and

Reduction of Error (Mcare) Act, that conducts 20% or less of its

health care business or practice within this Commonwealth.

"Patient."  A natural person who receives or should have

received health care from a health care provider.

"Participating health care provider."  A health care provider

as defined in section 103 of the Medical Care Availability and

Reduction of Error (Mcare) Act that conducts more than 20% of

its health care business or practice within this Commonwealth or

a nonparticipating health care provider who chooses to

participate in the fund.

"Personal representative."  An executor or administrator of a

patient's estate.

"Prevailing primary premium."  The schedule of occurrence

rates approved by the commissioner for the joint underwriting

association.

SUBARTICLE B

FUND

Section 1311.  Medical professional liability insurance.

(a)  Requirement.--A health care provider providing health

care services in this Commonwealth shall:

(1)  purchase medical professional liability insurance

from an insurer which is licensed or approved by the

department; or

(2)  provide self-insurance.

(b)  Proof of insurance.--A health care provider required by

subsection (a) to purchase medical professional liability

insurance or provide self-insurance shall submit proof of

insurance or self-insurance to the department within 60 days of

the policy being issued.

(c)  Failure to provide proof of insurance.--If a health care

provider fails to submit the proof of insurance or self-

insurance required by subsection (b), the department shall,

after providing the health care provider with notice, notify the

health care provider's licensing authority. A health care

provider's license shall be suspended or revoked by its

licensure board or agency if the health care provider fails to

comply with any of the provisions of this article.

(d)  Basic coverage limits.--A health care provider shall

insure or self-insure medical professional liability in

accordance with the following:

(1)  For policies issued or renewed in the calendar year

2002, the basic insurance coverage shall be:

(i)  $500,000 per occurrence or claim and $1,500,000

per annual aggregate for a health care provider who

conducts more than 50% of its health care business or

practice within this Commonwealth and that is not a

hospital.

(ii)  $500,000 per occurrence or claim and $1,500,000

per annual aggregate for a health care provider who

conducts 50% or less of its health care business or

practice within this Commonwealth.

(iii)  $500,000 per occurrence or claim and

$2,500,000 per annual aggregate for a hospital.

(2)  For policies issued or renewed in calendar years

after 2002, the basic insurance coverage shall be:

(i)  $500,000 per occurrence or claim and $1,500,000

per annual aggregate for a participating health care

provider that is not a hospital.

(ii)  $1,000,000 per occurrence or claim and

$3,000,000 per annual aggregate for a nonparticipating

health care provider.

(iii)  $500,000 per occurrence or claim and

$2,500,000 per annual aggregate for a hospital.

(3)  Unless the commissioner finds pursuant to section

1345(a) that additional basic insurance coverage capacity is

not available, for policies issued or renewed in calendar

years after 2017 subject to paragraph (4), the basic

insurance coverage shall be:

(i)  $750,000 per occurrence or claim and $2,250,000

per annual aggregate for a participating health care

provider that is not a hospital.

(ii)  $1,000,000 per occurrence or claim and

$3,000,000 per annual aggregate for a nonparticipating

health care provider.

(iii)  $750,000 per occurrence or claim and

$3,750,000 per annual aggregate for a hospital.

If the commissioner finds pursuant to section 1345(a) that

additional basic insurance coverage capacity is not

available, the basic insurance coverage requirements shall

remain at the level required by paragraph (2); and the

commissioner shall conduct a study every two years until the

commissioner finds that additional basic insurance coverage

capacity is available, at which time the commissioner shall

increase the required basic insurance coverage in accordance

with this paragraph.

(4)  Unless the commissioner finds pursuant to section

1345(b) that additional basic insurance coverage capacity is

not available, for policies issued or renewed three years

after the increase in coverage limits required by paragraph

(3) and for each year thereafter, the basic insurance

coverage shall be:

(i)  $1,000,000 per occurrence or claim and

$3,000,000 per annual aggregate for a participating

health care provider that is not a hospital.

(ii)  $1,000,000 per occurrence or claim and

$3,000,000 per annual aggregate for a nonparticipating

health care provider.

(iii)  $1,000,000 per occurrence or claim and

$4,500,000 per annual aggregate for a hospital.

If the commissioner finds pursuant to section 1345(b) that

additional basic insurance coverage capacity is not

available, the basic insurance coverage requirements shall

remain at the level required by paragraph (3); and the

commissioner shall conduct a study every two years until the

commissioner finds that additional basic insurance coverage

capacity is available, at which time the commissioner shall

increase the required basic insurance coverage in accordance

with this paragraph.

(e)  Fund participation.--A participating health care

provider shall be required to participate in the fund.

(f)  Self-insurance.--

(1)  If a health care provider self-insures its medical

professional liability, the health care provider shall submit

its self-insurance plan, such additional information as the

department may require and the examination fee to the

department for approval.

(2)  The department shall approve the plan if it

determines that the plan constitutes protection equivalent to

the insurance required of a health care provider under

subsection (d).

(g)  Basic insurance liability.--

(1)  An insurer providing medical professional liability

insurance shall not be liable for payment of a claim against

a health care provider for any loss or damages awarded in a

medical professional liability action in excess of the basic

insurance coverage required by subsection (d) unless the

health care provider's medical professional liability

insurance policy or self-insurance plan provides for a higher

limit.

(2)  If a claim exceeds the limits of a participating

health care provider's basic insurance coverage or self-

insurance plan, the fund shall be responsible for payment of

the claim against the participating health care provider up

to the fund liability limits.

(h)  Excess insurance.--

(1)  No insurer providing medical professional liability

insurance with liability limits in excess of the fund's

liability limits to a participating health care provider

shall be liable for payment of a claim against the

participating health care provider for a loss or damages in a

medical professional liability action except the losses and

damages in excess of the fund coverage limits.

(2)  No insurer providing medical professional liability

insurance with liability limits in excess of the fund's

liability limits to a participating health care provider

shall be liable for any loss resulting from the insolvency or

dissolution of the fund.

(i)  Governmental entities.--A governmental entity may

satisfy its obligations under this article, as well as the

obligations of its employees to the extent of their employment,

by either purchasing medical professional liability insurance or

assuming an obligation as a self-insurer and paying the

assessments under this article.

(j)  Exemptions.--The following participating health care

providers shall be exempt from this article:

(1)  A physician who exclusively practices the specialty

of forensic pathology.

(2)  A participating health care provider who is a member

of the Pennsylvania military forces while in the performance

of the member's assigned duty in the Pennsylvania military

forces under orders.

(3)  A retired licensed participating health care

provider who provides care only to the provider or the

provider's immediate family members.

Section 1312.  Medical Care Availability and Reduction of Error

Fund.

(a)  Establishment.--There is hereby established within the

State Treasury a special fund to be known as the Medical Care

Availability and Reduction of Error Fund. Money in the fund

shall be used to pay claims against participating health care

providers for losses or damages awarded in medical professional

liability actions against them in excess of the basic insurance

coverage required by section 1311(d), liabilities transferred in

accordance with subsection (b) and for the administration of the

fund.

(b)  Transfer of assets and liabilities.--

(1)  (i)  The money in the Medical Professional Liability

Catastrophe Loss Fund established under section 701(d) of

the former act of October 15, 1975 (P.L.390, No.111),

known as the Health Care Services Malpractice Act, is

transferred to the fund.

(ii)  The rights of the Medical Professional

Liability Catastrophe Loss Fund established under section

701(d) of the former Health Care Services Malpractice Act

are transferred to and assumed by the fund.

(2)  The liabilities and obligations of the Medical

Professional Liability Catastrophe Loss Fund established

under section 701(d) of the former Health Care Services

Malpractice Act are transferred to and assumed by the fund.

(c)  Fund liability limits.--

(1)  For calendar year 2002, the limit of liability of

the Medical Professional Liability Catastrophe Loss Fund

created in section 701(d) of the former Health Care Services

Malpractice Act for each health care provider that conducts

more than 50% of its health care business or practice within

this Commonwealth and for each hospital shall be $700,000 for

each occurrence and $2,100,000 per annual aggregate.

(2)  (i)  Subject to section 1311(d)(3) and (4) (relating

to medical professional liability insurance), the limit

of liability of the fund for each participating health

care provider shall be $500,000 for each occurrence and

$1,500,000 per annual aggregate.

(ii)  If the basic insurance coverage requirement is

increased in accordance with section 1311(d)(3) and,

notwithstanding subparagraph (i), for each calendar year

following the increase in the basic insurance coverage

requirement, the limit of liability of the fund shall be

$250,000 for each occurrence and $750,000 per annual

aggregate.

(iii)  If the basic insurance coverage requirement is

increased in accordance with section 1311(d)(4) and,

notwithstanding subparagraphs (i) and (ii), for each

calendar year following the increase in the basic

insurance coverage requirement, the limit of liability of

the fund shall be zero.

(d)  Assessments.--

(1)  For calendar years 2003 through 2010, the fund shall

be funded by an assessment on each participating health care

provider. Assessments shall be levied by the department on or

after January 1 of each year. The assessment shall be based

on the prevailing primary premium for each participating

health care provider and shall, in the aggregate, produce an

amount sufficient to do all of the following:

(i)  Reimburse the fund for the payment of reported

claims which became final during the preceding claims

period.

(ii)  Pay expenses of the fund incurred during the

preceding claims period.

(iii)  Pay principal and interest on moneys

transferred into the fund in accordance with section

1313(c).

(iv)  Provide a reserve that shall be 10% of the sum

of subparagraphs (i), (ii) and (iii).

(1.1)  For calendar year 2011 and for each year

thereafter, the fund shall be funded by an assessment on each

participating health care provider. Assessments shall be

levied by the department on or after January 1 of each year.

The assessment shall be based on the prevailing primary

premium for each participating health care provider and

shall, in the aggregate, produce an amount equal to the sum

of the following amounts minus the projected fund balance at

the close of the calendar year preceding the assessment year:

(i)  The reported claims which became final during

the preceding claims period.

(ii)  The expenses of the fund incurred during the

preceding claims period.

(iii)  The outstanding principal and interest on

moneys transferred into the fund in accordance with

section 1313(c).

(iv)  Ten percent of the sum of subparagraphs (i),

(ii) and (iii).

(1.2)  Paragraph (1.1) is not intended to validate or

refute any position advanced by any party in proceedings

challenging any assessment prior to the effective date of

this paragraph. The outcome of those proceedings shall be

based upon the statutory language in effect on the day before

the effective date of this paragraph.

(2)  The department shall notify all basic insurance

coverage insurers and self-insured participating health care

providers of the assessment by November 1 for the succeeding

calendar year.

(3)  Any appeal of the assessment shall be filed with the

department.

(e)  Discount on surcharges and assessments.--

(1)  For calendar year 2002, the department shall

discount the aggregate surcharge imposed under section 701(e)

(1) of the former Health Care Services Malpractice Act by 5%

of the aggregate surcharge imposed under that section for

calendar year 2001 in accordance with the following:

(i)  Fifty percent of the aggregate discount shall be

granted equally to hospitals and to participating health

care providers that were surcharged as members of one of

the four highest rate classes of the prevailing primary

premium.

(ii)  Notwithstanding subparagraph (i), 50% of the

aggregate discount shall be granted equally to all

participating health care providers.

(iii)  The department shall issue a credit to a

participating health care provider who, prior to the

effective date of former section 712 of the act of March

20, 2002 (P.L.154, No.13), known as the Medical Care

Availability and Reduction of Error (Mcare) Act, has paid

the surcharge imposed under section 701(e)(1) of the

former Health Care Services Malpractice Act for calendar

year 2002 prior to the effective date of former section

712 of the Medical Care Availability and Reduction of

Error (Mcare) Act.

(2)  For calendar years 2003 and 2004, the department

shall discount the aggregate assessment imposed under

subsection (d) for each calendar year by 10% of the aggregate

surcharge imposed under section 701(e)(1) of the former

Health Care Services Malpractice Act for calendar year 2001

in accordance with the following:

(i)  Fifty percent of the aggregate discount shall be

granted equally to hospitals and to participating health

care providers that were assessed as members of one of

the four highest rate classes of the prevailing primary

premium.

(ii)  Notwithstanding subparagraph (i), 50% of the

aggregate discount shall be granted equally to all

participating health care providers.

(3)  For calendar years after 2017, if the basic

insurance coverage requirement is increased in accordance

with section 1311(d)(3) or (4), the department may discount

the aggregate assessment imposed under subsection (d) by an

amount not to exceed the aggregate sum to be deposited in the

fund in accordance with subsection (m).

(f)  Updated rates.--The joint underwriting association shall

file updated rates for all health care providers with the

commissioner by May 1 of each year. The department shall review

and may adjust the prevailing primary premium in line with any

applicable changes which have been approved by the commissioner.

(g)  Additional adjustments of the prevailing primary

premium.--The department shall adjust the applicable prevailing

primary premium of each participating health care provider in

accordance with the following:

(1)  The applicable prevailing primary premium of a

participating health care provider which is not a hospital

may be adjusted through an increase in the individual

participating health care provider's prevailing primary

premium not to exceed 20%. Any adjustment shall be based upon

the frequency of claims paid by the fund on behalf of the

individual participating health care provider during the past

five most recent claims periods and shall be in accordance

with the following:

(i)  If three claims have been paid during the past

five most recent claims periods by the fund, a 10%

increase shall be charged.

(ii)  If four or more claims have been paid during

the past five most recent claims periods by the fund, a

20% increase shall be charged.

(2)  The applicable prevailing primary premium of a

participating health care provider which is not a hospital

and which has not had an adjustment under paragraph (1) may

be adjusted through an increase in the individual

participating health care provider's prevailing primary

premium not to exceed 20%. Any adjustment shall be based upon

the severity of at least two claims paid by the fund on

behalf of the individual participating health care provider

during the past five most recent claims periods.

(3)  The applicable prevailing primary premium of a

participating health care provider not engaged in direct

clinical practice on a full-time basis may be adjusted

through a decrease in the individual participating health

care provider's prevailing primary premium not to exceed 10%.

Any adjustment shall be based upon the lower risk associated

with the less-than-full-time direct clinical practice.

(4)  The applicable prevailing primary premium of a

hospital may be adjusted through an increase or decrease in

the individual hospital's prevailing primary premium not to

exceed 20%. Any adjustment shall be based upon the frequency

and severity of claims paid by the fund on behalf of other

hospitals of similar class, size, risk and kind within the

same defined region during the past five most recent claims

periods.

(h)  Self-insured health care providers.--A participating

health care provider that has an approved self-insurance plan

shall be assessed an amount equal to the assessment imposed on a

participating health care provider of like class, size, risk and

kind as determined by the department.

(i)  Change in basic insurance coverage.--If a participating

health care provider changes the term of its medical

professional liability insurance coverage, the assessment shall

be calculated on an annual basis and shall reflect the

assessment percentages in effect for the period over which the

policies are in effect.

(j)  Payment of claims.--Claims which became final during the

preceding claims period shall be paid on or before December 31

following the August 31 on which they became final.

(k)  Termination.--Upon satisfaction of all liabilities of

the fund, the fund shall terminate. Any balance remaining in the

fund upon such termination shall be returned by the department

to the participating health care providers who participated in

the fund in proportion to their assessments in the preceding

calendar year.

(l)  Sole and exclusive source of funding.--Except as

provided in subsection (m), the surcharges imposed under section

701(e)(1) of the former Health Care Services Malpractice Act and

assessments on participating health care providers and any

income realized by investment or reinvestment shall constitute

the sole and exclusive sources of funding for the fund. Nothing

in this subsection shall prohibit the fund from accepting

contributions from nongovernmental sources. A claim against or a

liability of the fund shall not be deemed to constitute a debt

or liability of the Commonwealth or a charge against the General

Fund.

(m)  Supplemental funding.--Notwithstanding the provisions of

75 Pa.C.S. § 6506(b) (relating to surcharge) to the contrary,

beginning January 1, 2004, and for a period of nine calendar

years thereafter, all surcharges levied and collected under 75

Pa.C.S. § 6506(a) by any division of the unified judicial system

shall be remitted to the Commonwealth for deposit in the fund.

These funds shall be used to reduce surcharges and assessments

in accordance with subsection (e). Beginning January 1, 2014,

and each year thereafter, the surcharges levied and collected

under 75 Pa.C.S. § 6506(a) shall be deposited into the General

Fund.

(n)  Waiver of right to consent to settlement.--A

participating health care provider may maintain the right to

consent to a settlement in a basic insurance coverage policy for

medical professional liability insurance upon the payment of an

additional premium amount.

Section 1313.  Administration of fund.

(a)  General rule.--The fund shall be administered by the

department. The department shall contract with an entity or

entities for the administration of claims against the fund in

accordance with 62 Pa.C.S. (relating to procurement), and, to

the fullest extent practicable, the department shall contract

with entities that:

(1)  Are not writing, underwriting or brokering medical

professional liability insurance for participating health

care providers; however, the department may contract with a

subsidiary or affiliate of any writer, underwriter or broker

of medical professional liability insurance.

(2)  Are not trade organizations or associations

representing the interests of participating health care

providers in this Commonwealth.

(3)  Have demonstrable knowledge of and experience in the

handling and adjusting of professional liability or other

catastrophic claims.

(4)  Have developed, instituted and utilized best

practice standards and systems for the handling and adjusting

of professional liability or other catastrophic claims.

(5)  Have demonstrable knowledge of and experience with

the professional liability marketplace and the judicial

systems of this Commonwealth.

(b)  Reinsurance.--The department may purchase, on behalf of

and in the name of the fund, as much insurance or reinsurance as

is necessary to preserve the fund or retire the liabilities of

the fund.

(c)  Transfers.--The Governor may transfer to the fund from

the Catastrophic Loss Benefits Continuation Fund, or such other

funds as may be appropriate, such money as is necessary in order

to pay the liabilities of the fund until sufficient revenues are

realized by the fund. Any transfer made under this subsection

shall be repaid with interest pursuant to section 2 of the act

of August 22, 1961 (P.L.1049, No.479), entitled "An act

authorizing the State Treasurer under certain conditions to

transfer sums of money between the General Fund and certain

funds and subsequent transfers of equal sums between such funds,

and making appropriations necessary to effect such transfers."

(d)  Confidentiality.--Information provided to the department

or maintained by the department regarding a claim or adjustments

to an individual participating health care provider's assessment

shall be confidential, notwithstanding the act of February 14,

2008 (P.L.6, No.3), known as the Right-to-Know Law, or 65

Pa.C.S. Ch. 7 (relating to open meetings).

Section 1314.  Medical professional liability claims.

(a)  Notification.--A basic coverage insurer or self-insured

participating health care provider shall promptly notify the

department in writing of any medical professional liability

claim.

(b)  Failure to notify.--If a basic coverage insurer or self-

insured participating health care provider fails to notify the

department as required under subsection (a) and the department

has been prejudiced by the failure of notice, the insurer or

provider shall be solely responsible for the payment of the

entire award or verdict that results from the medical

professional liability claim.

(c)  Defense.--A basic coverage insurer or self-insured

participating health care provider shall provide a defense to a

medical professional liability claim, including a defense of any

potential liability of the fund, except as provided for in

section 1315. The department may join in the defense and be

represented by counsel.

(d)  Responsibilities.--In accordance with section 1313, the

department may defend, litigate, settle or compromise any

medical professional liability claim payable by the fund.

(e)  Releases.--In the event that a basic coverage insurer or

self-insured participating health care provider enters into a

settlement with a claimant to the full extent of its liability

as provided in this article, it may obtain a release from the

claimant to the extent of its payment, which payment shall have

no effect upon any claim against the fund or its duty to

continue the defense of the claim.

(f)  Adjustment.--The department may adjust claims.

(g)  Mediation.--Upon the request of a party to a medical

professional liability claim within the fund coverage limits,

the department may provide for a mediator in instances where

multiple carriers disagree on the disposition or settlement of a

case. Upon the consent of all parties, the mediation shall be

binding. Proceedings conducted and information provided in

accordance with this section shall be confidential and shall not

be considered public information subject to disclosure under the

act of February 14, 2008 (P.L.6, No.3), known as the Right-to-

Know Law, or 65 Pa.C.S. Ch. 7 (relating to open meetings).

(h)  Delay damages and postjudgment interest.--Delay damages

and postjudgment interest applicable to the fund's liability on

a medical professional liability claim shall be paid by the fund

and shall not be charged against the participating health care

provider's annual aggregate limits. The basic coverage insurer

or self-insured participating health care provider shall be

responsible for its proportionate share of delay damages and

postjudgment interest.

Section 1315.  Extended claims.

(a)  General rule.--If a medical professional liability claim

against a health care provider who was required to participate

in the Medical Professional Liability Catastrophe Loss Fund

under section 701(d) of the former act of October 15, 1975

(P.L.390, No.111), known as the Health Care Services Malpractice

Act, is made more than four years after the breach of contract

or tort occurred and if the claim is filed within the applicable

statute of limitations, the claim shall be defended by the

department if the department received a written request for

indemnity and defense within 180 days of the date on which

notice of the claim is first given to the participating health

care provider or its insurer. Where multiple treatments or

consultations took place less than four years before the date on

which the health care provider or its insurer received notice of

the claim, the claim shall be deemed for purposes of this

section to have occurred less than four years prior to the date

of notice and shall be defended by the insurer in accordance

with this article.

(b)  Payment.--If a health care provider is found liable for

a claim defended by the department in accordance with subsection

(a), the claim shall be paid by the fund. The limit of liability

of the fund for a claim defended by the department under

subsection (a) shall be $1,000,000 per occurrence.

(c)  Concealment.--If a claim is defended by the department

under subsection (a) or paid under subsection (b) and the claim

is made after four years because of the willful concealment by

the health care provider or its insurer, the fund shall have the

right to full indemnity, including the department's defense

costs, from the health care provider or its insurer.

(d)  Extended coverage required.--Notwithstanding subsections

(a), (b) and (c), all medical professional liability insurance

policies issued on or after January 1, 2006, shall provide

indemnity and defense for claims asserted against a health care

provider for a breach of contract or tort which occurs four or

more years after the breach of contract or tort occurred and

after December 31, 2005.

Section 1316.  Podiatrist liability.

The department shall calculate the amount necessary to

arrange for the separate retirement of the fund's liabilities

associated with podiatrists. Any arrangement shall be on terms

and conditions proportionate to the individual liability of the

class of health care provider. The arrangement may result in

assessments for podiatrists different from the assessments for

other health care providers. Upon satisfaction of the

arrangement, podiatrists shall not be required to contribute to

or be entitled to participate in the fund. In cases where the

class rejects an arrangement, the department shall present to

the provider class new term arrangements at least once in every

two-year period. All costs and expenses associated with the

completion and implementation of the arrangement shall be paid

by podiatrists and may be charged in the form of an addition to

the assessment.

SUBARTICLE C

JOINT UNDERWRITING ASSOCIATION

Section 1331.  Joint underwriting association.

(a)  Establishment.--There is established a nonprofit joint

underwriting association to be known as the Pennsylvania

Professional Liability Joint Underwriting Association. The joint

underwriting association shall consist of all insurers

authorized to write insurance in accordance with section 202(c)

(4) and (11) of the act of May 17, 1921 (P.L.682, No.284), known

as The Insurance Company Law of 1921, and shall be supervised by

the department. The powers and duties of the joint underwriting

association shall be vested in and exercised by a board of

directors.

(b)  Duties.--The joint underwriting association shall do all

of the following:

(1)  Submit a plan of operation to the commissioner for

approval.

(2)  Submit rates and any rate modification to the

department for approval in accordance with the act of June

11, 1947 (P.L.538, No.246), known as The Casualty and Surety

Rate Regulatory Act.

(3)  Offer medical professional liability insurance to

health care providers in accordance with section 1332.

(4)  File with the department the information required in

section 1312.

(c)  Liabilities.--A claim against or a liability of the

joint underwriting association shall not be deemed to constitute

a debt or liability of the Commonwealth or a charge against the

General Fund.

Section 1332.  Medical professional liability insurance.

(a)  Insurance.--The joint underwriting association shall

offer medical professional liability insurance to health care

providers and professional corporations, professional

associations and partnerships which are entirely owned by health

care providers who cannot conveniently obtain medical

professional liability insurance through ordinary methods at

rates not in excess of those applicable to similarly situated

health care providers, professional corporations, professional

associations or partnerships.

(b)  Requirements.--The joint underwriting association shall

ensure that the medical professional liability insurance it

offers does all of the following:

(1)  Is conveniently and expeditiously available to all

health care providers required to be insured under section

1311.

(2)  Is subject only to the payment or provisions for

payment of the premium.

(3)  Provides reasonable means for the health care

providers it insures to transfer to the ordinary insurance

market.

(4)  Provides sufficient coverage for a health care

provider to satisfy its insurance requirements under section

1311 on reasonable and not unfairly discriminatory terms.

(5)  Permits a health care provider to finance its

premium or allows installment payment of premiums subject to

customary terms and conditions.

Section 1333.  Deficit.

(a)  Filing.--In the event the joint underwriting association

experiences a deficit in any calendar year, the board of

directors shall file with the commissioner the deficit.

(b)  Approval.--Within 30 days of receipt of the filing, the

commissioner shall approve or deny the filing. If approved, the

joint underwriting association is authorized to borrow funds

sufficient to satisfy the deficit.

(c)  Rate filing.--Within 30 days of receiving approval of

its filing in accordance with subsection (b), the joint

underwriting association shall file a rate filing with the

department. The commissioner shall approve the filing if the

premiums generate sufficient income for the joint underwriting

association to avoid a deficit during the following 12 months

and to repay principal and interest on the money borrowed in

accordance with subsection (b).

SUBARTICLE D

REGULATION OF MEDICAL PROFESSIONAL

LIABILITY INSURANCE

Section 1341.  Approval.

In order for an insurer to issue a policy of medical

professional liability insurance to a health care provider or to

a professional corporation, professional association or

partnership which is entirely owned by health care providers,

the insurer must be authorized to write medical professional

liability insurance in accordance with the act of May 17, 1921

(P.L.682, No.284), known as The Insurance Company Law of 1921.

Section 1342.  Approval of policies on "claims made" basis.

The commissioner shall not approve a medical professional

liability insurance policy written on a "claims made" basis by

any insurer doing business in this Commonwealth unless the

insurer shall guarantee to the commissioner the continued

availability of suitable liability protection for a health care

provider subsequent to the discontinuance of professional

practice by the health care provider or the termination of the

insurance policy by the insurer or the health care provider for

so long as there is a reasonable probability of a claim for

injury for which the health care provider may be held liable.

Section 1343.  Reports to commissioner and claims information.

(a)  Duty to report.--By October 15 of each year, basic

insurance coverage insurers and self-insured participating

health care providers shall report to the department the claims

information specified in subsection (b).

(b)  Department report.--Sixty days after the end of each

calendar year, the department shall prepare a report. The report

shall contain the total amount of claims paid and expenses

incurred during the preceding calendar year, the total amount of

reserve set aside for future claims, the date and place in which

each claim arose, the amounts paid, if any, and the disposition

of each claim, judgment of court, settlement or otherwise. For

final claims at the end of any calendar year, the report shall

include details by basic insurance coverage insurers and self-

insured participating health care providers of the amount of

assessment collected, the number of reimbursements paid and the

amount of reimbursements paid.

(c)  Submission of report.--A copy of the report prepared

pursuant to this section shall be submitted to the chairman and

minority chairman of the Banking and Insurance Committee of the

Senate and the chairman and minority chairman of the Insurance

Committee of the House of Representatives.

Section 1344.  Professional corporations, professional

associations and partnerships.

A professional corporation, professional association or

partnership which is entirely owned by health care providers and

which elects to purchase basic insurance coverage in accordance

with section 1311 from the joint underwriting association or

from an insurer licensed or approved by the department shall be

required to participate in the fund and, upon payment of the

assessment required by section 1312, be entitled to coverage

from the fund.

Section 1345.  Actuarial data.

(a)  Study.--The following shall apply:

(1)  No later than April 1, 2017, each insurer providing

medical professional liability insurance in this Commonwealth

shall file loss data as required by the commissioner. For

failure to comply, the commissioner shall impose an

administrative penalty of $1,000 for every day that this data

is not provided in accordance with this paragraph.

(2)  After the filing under paragraph (1) and before July

2, 2017, the commissioner shall complete and present a study

regarding the availability of additional basic insurance

coverage capacity  to the chairman and minority chairman of

the Banking and Insurance Committee of the Senate and to the

chairman and minority chairman of the Insurance Committee of

the House of Representatives. The study shall include an

estimate of the total change in medical professional

liability insurance loss-cost resulting from implementation

of this act prepared by an independent actuary. The fee for

the independent actuary shall be borne by the fund. In

developing the estimate, the independent actuary shall

consider all of the following:

(i)  The most recent claim and ratemaking data

available.

(ii)  Any other relevant factors within or outside

this Commonwealth in accordance with sound actuarial

principles.

(b)  Additional study.--If additional basic insurance

coverage capacity is found under subsection (a) and limits are

increased under section 1311(d)(3), the following shall apply:

(1)  Three years following the increase of the basic

insurance coverage requirement in accordance with section

1311(d)(3), each insurer providing medical professional

liability insurance in this Commonwealth shall file loss data

with the commissioner upon request. For failure to comply,

the commissioner shall impose an administrative penalty of

$1,000 for every day that this data is not provided in

accordance with this paragraph.

(2)  Three months following the request made under

paragraph (1), the commissioner shall complete and present a

study regarding the availability of additional basic

insurance coverage capacity to the chairman and minority

chairman of the Banking and Insurance Committee of the Senate

and to the chairman and minority chairman of the Insurance

Committee of the House of Representatives. The study shall

include an estimate of the total change in medical

professional liability insurance loss-cost resulting from

implementation of this act prepared by an independent

actuary. The fee for the independent actuary shall be borne

by the fund. In developing the estimate, the independent

actuary shall consider all of the following:

(i)  The most recent claim and ratemaking data

available.

(ii)  Any other relevant factors within or outside

this Commonwealth in accordance with sound actuarial

principles.

Section 1346.  Mandatory reporting.

(a)  General provisions.--Each medical professional liability

insurer and each self-insured health care provider, including

the fund established by this article, which makes payment in

settlement or in partial settlement of or in satisfaction of a

judgment in a medical professional liability action or claim

shall provide to the appropriate licensure board a true and

correct copy of the report required to be filed with the Federal

Government by section 421 of the Health Care Quality Improvement

Act of 1986 (Public Law 99-660, 42 U.S.C. § 11131). The copy of

the report required by this section shall be filed

simultaneously with the report required by section 421 of the

Health Care Quality Improvement Act of 1986. The department

shall monitor and enforce compliance with this section. The

Bureau of Professional and Occupational Affairs and the

licensure boards shall have access to information pertaining to

compliance.

(b)  Immunity.--A medical professional liability insurer or

person who reports under subsection (a) in good faith and

without malice shall be immune from civil or criminal liability

arising from the report.

(c)  Public information.--Information received under this

section shall not be considered public information for the

purposes of the act of February 14, 2008 (P.L.6, No.3), known as

the Right-to-Know Law, or 65 Pa.C.S. Ch. 7 (relating to open

meetings) until used in a formal disciplinary proceeding.

Section 1347.  Cancellation of insurance policy.

A termination of a medical professional liability insurance

policy by cancellation, except for suspension or revocation of

the insured's license or for reason of nonpayment of premium, is

not effective against the insured unless notice of cancellation

was given within 60 days after the issuance of the policy to the

insured, and no cancellation shall take effect unless a written

notice stating the reasons for the cancellation and the date and

time upon which the termination becomes effective has been

received by the commissioner. Mailing of the notice to the

commissioner at the commissioner's principal office address

shall constitute notice to the commissioner.

Section 1348.  Regulations.

The commissioner may promulgate regulations to implement and

administer this article.

Section 1349.  Conflict.

This article does not affect any other statutory provision

which:

(1)  relates to the participation of a health care

provider in the fund; and

(2)  is in effect on the effective date of this section.

Section 4.  Repeals are as follows:

(1)  The General Assembly declares that the repeal under

paragraph (2) is necessary to effectuate the addition of

Article XIII of the act.

(2)  Chapter 7 of the act of March 20, 2002 (P.L.154,

No.13), known as the Medical Care Availability and Reduction

of Error (Mcare) Act, is repealed.

Section 5.  The addition of Article XIII of the act is a

continuation of Chapter 7 of the act of March 20, 2002 (P.L.154,

No.13), known as the Medical Care Availability and Reduction of

Error (Mcare) Act. Except as otherwise provided in Article XIII

of the act, all activities initiated under Chapter 7 of the

Medical Care Availability and Reduction of Error (Mcare) Act

shall continue and remain in full force and effect and may be

completed under Article XIII of the act. Resolutions, orders,

regulations, rules and decisions which were made under Chapter 7

of the Medical Care Availability and Reduction of Error (Mcare)

Act and which are in effect on the effective date of this

section shall remain in full force and effect until revoked,

vacated or modified under Article XIII of the act. Contracts,

obligations and agreements entered into under Chapter 7 of the

Medical Care Availability and Reduction of Error (Mcare) Act are

not affected nor impaired by the repeal of Chapter 7 of the

Medical Care Availability and Reduction of Error (Mcare) Act.

Section 2.  This act shall take effect in 60 days.

<--

Section 6.  This act shall take effect as follows:

<--

(1)  The following provisions shall take effect

immediately:

(i)  The addition of section 1312(d)(1), (1.1) and

(1.2) of the act.

(ii)  This section.

(2)  The remainder of this act shall take effect in 60

days.