and by absolving carriers from liability for any act of malpractice committed by one of its insureds in prior years. The Commonwealth legislature could reasonably have believed that these limitations on the liability of insurance carriers would foster the continuing availability of medical malpractice insurance in Pennsylvania.
The ultimate goal of the Act, assurance of a full recovery by malpractice victims, is achieved by the establishment of the CAT Fund from which victims may draw the proceeds of a verdict which exceeds the carriers' liability. The Commonwealth legislature could have reasonably believed that the CAT Fund would directly promote full recovery by medical malpractice victims. Therefore, "regardless of the ultimate economic efficacy of the statute," see, e.g., Hofflander & Nye, Medical Malpractice Insurance in Pennsylvania at 49 (1985), I "have no hesitancy in concluding that it bears a reasonable relation to the [Commonwealth's] legitimate purpose in controlling" the medical malpractice insurance market in Pennsylvania. Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 124-25, 57 L. Ed. 2d 91, 98 S. Ct. 2207 (1978).
The plaintiffs also argue that the Act creates two irrebuttable presumptions in violation of the due process clause of the fourteenth amendment. The plaintiffs maintain that the Act presumes both "that each individual physician will be actionably negligent while practicing his profession during the course of his career," and "that no health care provider will have sufficient assets to compensate a patient for injuries relating to the physician's treatment of the patient."
The plaintiffs' contention, in the first place, is simply incorrect. The Act does not presume that all doctors will be actionably negligent; rather, it presumes that all doctors might be actionably negligent, and that, given the difficulty of predicting which doctors will be negligent, it is reasonable to require all doctors to contribute to a fund designed to compensate malpractice victims. Nor does the Act presume that no doctor will ever have sufficient assets to compensate a patient for his or her injuries; in fact, the Act presumes that some doctors will be capable of adopting self-insurance plans sufficient to comply with the Act's basic coverage requirements. See Pa. Stat. Ann. tit. 40, § 1301.701(a), (a)(1)(i), (a)(1)(ii), (a)(2) (Purdon Supp. 1988). With respect to the CAT Fund surcharge, the Act presumes only that, given the difficulty of predicting which doctors will be actionably negligent, given the impossibility of predicting the amount of any liability judgment that will be entered against a negligent doctor, and given the need to ensure the economic viability of the Fund, it is reasonable to require contributions from all health care providers in proportion to their basic coverage premiums.
More importantly, irrebuttable presumption attacks are premised on a request to the court that the plaintiff be allowed to rebut the statutory presumption on the ground that "the Due Process Clause require[s] a more individualized determination." Cleveland Bd. of Educ. v. LaFleur, 414 U.S. 632, 645, 39 L. Ed. 2d 52, 94 S. Ct. 791 (1974); see also United States Dept. of Agric. v. Murry, 413 U.S. 508, 518, 37 L. Ed. 2d 767, 93 S. Ct. 2832 (1973) (Douglas, J., concurring) (question is whether "the Due Process Clause requires the Government to act on an individualized basis [by using a well-designed hearing procedure], with general propositions serving only as rebuttable presumptions or other burden shifting devices"); Vlandis v. Kline, 412 U.S. 441, 453, 37 L. Ed. 2d 63, 93 S. Ct. 2230 (1973) (question is whether statute is unconstitutional "because it provides no opportunity for students . . . to demonstrate that they have become bona fide Connecticut residents"). The plaintiffs have not attempted to show, nor requested an opportunity to show, that they will not "be actionably negligent . . . during the course of [their] career[s]" or that they will "have sufficient assets to compensate a patient for injuries relating to [their] treatment of the patient." Given the nature of these presumptions, based as they are on predictions, it is highly unlikely that the plaintiffs could make either of these showings.
The object of the plaintiffs' irrebuttable presumption attack seems instead to be the reasonableness of the legislature's supposed reliance on these presumptions in fashioning the statutory scheme of the Act. See Plaintiffs' Memorandum at 18 ("Neither one of these presumptions is totally true yet the Act's purpose of compensating health care victims seems to be clearly based on them."). To the extent that this is the crux of the plaintiffs' argument, it is clearly foreclosed by my finding that the Act is rationally related to legitimate state interests and therefore comports with the requirements of the due process clause of the fourteenth amendment.
C. Takings Clause
The plaintiffs contest the constitutionality of the Act on the additional ground that assessing the CAT Fund surcharge against all doctors -- instead of placing the burden of compensating malpractice victims on society as a whole, or solely on those doctors who commit acts of malpractice -- constitutes a "taking" in violation of the fifth and fourteenth amendments. In support of this contention, plaintiffs make reference to the decision of the United States Supreme Court in Nollan v. California Coastal Comm'n, 483 U.S. 825, 107 S. Ct. 3141, 97 L. Ed. 2d 677 (1987).
In Nollan, the Court stated that "land use regulation does not effect a taking if it 'substantially advance[s] legitimate state interests' and does not 'den[y] an owner economically viable use of his land.'" Nollan, 107 S. Ct. at 3146 (quoting Agins v. Tiburon, 447 U.S. 255, 260, 65 L. Ed. 2d 106, 100 S. Ct. 2138 (1980)) (bracketed material added by Nollan court). Because the "property" at issue in this case is not real property, the standard enunciated in Agins and Nollan is not applicable.
Rather, the court has identified three factors which have "particular significance" in determining whether governmental regulation constitutes a taking of property: "(1) 'the economic impact of the regulation on the claimant'; (2) 'the extent to which the regulation has interfered with distinct investment-backed expectations'; and (3) 'the character of the governmental action.'" Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 225, 89 L. Ed. 2d 166, 106 S. Ct. 1018 (1986) (quoting Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 124, 57 L. Ed. 2d 631, 98 S. Ct. 2646 (1978)). A district court, however, should not apply these factors rigidly. The Supreme Court has "'eschewed the development of any set formula . . . and ha[s] relied instead on ad hoc, factual inquiries into the circumstances of each particular case.'" Bowen v. Gilliard, 483 U.S. 587, 107 S. Ct. 3008, 3020, 97 L. Ed. 2d 485 (1987) (quoting Connolly, 475 U.S. at 224).
First, with respect to the nature of the governmental action, the Commonwealth has not physically invaded or permanently appropriated for its own use any of plaintiffs' assets. Instead, the Act requires doctors to maintain medical malpractice insurance and to contribute an additional percentage of their insurance premium to the CAT Fund. The Act safeguards malpractice victims and ensures the continued availability of malpractice insurance. "This interference with . . . property rights . . . arises from a public program that adjusts the benefits and burdens of economic life to promote the common good and . . . does not constitute a taking requiring Government compensation." Connolly, 475 U.S. at 225; see also Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 107 S. Ct. 1232, 1244, 94 L. Ed. 2d 472 (1987). This is not the type of enactment that "forc[es] some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." Armstrong v. United States, 364 U.S. 40, 49, 4 L. Ed. 2d 1554, 80 S. Ct. 1563 (1960).
Second, with regard to the economic severity of the Act, "there is no doubt that the Act completely deprives a [doctor] of whatever amount of money [the doctor] is obligated to pay to fulfill its statutory liability." Connolly, 475 U.S. at 225. As in Connolly, however, the assessment is not made in a vacuum. The applicable surcharge is determined by reference to each doctor's medical malpractice premium which presumably depends, at least in part, on the doctor's claim history. Moreover, doctors are protected under the statutory scheme from liability for medical malpractice claims, including claims in excess of their malpractice insurance policy limits. The Act, therefore, is a classic instance of legislation that produces a "reciprocity of advantage." Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415, 67 L. Ed. 322, 43 S. Ct. 158 (1922); see also Keystone, 107 S. Ct. at 1245. Thus, doctors as well as malpractice victims benefit from the Act.
In addition, the facts in the present case reveal that the premium and surcharge have historically constituted between 5 and 50 percent of the plaintiffs' gross incomes. Although this percentage undoubtedly represents a large proportion of plaintiffs' costs of doing business, it has not yet denied them "the economically viable use of th[eir] property." Keystone, 107 S. Ct. at 1247-1249; see also United States v. General Motors Corp., 323 U.S. 373, 378, 89 L. Ed. 311, 65 S. Ct. 357 (1945) (taking exists if effects of governmental action "are so complete as to deprive the owner of all or most of his interest in the subject matter"); PruneYard Shopping Center v. Robins, 447 U.S. 74, 64 L. Ed. 2d 741, 100 S. Ct. 2035 (1980). No plaintiff has shown an inability to pay or that he can no longer pursue his occupation because of the added expense of the CAT Fund surcharge.
Finally, with respect to the extent to which the regulation has interfered with distinct investment-backed expectations, it is clear that "[a] 'reasonable investment-backed expectation' must be more than a 'unilateral expectation or an abstract need.'" Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1005, 81 L. Ed. 2d 815, 104 S. Ct. 2862 (1984) (quoting Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161, 66 L. Ed. 2d 358, 101 S. Ct. 446 (1980)). The plaintiffs have not shown that they have an investment-backed expectation of maintaining a certain income level in a regulated profession. Moreover, as stated earlier, in the absence of regulation doctors would have an expectation that they might be held liable for a substantial malpractice judgment. The Act eliminates the expectation of possible tort liability by requiring that doctors procure malpractice insurance and pay an additional premium for excess coverage. The plaintiffs, therefore, have a difficult time showing that they have suffered a cognizable loss, let alone a taking. More importantly, the field of medicine has long been regulated. "Those who do business in the regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end." FHA v. The Darlington, Inc., 358 U.S. 84, 91, 3 L. Ed. 2d 132, 79 S. Ct. 141 (1958). A license to practice medicine, like other rights, is "subject to modification by 'the public acts of government.'" Bowen, 107 S. Ct. at 3021 (quoting Reichelderfer v. Quinn, 287 U.S. 315, 319, 77 L. Ed. 331, 53 S. Ct. 177 (1932)).
Having upheld the Act against a substantive due process attack, it would be surprising to discover that the Commonwealth had unconstitutionally "taken" the surcharges that it was earlier determined are an integral part of a legitimate and rational statutory scheme. See Connolly, 475 U.S. at 223. The standards, of course, for reviewing a due process challenge are different than those employed in the takings context. Nollan, 107 S. Ct. at 3147 n.3. However, having examined the factors mentioned above, and viewing the statutory scheme in its entirety, I am "far from persuaded that fairness and justice require the public, rather than . . . [doctors], to shoulder the responsibility for" compensating medical malpractice victims.
Connolly, 475 U.S. at 227.
D. Procedural Due Process
The plaintiffs argue that the Act is unconstitutionally defective because it fails to provide adequate procedural safeguards before a health care provider's license is revoked for failure to comply with the Act. Specifically, the plaintiffs complain that "although the Act provides a hearing opportunity to physicians, they cannot plead an inability to pay the required fees." Plaintiffs' Memorandum at 14. The defendants concede that the plaintiffs have an interest in their medical licenses that is protected by the fourteenth amendment.
To the extent that the plaintiffs argue that they will be denied due process if they are not permitted to raise the defense of an inability to pay at some future license revocation proceeding, they seem to be attacking the substance of the Act rather than the procedure used to enforce it.
As the Supreme Court stated in Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 84 L. Ed. 2d 494, 105 S. Ct. 1487 (1985):
Property interests are not created by the Constitution, "they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law . . . ." Board of Regents v. Roth, supra 408 U.S. at 577 (1972).