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11/03/97 ANDREW A. WILLET v. PENNSYLVANIA MEDICAL

November 3, 1997

ANDREW A. WILLET, M.D., APPELLANT
v.
PENNSYLVANIA MEDICAL CATASTROPHE LOSS FUND, PENNSYLVANIA MEDICAL SOCIETY LIABILITY INSURANCE COMPANY, AND PHICO INSURANCE COMPANY, APPELLEE; GREENE COUNTY MEMORIAL HOSPITAL, APPELLANT V. PENNSYLVANIA MEDICAL CATASTROPHE LOSS FUND, PENNSYLVANIA MEDICAL SOCIETY LIABILITY INSURANCE COMPANY, AND PHICO INSURANCE COMPANY, APPELLEE



Direct Appeal from the order of the Commonwealth Court, dated December 21, 1995, at No. 387 M.D. 1994. JUDGE BELOW: Commonwealth - HON. SILVESTRI SILVESTRI.

Direct Appeal from the Order of the Commonwealth court, dated December 21, 1995 at No, 388 M.D. 1994. JUDGE BELOW: Commonwealth - HON. SILVESTRI SILVESTRI.

Before: Flaherty, CJ., Zappala, Cappy, Castille, Nigro & Newman, JJ. Mr. Justice Cappy files a Concurring opinion. Mr. Justice Zappala concurs in the result.

The opinion of the court was delivered by: Nigro

JUSTICE NIGRO

DECIDED: NOVEMBER 3, 1997

This consolidated appeal arises from the filing of amended complaints by appellants, Andrew A. Willet, M.D. (" Dr. Willet") and Greene County Memorial Hospital ("Hospital"), within the original jurisdiction of the Commonwealth Court, *fn1 seeking indemnity or contribution from appellees, the Pennsylvania Medical Catastrophe Loss Fund ("CAT Fund"), Pennsylvania Medical Society Liability Insurance Company ("PMSLIC") and PHICO Insurance Company. *fn2

The question presented on appeal is whether the Commonwealth Court erred in sustaining the demurrer of the CAT Fund to the appellants' amended complaints. Appellants seek indemnification for a portion of the delay damages added to a $4 million verdict in an underlying medical malpractice action. For the reasons set forth below, we reverse the decision of the Commonwealth Court.

PMSLIC issued Dr. Willet a professional liability insurance policy providing basic liability coverage of up to $200,000 per occurrence. PHICO provided basic liability insurance for the Hospital in the same amount. In addition, each appellant participated in the contingency fund administered by the CAT Fund, a Commonwealth agency established by the Pennsylvania Health Care Services Malpractice Act, 40 P.S. §§ 1301.101-1301.1006 ("the Act"), which requires the CAT Fund to provide an additional $1 million in liability coverage for each appellant. Lastly, in addition to its basic policy, PHICO also provided the Hospital with a policy for excess liability coverage of up to $3 million.

On May 14, 1991, plaintiff, Terry Harding, filed a civil action seeking damages for medical negligence of, among others, Dr. Willet and the Hospital. Harding's lowest pre-trial settlement demand was $3 million. By March 23, 1993, PMSLIC and PHICO each tendered their respective $200,000 limits of basic coverage toward settlement.

From May 14, 1991, until February 25, 1994, despite the urging of Dr. Willet and the Hospital, who recognized a meritorious and significant medical malpractice claim and sought to resolve the matter and avoid trial, the CAT Fund did not tender the limits of the respective policies.

On January 25, 1994, PHICO, as the Hospital's excess carrier, asked the CAT Fund to tender its coverage limits to PHICO so it could attempt settlement. On February 10, 1994, the CAT Fund tendered its $1 million limits to PHICO, on behalf of the Hospital. Upon receipt of the funds, PHICO assumed control over the negotiations on behalf of the Hospital. PHICO then offered $800,000 from the Hospital's excess coverage, making the total offer for settlement on behalf of the Hospital $2 million. *fn3 The CAT Fund also indicated it would contribute only $300,000 of its $1 million toward a "global settlement," making the settlement offer on behalf of Dr. Willet $500,000.00. However, as neither offer met plaintiff's settlement demand of $3 million, the case proceeded to trial.

On February 25, 1994, the jury returned a $4 million verdict for plaintiff, for which Dr. Willet was deemed to be 60% liable and the Hospital 40% liable. On May 12, 1994, the trial court granted plaintiff's Petition for Delay Damages pursuant to Pa. R.C.P. 238 in the amount of $508,902 for the period of May 15, 1992, until February 22, 1994. *fn4 The Superior Court affirmed the order adding delay damages to the verdict and this Court denied allocatur. Appellants then filed separate amended complaints against the CAT Fund seeking "indemnity or contributions representing all or half of those delay damages and accrued interest attributable to the period from March 23, 1993 through February 10, 1994," representing the time period in which the CAT Fund was in control of settlement negotiations with plaintiff. Specifically, Dr. Willet seeks reimbursement from the CAT Fund and/or PMSLIC whereas the Hospital seeks the same relief for the same period from the CAT Fund only. *fn5

In November 1995, the CAT Fund, PMSLIC and PHICO separately filed preliminary objections to both Dr. Willet's and the Hospital's amended complaints. Specifically, in its preliminary objections, the CAT Fund asserted the relief requested by appellants is expressly barred by 40 P.S. § 1301.701(d), and as an executive agency of the Commonwealth, sovereign immunity further bars any right to relief appellants may have. See preliminary objections to respective appellants' amended complaints, PP 4,5. On December 21, 1995, the Commonwealth Court sustained the CAT Fund's preliminary objections in the nature of a demurrer and found that no legal basis exists upon which to hold the CAT Fund liable, and as a result, the Commonwealth Court determined that PMSLIC's and PHICO's preliminary objections were moot.

In sustaining the CAT Fund's preliminary objections, the Commonwealth Court found that there is no legal basis for either indemnification or contribution from the CAT Fund. Slip Op. at p. 7. Further, the court determined that the CAT Fund only had a combined total of $2.4 million to offer ($400,000 in basic coverage from the Hospital and Dr. Willet $2 million in CAT Fund coverage for the Hospital and Dr. Willet = $2.4 million) and, therefore, there is no ...


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