United States District Court, Eastern District of Pennsylvania
October 1, 2002
LAWRENCE I. LIVORNESE, M.D., DAVID M. ROGERS, M.D., AND CHESTNUT HILL CARDIOLOGY CONSULTANTS, LTD., PLAINTIFFS
THE MEDICAL PROTECTIVE CO., DEFENDANT/THIRD-PARTY PLAINTIFF V. COMMONWEALTH OF PENNSYLVANIA MEDICAL PROFESSIONAL LIABILITY CATASTROPHE LOSS FUND, AND JOHN REED, THIRD-PARTY DEFENDANTS.
The opinion of the court was delivered by: Schiller, United Stateas District Judge
MEMORANDUM AND ORDER
Plaintiffs in this matter were defendants in a medical malpractice suit
tried in the Court of Common Pleas for Philadelphia County that resulted
in a substantial judgment against them. In January 1999, a jury returned
a verdict of $2,085,000.00, and the court molded the verdict to include
delay damages and postjudgment interest. Plaintiffs' primary insurer, The
Medical Protective Company ("MedPro"), tendered its $400,000 policy
limits in August 1999. An appeal was taken, and the Superior Court
affirmed the judgment in an opinion filed on February 23, 2000. See Gunn
v. Grossman, 748 A.2d 1235 ( Pa. Super. 2000). Plaintiffs then commenced
this diversity action against MedPro. Subsequently, MedPro filed a
third-party complaint against the Commonwealth of Pennsylvania Medical
Professional Liability Catastrophe Loss Fund and its Director, John Reed
("CAT Fund").*fn1 Pursuant to Federal Rule of Civil Procedure 12(b)(6),
the CAT Fund has moved for the dismissal of MedPro's third-party
complaint in its entirety for failure to state a claim upon which relief
can be granted.
STANDARD OF REVIEW
In considering Third-Party Defendant's motion to dismiss for failure to
state a claim upon which relief can be granted under Rule 12(b)(6), I
must accept as true all of the factual allegations pleaded in the
complaint and draw all reasonable inferences in favor of the
non-movants. See Fuentes v. S. Hills Cardiology, 946 F.2d 196, 201 (3d
Cir. 1991). In addition, I must "refrain from granting a dismissal unless
it is certain that no relief can be granted under any set of facts which
could be proved." Id.
BAD FAITH CLAIM AGAINST THE CAT FUND
MedPro alleges that in the event that it is found liable to
Plaintiffs, the CAT Fund will be liable to MedPro "for all of part of the
Plaintiffs' claim . . . on the basis of contribution and/or indemnity."
(Third Party Compl. ¶ 27.) In moving for dismissal, the CAT Fund
argues that MedPro cannot state a claim against it under Pennsylvania's
bad faith statute, 42 Pa. Cons. Stat. § 8371. Because I previously
dismissed Plaintiffs' bad faith claim against MedPro, see Livornese v.
Medical Protective Co., Civ. A. No. 01-3124, 2002 WL 1906594, 2002 U.S.
Dist. LEXIS 14000, at *11 (E.D.Pa. July 16, 2002), and MedPro seeks only
indemnity or contribution from the CAT Fund, there is no basis for
holding the CAT Fund liable for bad faith in this action. That is,
MedPro's claim for bad faith against the CAT Fund is moot.
MEDPRO'S REMAINING CLAIMS AGAINST THE CAT FUND
A statutory provision at issue in this case is section 702(j) of the
Healthcare Services Malpractice Act, which provides as follows:
Delay damages and postjudgment interest applicable to
the [CAT Fund's] liability in a case shall be paid by
and shall not be charged against the
insured's annual aggregate limits. The basic insurance
carrier or self-insurer shall be responsible for its
proportionate share of delay damages and post-judgment
40 Pa. Cons. Stat. § 1301.702(j). On the one hand, the CAT Fund
argues that under section 702(j), it is not responsible for MedPro's
share of delay damages or postjudgment interest. According to the CAT
Fund, section 702(j) places absolute liability on the basic insurance
carrier for its "proportionate share" of delay damages and postjudgment
interest. On the other hand, MedPro argues that when it tendered its
policy limits, the CAT Fund took exclusive control of the defense of this
case, including control over the appeal, and MedPro's liability for delay
damages and postjudgment interest thereby ended.
I agree and disagree with both parties. First, the mere fact that
MedPro tendered its policy limits after the judgment was entered does not
negate its liability for delay damages. Under Pennsylvania Rule of Civil
Procedure 238, delay damages accrue "from a date one year after the date
of original process was first served in the action up to the date of the
award, verdict or decision." Pa. R.Civ.P. 238(ii). Because MedPro
tendered its policy limits after the verdict had been molded to include
delay damages, i.e., after delay damages stopped accruing, MedPro's
payment did not affect MedPro's obligations with respect to delay
However, MedPro's act of making payment is of consequence with respect
to the imposition of postjudgment interest. MedPro should not be held
responsible for any postjudgment interest that accrued on the amount it
tendered subsequent to the date that MedPro made payment. Moreover, in
Willet v. Pennsylvania Medical Catastrophe Loss Fund, 702 A.2d 850 (Pa.
1997), the Pennsylvania Supreme Court reasoned that "the law of indemnity
provides a legal basis to hold the CAT Fund liable for the portion of
delay damages attributable to the time period in which the CAT Fund
retained exclusive control over settlement negotiations." Id. at 855.
Although Willet addressed a situation that is factually different from
the case at bar and addressed a previous version of the Healthcare
Services Malpractice Act, the Willet court's reasoning is nonetheless
instructive insofar as it makes clear that in certain circumstances the
CAT Fund's conduct during litigation will create a duty to indemnify.
Here, MedPro effectively removed itself from the litigation by tendering
its policy limits, and under the equitable remedy of indemnity, it may be
able to shift responsibility for accrued postjudgment interest to the CAT
Fund. As such, the CAT Fund cannot be dismissed from this action.
For the foregoing reasons, I grant in part and deny in part the CAT
Fund's motion to dismiss.
AND NOW, this 1st day of October, 2002, upon consideration of
Third-Party Defendant Commonwealth of Pennyslvania Medical Professional
Liability Catastrophe Loss Fund's Motion to Dismiss, the memoranda of law
in support thereof, and the responses thereto, it is hereby ORDERED
Third-Party Defendant's Commonwealth of Pennyslvania
Medical Professional Liability Catastrophe Loss Fund's
Motion to Dismiss (Document No. 13) is GRANTED IN PART
AND DENIED IN PART. Third-Party Defendant's motion is
GRANTED to the extent it seeks
dismissal of Third-Party
Plaintiff's bad faith claim and DENIED in all other
Defendant shall respond to Plaintiffs' Motion to Compel
Discovery (Document No. 25) no later than October 21,