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Fletcher v. Pennsylvania Property & Casualty Insurance Guaranty Association

December 15, 2009

JOHANNA FLETCHER, ADMINISTRATRIX OF THE ESTATE OF TIMOTHY FLETCHER,
v.
PENNSYLVANIA PROPERTY & CASUALTY INSURANCE GUARANTY ASSOCIATION AND COMMONWEALTH OF PENNSYLVANIA, MEDICAL CARE AVAILABILITY AND REDUCTION OF ERROR FUND APPEAL OF THE COMMONWEALTH OF PENNSYLVANIA, MEDICAL CARE VAILABILITY AND REDUCTION OF ERROR FUND.



Appeal from the Order of the Commonwealth Court entered on January 4, 2007, at No. 107 M.D. 2006 and amended on February 2, 2007 914 A.2d 477

The opinion of the court was delivered by: Mr. Justice Baer

CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, GREENSPAN, JJ.

ARGUED December 4, 2008

OPINION

This appeal implicates the excess malpractice insurance scheme embodied in the Medical Care Availability and Reduction of Error Act (MCARE Act).*fn1 A successful medical malpractice plaintiff, Johanna Fletcher (Fletcher), brought a declaratory judgment action in the original jurisdiction of the Commonwealth Court to resolve coverage issues relating to the Medical Care Availability and Reduction of Error Fund (MCARE Fund).*fn2 We granted permission to appeal an interlocutory order to determine whether the Commonwealth Court has original jurisdiction over the petition for review in which Fletcher sought a declaration regarding the MCARE Fund's responsibility for excess liability and delay damages, or whether Fletcher must first exhaust administrative remedies by seeking relief from the Insurance Department. Adhering to the reasoning of our decision in Ohio Casualty Group of Ins. Companies v. Argonaut Ins. Co., 525 A.2d 1195 (Pa. 1987), we conclude that the Commonwealth Court has original jurisdiction over MCARE Fund coverage disputes such as that presented by Fletcher, and, accordingly, affirm the Commonwealth Court.

The genesis of Fletcher's declaratory judgment action is the underlying wrongful death medical malpractice action filed by Fletcher in the court of common pleas of Philadelphia County on December 13, 2002, against Kominsky Kubacki Medical Associates and its employee physicians, Drs. Solomon Kominsky and Thomas Kubacki.*fn3 Both doctors died prior to commencement of the suit, prompting Fletcher to name the representatives of the doctors' respective estates as defendants. At all relevant times, both doctors and their professional corporation were insured by PHICO Insurance Company (PHICO) under a claims made policy.*fn4 PHICO was placed into liquidation in February, 2002, prior to the initiation of Fletcher's suit, and its obligations were assumed by the Pennsylvania Property and Casualty Insurance Guaranty Association (PPCIGA).*fn5 According to Fletcher, the MCARE Fund was the excess carrier under the relevant insurance policies and was responsible for excess liability up to $1.2 million for each of the two doctors to the extent that PPCIGA paid less than such amounts.

Fletcher provided timely notice of her lawsuit to PHICO, PPCIGA, and the MCARE Fund. On January 14, 2004, PHICO informed Kominsky Kubacki Medical Associates that PPCIGA would not cover Fletcher's claim against the estates of Kominsky and Kubacki.*fn6

The MCARE Fund likewise denied coverage.*fn7 Despite these coverage disputes, the medical malpractice action proceeded and in November, 2005, a jury returned a verdict of $7 million in favor of Fletcher against the estates of Drs. Kominsky and Kubacki and their professional corporation. The trial court molded the verdict to include delay damages for a total award of $7,727,808.20.

On March 10, 2006, Fletcher brought a declaratory judgment action in the original jurisdiction of the Commonwealth Court, which the court treated as a Petition for Review, against PPCIGA and the MCARE Fund.*fn8 Fletcher relied upon our decision in Ohio Casualty to assert original jurisdiction in the Commonwealth Court. As will be discussed more fully infra, in Ohio Casualty, an insurer brought an action against the CAT Fund in the Commonwealth Court's original jurisdiction asserting that the CAT Fund was statutorily obligated to contribute to a medical malpractice settlement. The CAT Fund argued that the insurer first had to seek resolution of its coverage claim through an administrative process before the CAT Fund itself. We rejected the CAT Fund's argument, and held that because the Malpractice Act did not contain a procedure which could afford the insurer the remedy it sought, the available administrative remedies were not adequate to resolve the coverage dispute, and the Commonwealth Court, therefore, had original jurisdiction over claims against the CAT Fund.

According to Fletcher's petition, the doctors' estates had assigned their rights to her to pursue the doctors' claims against PHICO, PPCIGA, and the MCARE Fund for coverage. Substantively, Fletcher averred that PPCIGA had a statutory obligation to indemnify PHICO's claims by paying $300,000 per claim plus a share of delay damages. With regard to the MCARE Fund, Fletcher alleged that the Fund was the excess carrier and was obligated to pay excess coverage above the amount paid by PPCIGA up to $1.2 million for each doctor, plus its share of delay damages.*fn9

In response to being served with Fletcher's Petition for Review, the MCARE Fund issued a letter rejecting coverage and informing Fletcher that she had thirty days to request a formal administrative hearing before a hearing officer appointed by the Insurance Commissioner.*fn10 Two days later the MCARE Fund filed preliminary objections in the Commonwealth Court in response to Fletcher's petition for review asserting that the MCARE Act established the Fund within the Insurance Department, and, therefore, Fletcher should have filed her action with the Insurance Department's Administrative Hearings Office. Specifically, although the Commonwealth Court had original jurisdiction over actions for recovery against the CAT Fund pursuant to our decision in Ohio Casualty, 535 A.2d 1195, the MCARE Fund asserted that since the enactment of the MCARE Act, which repealed the Health Care Services Malpractice Act (Malpractice Act) and transferred the rights and responsibilities of the CAT Fund to the MCARE Fund, the Insurance Commissioner has exclusive jurisdiction over all of the MCARE Fund's written determinations. The MCARE Fund argued that such exclusive jurisdiction deprived the Commonwealth Court of subject matter jurisdiction over Fletcher's petition. See 40 P.S. §§ 1303.712 ("There is hereby established within the State Treasury a special fund to be known as the Medical Care Availability and Reduction of Error Fund."), 1303.713(a) ("The [MCARE] fund shall be administered by the [Insurance] department."); 2 Pa.C.S. § 501 et seq; Myers v. Commonwealth, Dep't of Revenue, 423 A.2d 1101 (Pa. Cmwlth. 1980) (holding that where a proceeding lies within exclusive jurisdiction of either the Department of Revenue's Board of Appeals or the Department's Board of Finance and Revenue, declaratory relief is unavailable under the Declaratory Judgment Act). The MCARE Fund further asserted that because Fletcher failed to bring her claim to reverse the MCARE Fund's coverage determination before the Insurance Department, she failed to exhaust her administrative remedies.

Following oral argument, a single judge of the Commonwealth Court sustained the MCARE Fund's preliminary objections and transferred the matter to the Insurance Commissioner. Fletcher v. PPCIGA and MCARE Fund, slip op. (Pa. Cmwlth. July 13, 2006). Because the MCARE Fund was established within the Insurance Department, see 40 P.S. § 1303.713(a), the judge agreed with the MCARE Fund that the Insurance Department, not the Commonwealth Court, had original jurisdiction over Fletcher's action.*fn11

Fletcher filed an application for reargument, which the Commonwealth Court granted. Before the three-judge Commonwealth Court panel, the MCARE Fund again argued that the court lacked jurisdiction because the Insurance Department possesses exclusive subject matter jurisdiction over all of the MCARE Fund's written determinations. Although the MCARE Fund agreed that the Commonwealth Court properly exercised original jurisdiction over the CAT Fund, see Ohio Casualty, the MCARE Fund asserted that this was because the CAT Fund, unlike the MCARE Fund, was an independent Commonwealth agency without a formal administrative hearing process. Because the MCARE Act located the MCARE Fund in the Insurance Department, the MCARE Fund argued that the legislature abrogated the Commonwealth Court's original jurisdiction over these claims, and subjected the MCARE Fund to the Insurance Department's internal appeal process. According to the MCARE Fund, therefore, all of its determinations, like all other Insurance Department determinations, are appealable first to the Department's Administrative Hearings Office, then to the Insurance Commissioner, and only then to the Commonwealth Court in its appellate jurisdiction.*fn12

Fletcher responded that the Commonwealth Court retained exclusive jurisdiction over disputes involving MCARE Fund coverage, just as it did for the CAT Fund. According to Fletcher, the MCARE Act contains many of the same provisions contained in the former Malpractice Act, and the General Assembly did not alter the Commonwealth Court's original jurisdiction over coverage disputes. Fletcher pointed out that although Section 712(d)(3) of the MCARE Act, 40 P.S. § 1303.712(d)(3), expressly provides for administrative appeals of assessments to the Insurance Department, the Act is silent as to administrative appeals involving coverage determinations.*fn13 Thus, under the principle of statutory construction expressio unius est exclusio alterius (the expression of one thing is the exclusion of another), Fletcher argued that the MCARE Act's failure to include an express administrative appeal provision for coverage disputes implied that none was intended and that, therefore, the General Assembly left the Commonwealth Court's original jurisdiction over such disputes intact.

Despite the minor distinctions between the Malpractice Act/CAT Fund and the MCARE Act/MCARE Fund, the Commonwealth Court sub judice held that Ohio Casualty remains controlling for several reasons. First, the court held that the MCARE Act's silence on the resolution of coverage disputes indicated that the legislature did not intend to change the Commonwealth Court's jurisdiction, as articulated by this Court in Ohio Casualty. Second, the similarity of language and responsibilities between the Malpractice Act and the MCARE Act supported the conclusion that the General Assembly did not intend to change the jurisdiction of the Commonwealth Court in regard to coverage disputes. Finally, the court found that there were no adequate regulatory procedures within the Insurance Department to resolve coverage disputes involving the MCARE Fund.*fn14

Judge Kelley dissented, referring to the Insurance Commissioner's public explanation that timely appeals of written determinations made by the MCARE Fund are subject to the formal administrative hearings process of the Insurance Department and are governed by the Administrative Agency Law, 2 Pa.C.S. §§ 501-508 and 701-704, and the Pennsylvania Code, 1 Pa. Code Part II, and 31 Pa. Code §§ 56.1-56.3. See 32 Pa. Bull. 4553 (2002) (advising that an aggrieved party who disputes a written determination by the MCARE Fund may request a formal administrative hearing before the Insurance Commissioner). Thus, Judge Kelley accepted the MCARE Fund's ...


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