CORRECTIVE REPRINT
PRIOR PRINTER'S NOS. 721, 1242, 1412 PRINTER'S NO. 1418
No. 679 Session of 1977
INTRODUCED BY HANKINS, CIANFRANI, HAGER, LYNCH, COPPERSMITH,
HESS, HILL, SMITH AND MELLOW, MARCH 30, 1977
SENATOR HANKINS, INSURANCE, RE-REPORTED AS AMENDED,
OCTOBER 25, 1977
AN ACT
1 Amending the act of October 15, 1975 (P.L.390, No.111), entitled
2 "An act relating to medical and health related malpractice
3 insurance, prescribing the powers and duties of the Insurance
4 Department; providing for a joint underwriting plan; the
5 Arbitration Panels for Health Care, compulsory screening of
6 claims; collateral sources requirement; limitation on
7 contingent fee compensation; establishing a Catastrophe Loss
8 Fund; and prescribing penalties," providing additional <--
9 procedures to control the malpractice of health care services
10 and authorizing certain professional corporations, <--
11 PROFESSIONAL ASSOCIATIONS AND PARTNERSHIPS to obtain
12 insurance coverage from certain sources.
13 The General Assembly of the Commonwealth of Pennsylvania
14 hereby enacts as follows:
15 Section 1. The definitions of "Government" and "Health care <--
16 provider" in section 103 and the introductory paragraph and
17 paragraphs (4) and (5) of subsection (a) of section 701, act of
18 October 15, 1975 (P.L.390, No.111), known as the "Health Care
19 Services Malpractice Act," amended July 15, 1976 (P.L.1028,
20 No.207), are amended and definitions are added to section 103 to
21 read:
22 Section 103. Definitions.--As used in this act:
1 "Act" means the act of October 15, 1975 (P.L.390, No.111),
2 known as the "Health Care Services Malpractice Act," unless
3 otherwise stated.
4 * * *
5 "Government" means the Government of the United States, the
6 Commonwealth of Pennsylvania, any state, any political
7 subdivision of a state, any instrumentality of one or more
8 states, or any agency, subdivision, or department of any such
9 government, including any corporation or other association
10 organized by a government for the execution of a government
11 program and subject to control by a government, or any
12 corporation or agency established under an interstate compact or
13 international treaty.
14 "Health care provider" means a primary health center or a
15 person, corporation, facility institution or other entity
16 licensed or approved by the Commonwealth to provide health care
17 or professional medical services as a physician, [an osteopathic
18 physician or surgeon,] a podiatrist, hospital, nursing home, and
19 except as to section 701(a), an officer, employee or agent of
20 any of them acting in the course and scope of his employment.
21 "Health care professional" means those persons or entities
22 actively engaged in providing or rendering health services as
23 determined by the commissioner in accord with section 804.
24 * * *
25 "Plan of risk management" means a program established and
26 maintained for the purposes of reducing the frequency or
27 severity of personal injuries or death arising out of the
28 rendition of or failure to render professional services by a
29 health care provider or health care professional as defined in
30 the act, through loss prevention, loss reduction and other
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1 generally accepted risk management techniques.
2 * * *
3 Section 701. Professional Liability Insurance and Fund.--(a)
4 Every health care provider as defined in this act, practicing
5 medicine or podiatry or otherwise providing health care services
6 in the Commonwealth shall insure his professional liability with
7 an insurance company either licensed or approved in the
8 Commonwealth of Pennsylvania or provide proof of self-insurance
9 in accordance with this section.
10 * * *
11 (4) All self-insurance plans shall be submitted with such
12 information as the commissioner shall require for approval and
13 shall be approved by the commissioner upon his finding that the
14 plan constitutes protection equivalent to the insurance
15 requirements of a health care provider and provide for a plan of
16 risk management acceptable to the commissioner.
17 (5) A fee shall be charged by the Insurance Department to
18 all self-insurers for examination ,re-examination and approval
19 of their plans equal to the actual costs incurred by the
20 Insurance Department. All self-insurers shall pay the fee for
21 this examination, re-examination and approval directly to the
22 Insurance Department. The funds collected for the examination,
23 re-examination and approval for these self-insurance plans shall
24 be for the sole and exclusive use of the Insurance Department
25 for reimbursement in carrying out the provisions of this act. At
26 any time during the review of self-insurance plans, the
27 commissioner at his discretion may delegate the examination of
28 self-insurance plans to any qualified person or organization not
29 employed by the Insurance Department or affiliated with the
30 self-insurer. In this instance the reasonable fee for this
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1 service shall be paid directly to the examining person or
2 organization and not the Insurance Department.
3 * * *
4 Section 2. Subsection (b) of section 803, section 804 and
5 section 808 of the act are amended to read:
6 Section 803. Plan Operation, Rates and Deficits.-- * * *
7 (b) In the event that the Joint Underwriting Association
8 suffers a deficit in any calendar year, the board of directors
9 of the Joint Underwriting Association shall so certify to [the
10 director of the Catastrophe Loss Fund and] the Insurance
11 Commissioner. Such certification shall be subject to the review
12 and approval of the Insurance Commissioner. Within 60 days
13 following such certification and approval [the director of the
14 fund shall make sufficient payment to the Joint Underwriting
15 Association to compensate for said deficit] the plan shall
16 assess member insurers on an equitable apportionment basis
17 sufficient funds to compensate the Joint Underwriting
18 Association for said deficit. This assessment shall be made
19 retroactive to January 13, 1976. A deficit shall exist whenever
20 the sum of the earned premiums collected by the Joint
21 Underwriting Association and the investment income therefrom is
22 exhausted by virtue of payment of or allocation for the Joint
23 Underwriting Association's necessary administrative expenses,
24 taxes, losses, lost adjustment expenses and reserves, including
25 reserves for: (1) losses incurred, excluding incurred but not
26 reported losses except to the extent that a reserve may be
27 established for a reported incident which reasonably may result
28 in a claim, (2) [losses incurred but not reported, (3)] loss
29 adjustment expenses, [(4)](3) unearned premiums.
30 Section 804. Authority of Insurance Commissioner.--To carry
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1 out the objectives of this article, the commissioner may adopt
2 rules, make orders, enter into agreements with other
3 governmental or private entities and individuals and form and
4 operate or authorize the formation and operation of bureaus and
5 other legal entities. Whenever the commissioner finds after
6 review of the professional liability insurance market that
7 health care professionals cannot conveniently obtain
8 professional liability insurance through ordinary methods at
9 rates not in excess of those applicable to similarly situated
10 health care providers under the plan, he may direct the plan to
11 provide basic limits professional liability insurance coverage
12 in the amount of $100,000 per occurrence and $300,000 per annual
13 aggregate or in other amounts as he may deem appropriate. For
14 the purposes of this section, other health care professionals
15 shall include but are not limited to licensed or approved
16 providers of health care services of any nature and those
17 providers of health care services which are not licensed but
18 which in the commissioner's judgment contribute substantially to
19 the public welfare through the delivery of health care services.
20 Section 808. When Plan Exclusive Source of Insurance.--If
21 the private insurance market unfairly discriminates against
22 [higher risk physicians by denying professional liability
23 insurance coverage to 50% or more of all physicians in insurance
24 rating classes 3, 4 or 5, or their equivalents] any class of
25 health care provider or health care professional defined under
26 this act or included by the commissioner's action under section
27 804 by denying professional liability insurance coverage to 50%
28 or more of a class of health care provider or health care
29 professional either by rating class or by health care provider
30 or health care professional definition, the commissioner, after
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1 notice in the Pennsylvania Bulletin and public hearings, may
2 declare that the plan established under this article shall be
3 the sole and exclusive source of professional liability
4 insurance for [health care providers within this Commonwealth.
5 The commissioner may dissolve the plan if he determines that it
6 is no longer necessary and that an adequate market will be
7 maintained for professional liability insurance for health care
8 providers by the private insurance market. The commissioner may
9 reestablish the plan if he shall find that the private industry
10 has failed to provide an adequate market for professional
11 liability insurance by denying professional liability insurance
12 coverage to 50% or more of all rating classes 3, 4 or 5, or
13 their equivalents, and may declare it the sole and exclusive
14 source of such insurance under the procedure set forth in this
15 section.] that class of health care provider or health care
16 professional within the Commonwealth. Whenever the commissioner
17 determines that an adequate market will be maintained for
18 professional liability for that class of health care provider or
19 health care professional by the private insurance market, he may
20 dissolve the plan or revoke the plan's exclusive underwriting
21 authority.
22 Section 3 1. The act OF OCTOBER 15, 1975 (P.L.390, NO.111), <--
23 KNOWN AS THE "HEALTH CARE SERVICES MALPRACTICE ACT," is amended
24 by adding a section to read:
25 Section 811. Professional Corporations, PROFESSIONAL <--
26 ASSOCIATIONS AND PARTNERSHIPS.--(a) The Joint Underwriting
27 Association shall offer basic coverage insurance to such
28 professional corporations, PROFESSIONAL ASSOCIATIONS AND <--
29 PARTNERSHIPS entirely owned by health care providers who cannot
30 conveniently obtain insurance through ordinary methods at rates
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1 not in excess of those applicable to similarly situated
2 professional corporations, PROFESSIONAL ASSOCIATIONS AND <--
3 PARTNERSHIPS.
4 (b) In the event that a professional corporation, <--
5 PROFESSIONAL ASSOCIATION OR PARTNERSHIP IS entirely owned by
6 health care providers elected to be covered by professional
7 liability insurance and upon payment of the annual surcharge as
8 required by section 701(e), the professional corporation, <--
9 PROFESSIONAL ASSOCIATION OR PARTNERSHIP shall be entitled to
10 such excess coverage from the Medical Professional Liability
11 Catastrophe Loss Fund as is provided in this act.
12 Section 4. Section 1002 of the act, amended July 15, 1976 <--
13 (P.L.1028, No.207) is amended to read:
14 Section 1002. [Cancellation] Termination of Insurance
15 Policy.--(a) Any termination of a professional liability
16 insurance policy by cancellation, except for suspension or
17 revocation of the insured's license or approval by the
18 Commonwealth to provide health care services or for reason of
19 nonpayment of premium, is not effective against the insured
20 covered thereby, unless notice of [cancellation] termination
21 shall have been given within 60 days after the issuance of such
22 contract of insurance [against] to the insured covered
23 thereunder and no [cancellation] termination shall take effect
24 unless a written notice [stating the reasons for the
25 cancellation and the date and time upon which termination
26 becomes effective has been received by the commissioner at his
27 office. Mailing of such notice to the commissioner at his
28 principal office address shall constitute notice to the
29 commissioner] has been mailed to the insured and the
30 commissioner. Such notice shall:
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1 (1) State the time and date that the termination becomes
2 effective.
3 (2) State the specific reason or reasons of the insurer for
4 termination.
5 (b) In the event of termination by nonrenewal, the insurer
6 must mail written notice to the insured and the commissioner
7 which shall:
8 (1) State the specific reason or reasons for nonrenewal.
9 (2) State the date and time upon which the nonrenewal
10 becomes effective.
11 (c) The notice of nonrenewal must be mailed to the insured
12 and the commissioner 60 days prior to nonrenewal of the policy.
13 Section 5 2. This act shall take effect immediately and <--
14 shall be retroactive to January 13, 1976.
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