PRINTER'S NO. 705
No. 649 Session of 2001
INTRODUCED BY MICOZZIE, SATHER, THOMAS, WRIGHT, ARMSTRONG,
M. BAKER, BARD, BARRAR, CLYMER, L. I. COHEN, FAIRCHILD,
FEESE, FICHTER, FLEAGLE, FLICK, FORCIER, GORDNER, HENNESSEY,
HERMAN, HORSEY, LAUGHLIN, LEH, MANN, McILHINNEY, R. MILLER,
MUNDY, ORIE, PRESTON, ROSS, RUBLEY, SAYLOR, SCHRODER, SEMMEL,
SHANER, S. H. SMITH, STABACK, STEELMAN, STEIL, STERN,
E. Z. TAYLOR, TRELLO, WALKO, C. WILLIAMS, WILT, WOJNAROSKI,
HARHAI, YOUNGBLOOD AND YEWCIC, FEBRUARY 12, 2001
REFERRED TO COMMITTEE ON INSURANCE, FEBRUARY 12, 2001
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," further providing for the
9 transfer of the Medical Professional Liability Catastrophe
10 Loss Fund coverage to the private sector; and creating a
11 Medical Professional Liability Authority to provide for the
12 controlled run-off of the Medical Professional Liability
13 Catastrophe Loss Fund and for the authority liabilities in
14 the most certain, expeditious and cost-effective manner
15 possible.
16 The General Assembly of the Commonwealth of Pennsylvania
17 hereby enacts as follows:
18 Section 1. The definitions of "director," "fund" and "fund
19 coverage limits" in section 103 of the act of October 15, 1975
20 (P.L.390, No.111), known as the Health Care Services Malpractice
21 Act, amended November 26, 1996 (P.L.776, No.135), are amended
1 and the section is amended by adding definitions to read:
2 Section 103. Definitions.--As used in this act:
3 "Authority" means the Medical Professional Liability
4 Authority created in Article VII.
5 "Authority coverage limits" means the coverage provided by
6 the Medical Professional Liability Authority under section
7 701(a).
8 Board" means the governing board established under section
9 706.
10 "Bond" means a note, bond, refunding note and bond, interim
11 certificate, debenture and other evidence of indebtedness or
12 obligation which the authority is authorized to issue pursuant
13 to this act.
14 * * *
15 "Director" means the Director of the Medical Professional
16 Liability [Catastrophe Loss Fund] Authority.
17 ["Fund" means the Medical Professional Liability Catastrophe
18 Loss Fund created in Article VII.
19 "Fund coverage limits" means the coverage provided by the
20 Medical Professional Liability Catastrophe Loss Fund under
21 section 701(a).]
22 * * *
23 Section 2. Sections 605, 701, 702, 705, 706, 803, 809, 811
24 and 841-A(a) of the act, amended November 26, 1996 (P.L.776,
25 No.135), are amended to read:
26 Section 605. Statute of Limitations.--(a) All claims for
27 recovery pursuant to this act must be commenced within the
28 existing applicable statutes of limitation. In the event that
29 any claim is made against a health care provider subject to the
30 provisions of Article VII more than four years after the breach
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1 of contract or tort occurred which is filed within the statute
2 of limitations, such claim shall be defended and paid by the
3 [fund] authority if the [fund] authority has received a written
4 request for indemnity and defense within 180 days of the date on
5 which notice of the claim is given to the health care provider
6 or his insurer. For these claims, the limit of liability of the
7 authority shall be $1,000,000 for each occurrence for each
8 health care provider. Where multiple treatments or consultations
9 took place less than four years before the date on which the
10 health care provider or his insurer received notice of the
11 claim, the claim shall be deemed, for purposes of this section,
12 to have occurred less than four years prior to the date of
13 notice and shall be defended by the insurer pursuant to section
14 702(d). If such claim is made after four years because of the
15 willful concealment by the health care provider or his insurer,
16 the [fund] authority shall have the right of full indemnity
17 including defense costs from such health care provider or his
18 insurer. A filing pursuant to section 401 shall toll the running
19 of the limitations contained herein.
20 (b) For policies issued or renewed in the calendar year
21 2002, and each year thereafter, the limit of liability of the
22 authority under this section shall be $0 for each occurrence for
23 each health care provider and per annual aggregate for each
24 health care provider and the authority shall not be responsible
25 for defense of claims under this section. For claims incurred
26 but not reported against claims made policies prior to January
27 1, 2002, the limit of liability of the authority under this
28 section shall be $0 for each occurrence for each health care
29 provider and $0 per annual aggregate for each health care
30 provider and the authority shall not be responsible for defense
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1 of claims under this section.
2 Section 701. Professional Liability Insurance and [Fund]
3 Authority.--(a) Every health care provider as defined in this
4 act, practicing medicine or podiatry or otherwise providing
5 health care services in the Commonwealth shall insure his
6 professional liability only with an insurer licensed or approved
7 by the Commonwealth of Pennsylvania, or provide proof of self-
8 insurance in accordance with this section.
9 (1) (i) For policies issued or renewed in the calendar years
10 1997 through 1998, a health care provider, other than hospitals,
11 who conducts more than 50% of its health care business or
12 practice within the Commonwealth of Pennsylvania shall annually
13 insure or self-insure its professional liability in the amount
14 of $300,000 per occurrence and $900,000 per annual aggregate,
15 and hospitals located in the Commonwealth shall insure or self-
16 insure their professional liability in the amount of $300,000
17 per occurrence, and $1,500,000 per annual aggregate, hereinafter
18 known as "basic coverage insurance" and they shall be entitled
19 to participate in the [fund] authority.
20 (ii) For policies issued or renewed in the calendar years
21 1999 through 2000, a health care provider, other than hospitals,
22 [who] that conducts more than 50% of its health care business or
23 practice within this Commonwealth shall annually insure or self-
24 insure its professional liability in the amount of $400,000 per
25 occurrence and $1,200,000 per annual aggregate, and hospitals
26 located in this Commonwealth shall insure or self-insure their
27 professional liability in the amount of $400,000 per occurrence
28 and $2,000,000 per annual aggregate, and they shall be entitled
29 to participate in the authority.
30 (iii) For policies issued or renewed in the calendar year
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1 2001, [and each year thereafter,] a health care provider, other
2 than hospitals, [who] that conducts more than 50% of its health
3 care, business or practice within this Commonwealth shall
4 annually insure or self-insure its professional liability in the
5 amount of $500,000 per occurrence and $1,500,000 per annual
6 aggregate, and hospitals located in this Commonwealth shall
7 insure or self-insure their professional liability in the amount
8 of $500,000 per occurrence and $2,500,000 per annual
9 aggregate[.], and they shall be entitled to participate in the
10 authority.
11 (iv) For policies issued or renewed in the calendar year
12 2002, and each year thereafter, a health care provider, other
13 than hospitals, that conducts more than 50% of its health care
14 business or practice within this Commonwealth shall annually
15 insure or self-insure its professional liability in the amount
16 of $1,200,000 per occurrence and $3,600,000 per annual
17 aggregate, and hospitals located in this Commonwealth shall
18 insure or self-insure their professional liability in the amount
19 of $1,200,000 per occurrence, and $4,000,000 per annual
20 aggregate, and they shall be entitled to participate in the
21 authority.
22 (2) (i) A health care provider [who] that conducts 50% or
23 less of its health care business or practice within the
24 Commonwealth shall insure or self-insure its professional
25 liability in the amounts listed in subparagraphs (ii), (iii)
26 [and], (iv) and (v) and shall not be required to contribute to
27 or be entitled to participate in the [fund] authority set forth
28 in Article VII [of this act] or the plan set forth in Article
29 VIII [of this act].
30 (ii) For policies issued or renewed in the calendar years
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1 1997 through 1998, basic insurance coverage shall, on an annual
2 basis, be in the amount of $300,000 per occurrence and $900,000
3 per annual aggregate.
4 (iii) For policies issued or renewed in the calendar years
5 1999 through 2000, basic insurance coverage shall, on an annual
6 basis, be in the amount of $400,000 per occurrence and
7 $1,200,000 per annual aggregate.
8 (iv) For policies issued or renewed in the calendar year
9 2001, [and each year thereafter,] basic insurance coverage
10 shall, on an annual basis, be in the amount of $500,000 per
11 occurrence and $1,500,000 per annual aggregate.
12 (v) For policies issued or renewed in the calendar year
13 2002, and each year thereafter, basic insurance coverage shall,
14 on an annual basis, be in the amount of $1,200,000 per
15 occurrence and $3,600,000 per annual aggregate.
16 (3) For the purposes of this section, "health care business
17 or practice" shall mean the number of patients to whom health
18 care services are rendered by a health care provider within an
19 annual period.
20 (4) All self-insurance plans shall be submitted with such
21 information as the commissioner shall require for approval and
22 shall be approved by the commissioner upon his finding that the
23 plan constitutes protection equivalent to the insurance
24 requirements of a health care provider.
25 (5) A fee shall be charged by the Insurance Department to
26 all self-insurers for examination and approval of their plans.
27 (6) Self-insured health care providers and hospitals if
28 exempt from this act shall submit the information required under
29 section 809 to the commissioner.
30 (b) (1) No insurer providing professional liability
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1 insurance shall be liable for payment of any claim against a
2 health care provider for any loss or damages awarded in a
3 professional liability action in excess of the basic coverage
4 insurance, as provided in subsection (a)(1) for each health care
5 provider against whom an award is made unless the health care
6 provider's professional liability policy or self-insurance plan
7 provides for a higher annual aggregate limit.
8 (2) If a claim exceeds the aggregate limits of an insurer or
9 a self-insurance plan, the [fund] authority shall be responsible
10 for the payment of the claim up to the [fund] authority coverage
11 limits.
12 (c) A government may satisfy its obligations pursuant to
13 this act, as well as the obligations of its employees to the
14 extent of their employment, by either purchasing insurance or
15 assuming such obligation as a self-insurer and including the
16 payment of all [surcharges] assessments under this act.
17 (d) There is hereby created a [contingency fund] body
18 corporate and politic to be known as the Medical Professional
19 Liability Authority for the purpose of paying all awards,
20 judgments and settlements for loss or damages against a health
21 care provider entitled to participate in the [fund] authority as
22 a consequence of any claim for professional liability brought
23 against such health care provider as a defendant or an
24 additional defendant to the extent such health care provider's
25 share exceeds its basic coverage insurance in effect at the time
26 of occurrence as provided in subsection (a)(1). The authority
27 shall be a public authority and instrumentality of the
28 Commonwealth, exercising public powers of the Commonwealth as an
29 agency and instrumentality thereof. The exercise by the
30 authority of the powers conferred by this act is hereby declared
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1 to be and shall for all purposes be deemed and held to be the
2 performance of an essential public function. The limit of
3 liability of the [fund] authority shall be as follows:
4 (1) For policies issued or renewed in the calendar years
5 1997 through 1998, the limit of liability of the [fund]
6 authority shall be $900,000 for each occurrence for each health
7 care provider and $2,700,000 per annual aggregate for each
8 health care provider.
9 (2) For policies issued or renewed in the calendar years
10 1999 through 2000, the limit of liability of the [fund]
11 authority shall be $800,000 for each occurrence for each health
12 care provider and $2,400,000 per annual aggregate for each
13 health care provider.
14 (3) For policies issued or renewed in the calendar year
15 2001, [and each year thereafter,] the limit of liability of the
16 [fund] authority shall be $700,000 for each occurrence for each
17 health care provider and $2,100,000 per annual aggregate for
18 each health care provider.
19 (4) For policies issued or renewed in the calendar year
20 2002, and each year thereafter, the limit of liability of the
21 authority shall be $0 for each occurrence for each health care
22 provider and $0 per annual aggregate for each health care
23 provider. For claims incurred but not reported against claims
24 made policies prior to January 1, 2002, the limit of liability
25 of the authority under this section shall be $0 for each
26 occurrence for each health care provider and $0 per annual
27 aggregate for each health care provider.
28 (5) The authority shall be dissolved no later than one year
29 after final payment and discharge of all of its liabilities,
30 including, without limitation, its bonds, notes and other
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1 evidences of indebtedness. Upon dissolution of the authority,
2 all of its rights and properties, including any money remaining
3 in any fund or account, shall be repaid to health care providers
4 in a manner and proportion consistent with the average
5 proportion of assessments levied on such health care providers
6 for policies issued over the previous two calendar years in
7 which assessments were levied.
8 (e) (1) After December 31, [1996] 2001, the [fund]
9 authority shall be funded by the levying of an annual
10 [surcharge] assessment on or after January 1 of every year on
11 all health care providers [entitled to participate in the fund],
12 except those exempted under subsections (a)(2), (g) and (h). The
13 [surcharge] assessment shall be determined by the [fund]
14 authority, filed with the commissioner and communicated to all
15 basic insurance coverage carriers and self-insured providers.
16 The [surcharge] assessment shall be based on the prevailing
17 primary premium for each health care provider for maintenance of
18 professional liability insurance and shall be the appropriate
19 percentage thereof, necessary to produce an amount sufficient to
20 [reimburse the fund for the payment of final claims and expenses
21 incurred during the preceding claims period and to provide an
22 amount necessary to maintain an additional 15% of the final
23 claims and expenses incurred during the preceding claims
24 period.] provide for the payment of claims, any and all debt
25 service requirements with respect to any bonds issued or to be
26 issued by the authority, all operating, administrative and
27 financing costs and expenses, as well as liquidity and insurance
28 costs, if any, associated with any bonds issued or to be issued
29 by the authority, under the plan of finance adopted by the
30 authority under section 706(g). For the calendar year 2002, and
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1 each year thereafter, in no instance shall the revenue generated
2 by the annual assessment levy in any year exceed the revenue
3 generated by the annual assessment levy in the calendar year
4 2001.
5 (2) The Joint Underwriting Association shall file [updated
6 rates] an updated schedule of occurrence rates for all health
7 care providers with the commissioner by May 1 of each year.
8 (3) The [fund] authority shall review and may adjust the
9 prevailing primary premium in line with any applicable changes
10 to the [prevailing primary premium] schedule of occurrence rates
11 made in filings by the Joint Underwriting Association and
12 approved by the commissioner.
13 (4) The [fund may] authority shall adjust the applicable
14 prevailing primary premium of any hospital, including a hospital
15 associated with a university or other education institution,
16 through an increase or decrease in the individual hospital's
17 prevailing primary premium not to exceed 20%. Any such
18 adjustment shall be based upon the frequency and severity of
19 claims paid by the [fund] authority on behalf of other hospitals
20 of similar class, size, risk and kind within the same defined
21 region during the past five most recent claims periods. All
22 prevailing primary premium adjustments pursuant to this
23 subsection shall require the approval of the commissioner.
24 (5) For health care providers that do not engage in direct
25 clinical practice on a full-time basis, the prevailing primary
26 premium [rate] shall be [adjusted] prorated, based on the
27 proportionate share of direct clinical practice to nonclinical
28 practice, by the [fund] authority to reflect the lower risk
29 associated with the less-than-full-time direct clinical
30 practice.
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1 (6) The [surcharge] assessment provided in paragraph (1)
2 shall be reviewed by the commissioner within 30 days of
3 submission. After review, the commissioner may [only] disapprove
4 [a surcharge] an assessment only if it is inadequate or
5 excessive under the plan of finance adopted by the authority
6 under section 706(g). If so disapproved, the [fund] authority
7 shall make an adjustment to the next [surcharge] assessment
8 calculation to reflect the appropriate increase or decrease.
9 (7) When a health care provider changes the term of its
10 professional liability coverage, the [surcharge] assessment
11 shall be calculated on an annual base and shall reflect the
12 [surcharge] assessment percentages in effect for all the
13 [surcharge] assessment periods over which the policy is in
14 effect.
15 (8) Health care providers having approved self-insurance
16 plans shall be [surcharged] assessment an amount equal to the
17 [surcharge] assessment imposed on a health care provider of like
18 class, size, risk and kind as determined by the [director]
19 authority. The [fund] authority and all income from the [fund]
20 authority shall be held in trust, deposited in a segregated
21 account, invested and reinvested by the [director,] authority in
22 investments approved by the board and shall not become a part of
23 the General Fund of the Commonwealth, the Commonwealth, or any
24 other government agency. All claims shall be computed on August
25 31 for all claims which became final between that date and
26 September 1 of the preceding year. All such claims shall be paid
27 on the last business day on or before December 31 following the
28 August 31 by which they became final, as provided above.
29 (9) [Notwithstanding the above provisions relating to an
30 annual surcharge, the commissioner shall have the authority,
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1 during September of each year, if the fund would be exhausted by
2 the payment in full of all claims which have become final and
3 the expenses of the fund, to determine and levy an emergency
4 surcharge on all health care providers then entitled to
5 participate in the fund. Such emergency surcharge shall be the
6 appropriate percentage of the cost to each health care provider
7 for maintenance of professional liability insurance necessary to
8 produce an amount sufficient to allow the fund to pay in full
9 all claims determined to be final as of August 31 of each year
10 and the expenses of the fund as of December 31 of each year.]
11 The authority shall be empowered to and shall arrange for the
12 separate retirement of the liabilities associated with the
13 following classes of health care providers: primary health
14 centers, certified nurse midwives, podiatrists, nursing homes
15 and birth centers. Such arrangements shall be on terms and
16 conditions proportionate to the individual liability of each
17 class of health care provider. Such arrangements may result in
18 assessments for primary health centers, certified nurse
19 midwives, podiatrists, nursing homes and birth centers different
20 than provided for under section 701(e). Upon satisfaction of
21 such arrangements, primary health centers, certified nurse
22 midwives, podiatrists, nursing homes and birth centers shall not
23 be required to contribute to or be entitled to participate in
24 the authority set forth in Article VII.
25 (10) The annual [and emergency surcharges] assessments on
26 health care providers, any proceeds of any sale of bonds, and
27 any income realized by investment or reinvestment shall
28 constitute the sole and exclusive sources of funding for the
29 [fund] authority. No claims or expenses against the [fund]
30 authority shall be deemed to constitute a debt of the
20010H0649B0705 - 12 -
1 Commonwealth or a charge against the General Fund of the
2 Commonwealth. No claims or expenses against the authority shall
3 be deemed to constitute a debt of any individual health care
4 provider.
5 (11) The [director] authority shall issue rules and
6 regulations consistent with this section regarding the
7 establishment and operation of the [fund] authority including
8 all procedures and the levying, payment and collection of the
9 [surcharges except that the commissioner shall issue rules and
10 regulations regarding the imposition of the emergency
11 surcharge.] assessments. No claims or expenses against the
12 authority shall be deemed to constitute a debt of any individual
13 health care provider.
14 (12) Upon the effective date of this section, the [fund]
15 authority shall immediately notify all insurers writing
16 professional liability insurance of the schedule of occurrence
17 rates approved by the commissioner and in effect for the Joint
18 Underwriting Association.
19 [(13) Within 20 days of the effective date of this section,
20 the fund shall recalculate the surcharge for health care
21 providers for the surcharge period beginning January 1, 1997,
22 based upon the prevailing primary premium.
23 (14) A health care provider may elect to pay the annual
24 surcharge in equal installments, not exceeding four, if the
25 health care provider informs the primary carrier of the option
26 to pay in installments and the entire annual surcharge is
27 collected and remitted to the fund by December 10, with four
28 equal installments commencing 60 days from the date of policy
29 inception or renewal with payment due each 60 days thereafter
30 until the full remittance is paid. This paragraph shall apply to
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1 surcharges for 1997. This paragraph shall expire January 1,
2 1998.]
3 (f) The failure of any health care provider to comply with
4 any of the provisions of this section or any of the rules and
5 regulations issued by the [director] authority shall result in
6 the suspension or revocation of the health care provider's
7 license by the licensure board.
8 (g) Any physician who exclusively practices the specialty of
9 forensic pathology shall be exempt from the provisions of this
10 act.
11 (h) All health care providers who are members of the
12 Pennsylvania military forces are exempt from the provisions of
13 this act while in the performance of their assigned duty in the
14 Pennsylvania military forces under orders.
15 Section 702. Director and Administration of [Fund]
16 Authority.--(a) The [fund] authority shall be administered by a
17 director who shall be appointed by [the Governor] and whose
18 salary shall be fixed by the [Executive Board. The] board.
19 Subject to any limitations imposed by the board and consistent
20 with the requirements of this act, the director may employ and
21 fix the compensation of such clerical and other assistants as
22 may be deemed necessary and may promulgate rules and regulations
23 relating to procedures for the reporting of claims to the
24 [fund.] authority which, notwithstanding any other provision of
25 law contrary, shall not be subject to review pursuant to the act
26 of June 25, 1982 (P.L.633, No.181), known as the "Regulatory
27 Review Act."
28 (b) The [director] authority shall be provided with adequate
29 offices in which the records shall be kept and official business
30 shall be transacted, and the [director] authority shall also be
20010H0649B0705 - 14 -
1 provided with necessary office furniture and other supplies.
2 (c) The basic coverage insurance carrier or self-insured
3 provider shall promptly notify the [director] authority of any
4 case where it reasonably believes that the value of the claim
5 exceeds the basic insurer's coverage or self-insurance plan or
6 falls under section 605. Such information, including the
7 [fund's] authority's claim file, shall be confidential,
8 notwithstanding the act of June 21, 1957 (P.L.390, No.212),
9 referred to as the Right To Know Law, and [the act of July 3,
10 1986 (P.L.388, No.84),) known as] the "Sunshine Act[."]," 65
11 Pa.C.S. Ch. 7 (relating to open meetings). Failure to so notify
12 the [director] authority shall make the basic coverage insurance
13 carrier or self-insured provider responsible for the payment of
14 the entire award or verdict, provided that the [fund] authority
15 has been prejudiced by the failure of notice.
16 (d) The basic coverage insurance carrier or self-insured
17 provider shall be responsible to provide a defense to the claim,
18 including defense of the [fund] authority, except as provided
19 for in section 605. In such instances where the [director]
20 authority has been notified in accordance with subsection (c),
21 the [director] authority may join in the defense and be
22 represented by counsel.
23 (e) In the event that the basic coverage insurance carrier
24 or self-insured provider enters into a settlement with the
25 claimant to the full extent of its liability as provided above,
26 it may obtain a release from the claimant to the extent of its
27 payment, which payment shall have no effect upon any excess
28 claim against the [fund] authority or its duty to continue the
29 defense of the claim.
30 (f) The [director] authority is authorized to defend,
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1 litigate, settle or compromise any claim payable by the [fund]
2 authority. A health care provider's basic insurance coverage
3 carrier shall have the right to approve any settlement entered
4 into by the [director] authority on behalf of its insured health
5 care provider. If the basic insurance coverage carrier does not
6 disapprove a settlement prior to execution by the [director]
7 authority, it shall be deemed approved by the basic insurance
8 coverage carrier. In the event that more than one health care
9 provider defendant is party to a settlement, the health care
10 provider's basic insurance coverage carrier shall have the right
11 to approve only that portion of the settlement which is
12 contributed on behalf of its insured health care provider.
13 (g) The [director] authority is hereby empowered to
14 purchase[, on behalf of the fund,] as much insurance [or], re-
15 insurance, guarantees, sureties and other insurance and
16 financial products as is necessary to [preserve the fund]
17 further its purposes under this act.
18 (h) Nothing in this act shall preclude the [director]
19 authority from adjusting or paying for the adjustment of claims.
20 (i) Upon the request of a party to a case within the [fund]
21 authority coverage limits, the [fund] authority may provide for
22 a mediator in instances where multiple carriers disagree on a
23 case. Upon the consent of all parties to any proceeding
24 hereunder that mediation shall be binding, the parties shall be
25 bound by the conclusions of the mediator. The [fund] authority
26 shall promulgate such rules and regulations as are necessary to
27 implement this provision. Proceedings conducted under this
28 section shall be confidential and shall not be considered public
29 information subject to disclosure under the Right-to-Know Law
30 and the "Sunshine Act."
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1 (j) Delay damages and postjudgment interest applicable to
2 the [fund's] authority's liability in a case shall be paid by
3 the [fund] authority and shall not be charged against the
4 insured's annual aggregate limits. The basic insurance carrier
5 or self-insurer shall be responsible for its proportionate share
6 of delay damages and post-judgment interest.
7 (k) The [fund] authority shall have the authority to borrow
8 money [for periods of less than two years in order to pay claims
9 and expenses until sufficient revenues are realized by the
10 fund.] for the purpose of fulfilling its duties and obligations
11 hereunder, and to evidence the same through the execution and
12 delivery of bonds hereunder; to secure payment of such bonds, or
13 any part thereof, by pledge of or security interest in all or
14 any part of its revenues, receipts, accounts, tangible personal
15 property and contract rights; make such agreements with
16 purchasers or holders of such bonds, or with any other obligees
17 of the authority, which agreements shall be in such form and
18 contain such terms and conditions as shall be necessary, proper
19 or desirable to effect the purposes of the authority hereunder,
20 and shall constitute contracts with the holders of such bonds;
21 obtain such credit enhancement or liquidity facilities in
22 connection with any such bond as the authority shall determine
23 to be advantageous; and in general, provide for the security for
24 any such bonds and the rights of the owners or holders thereof.
25 (l) Any bonds of the authority shall be authorized by a
26 resolution of the board by vote of a majority of the full board
27 and shall be of such series, bear such date or dates, bear or
28 accrue interest at such rate or rates as shall be determined by
29 the board as necessary to issue and sell in a public, private,
30 invited or negotiated sale, be in such denominations, be in such
20010H0649B0705 - 17 -
1 form, either coupon or fully registered without coupons or in
2 certificated or book-entry-only form, carry such registration,
3 exchangeability and interchangeability privileges, be payable in
4 such medium of payment and at such place or places, be subject
5 to such terms of redemption and be entitled to such priorities
6 of payment in the revenues or receipts of the authority as such
7 resolution or resolutions of the board may provide. The bonds
8 shall be signed by or shall bear the facsimile signatures of
9 such officers as the board shall determine, and coupon bonds
10 shall have attached thereto interest coupons bearing the
11 facsimile signature of the treasurer of the authority, and all
12 bonds or other evidence of indebtedness shall be authenticated
13 by an authenticating agent, fiscal agent or trustee, all as may
14 be prescribed in such resolution or resolutions. Any such bonds
15 may be issued and delivered notwithstanding that one or more of
16 the officers whose facsimile signatures shall be upon such bonds
17 or the treasurer whose signature shall be upon the coupon, shall
18 have ceased to be such officer at the time the bonds shall
19 actually be issued or delivered.
20 (m) Bonds issued by the authority under the provisions of
21 this act shall mature no later than 30 years from their
22 respective dates of original issuance. Revenue anticipation
23 notes issued by the authority under the provisions of this act
24 shall mature no later than 12 months after the date of their
25 issuance.
26 (n) Bonds issued by the authority under the provisions of
27 this act may be sold by the authority at public, private,
28 invited or negotiated sale for such price or prices and at such
29 rate or rates of interest as the authority shall determine.
30 Bonds issued by the authority under the provisions of this act
20010H0649B0705 - 18 -
1 may be sold by the authority at a private sale by negotiation
2 for such price or prices and at such rate or rates of interest
3 as the authority shall determine. Pending the preparation of
4 definitive bonds, temporary bonds may be issued to the purchaser
5 or purchasers of such bonds and may contain such terms and
6 conditions as the authority may determine.
7 (o) Bonds issued by the authority shall have the qualities
8 of negotiable instruments under 13 Pa.C.S. (relating to
9 commercial code).
10 (p) The proceeds of an issue of bonds issued by the
11 authority under this act may be used to pay:
12 (1) the costs of issuance of such bonds and to otherwise
13 provide for the security therefor, including, without
14 limitation, costs of liquidity and credit enhancement;
15 (2) administrative costs and expenses of the authority
16 associated with performing its duties and responsibilities
17 hereunder;
18 (3) to fund required reserves for the bonds or otherwise
19 required by the authority to perform its duties and obligations
20 hereunder, and to otherwise fulfill the legislative purposes of
21 this act;
22 (4) to capitalize interest on such bonds for a period to be
23 determined by the authority; and
24 (5) to fund the program or programs contemplated by the plan
25 of finance of the authority under section 706(g).
26 (q) Subject to the provisions of the outstanding bonds of
27 the authority, and subject to the provisions of this act, the
28 authority shall have the right and power to refund or otherwise
29 refinance any outstanding debt of the authority, whether such
30 debt represents principal or interest, in whole or in part at
20010H0649B0705 - 19 -
1 any time. The term "refund" and its variations shall mean the
2 issuance and sale of obligations the proceeds of which are used,
3 or are to be used, either now or in the future, for the payment
4 or redemption of outstanding obligations of the authority,
5 either at maturity or upon prior redemption. The term of any
6 bonds shall not extend to a final maturity date that could not
7 have been included in the original issue of bonds being
8 refunded. A refunding or refinancing may result in an increase
9 in the total principal amount of outstanding indebtedness, but
10 the total amount of principal and interest payments in any year
11 may not be increased as a result of the refunding or
12 refinancing.
13 (r) Any bonds issued by the authority under this act shall
14 be limited revenue obligations of the authority, payable solely
15 from the funds and accounts of the authority, including the
16 revenues pledged for the payment and security therefore. The
17 authority shall not have any power or authority at any time or
18 in any manner to pledge the credit or taxing power of the
19 Commonwealth or any political subdivision, and no obligation of
20 the authority shall be deemed to be an obligation of the
21 Commonwealth or any political subdivision. Neither the
22 Commonwealth nor any political subdivision shall be liable for
23 the payment of any principal or interest, or any other amounts,
24 with respect to any obligations of the authority. The issuance
25 of revenue obligations by the authority under the provisions of
26 this act shall not directly or indirectly obligate the
27 Commonwealth or any political subdivision to levy or pledge any
28 form of taxation whatever therefore or to make any appropriation
29 for their payment, except as may be expressly permitted under
30 this act. The bonds shall not constitute a charge, lien or
20010H0649B0705 - 20 -
1 encumbrance, legal or equitable, upon any property of the
2 Commonwealth or any political subdivision, except the authority,
3 the other funds and accounts established hereunder and under the
4 provisions of any resolution or indenture authorizing any
5 indebtedness, and the revenues pledged or otherwise encumbered
6 under the provisions of such resolutions or indentures and for
7 the purposes of issuing the indebtedness and fulfilling the
8 purposes of the authority hereunder. The substance of this
9 limitation shall be plainly stated on the face of every bond
10 delivered by the authority. Revenue bonds issued by the
11 authority shall not be subject to any statutory limitation on
12 the indebtedness of the Commonwealth nor shall they be included
13 in computing the aggregate indebtedness of the Commonwealth in
14 respect to, and to the extent of, any such limitation. As part
15 of the contract of the Commonwealth with the owners of the
16 revenue bonds, all amounts necessary for the punctual payment of
17 debt service requirements on the indebtedness shall be deemed
18 appropriated, but only from the limited sources specifically
19 pledged therefor under this act.
20 (s) The effectuation of the authorized purposes of the
21 authority shall and will be in all respects for the benefit of
22 the people of this Commonwealth, for the increase of their
23 commerce and prosperity and for the improvement of their health,
24 safety, welfare and living conditions; and since the authority
25 will, as a public instrumentality of the Commonwealth, be
26 performing essential government functions in effectuating such
27 purposes, the authority shall not be required to pay any taxes
28 or assessments upon any property acquired or used or permitted
29 to be used by the authority for such purposes; and the bonds
30 issued by the authority, their transfer and the income
20010H0649B0705 - 21 -
1 therefrom, including any profits made on the sale thereof,
2 shall, at all times, be free from State and local taxation
3 within this Commonwealth. This exemption shall not extend to
4 gift, estate, succession or inheritance taxes or any other taxes
5 not levied directly on the bonds, the transfer thereof, the
6 income therefrom or the realization of profits on the sale
7 thereof.
8 (t) (1) Any bond issued by the authority and reciting in
9 substance that it has been issued by the authority to accomplish
10 the public purposes of this act shall be conclusively deemed in
11 any suit, action or proceeding involving the validity or
12 enforceability of such bonds or any security therefore to have
13 been issued for such purposes.
14 (2) The authority shall cause a copy of any resolution
15 authorizing the issuance of bonds to be filed for public
16 inspection in its principal place of business.
17 (3) After the issuance of bonds by the authority, all such
18 bonds shall be conclusively presumed to be fully and properly
19 authorized and issued in accordance with all laws of the
20 Commonwealth, and any person shall be estopped from questioning
21 or challenging their authorization, sale, execution or delivery
22 by the authority.
23 (u) In connection with the issuance of bonds, and in order
24 to secure the payment of such bonds, the authority, in addition
25 to its other powers, but in all events, subject to the further
26 limitations imposed by this act, shall have the right and power
27 to:
28 (1) Pledge or grant a security interest all or any part of
29 its gross or net revenues, including, specifically without
30 limitation, any and all amounts received or to be received with
20010H0649B0705 - 22 -
1 respect to assessments levied under this act.
2 (2) Grant a security interest in all or any part of its
3 personal property then owned or thereafter acquired.
4 (3) Covenant against pledging or granting a security
5 interest in all or any part of its revenues or all or any part
6 of its personal property to which its right or title exists or
7 may thereafter come into existence, or against permitting or
8 suffering any lien on such revenues or property.
9 (4) Covenant with respect to limitations on its right to
10 sell, lease or otherwise dispose of any of its real property.
11 (5) Covenant as to which other or additional debts or
12 obligations may be incurred by it.
13 (6) Covenant as to the bonds to be issued, and as to the
14 issuance of such bonds, in escrow or otherwise, and as to the
15 use and disposition of the proceeds thereof.
16 (7) Provide for the replacement of lost, destroyed or
17 mutilated bonds.
18 (8) Covenant against extending the time for the payment of
19 bonds, or interest thereon, and to covenant for the redemption
20 of any such bonds, and to provide the terms and conditions
21 thereof.
22 (9) Covenant as to the amount of revenues to be received in
23 each fiscal year or other period of time by the authority, as
24 well as to the use and disposition to be made thereof, create or
25 authorize the creation of special funds or reserves for debt
26 service or other purposes and covenant as to the use and
27 disposition of the moneys held in such funds.
28 (10) Prescribe the procedure, if any, by which the terms of
29 any contract with bondholders may be amended or abrogated, and
30 the amount of bonds the holders of which must consent thereto,
20010H0649B0705 - 23 -
1 and the manner in which such consent may be given.
2 (11) Covenant as to the use of any or all of its real or
3 personal property, warrant as to the authority's title to such
4 property, and covenant as to the maintenance of its real and
5 personal property, the replacement thereof, the insurance to be
6 carried thereon and the use and disposition of insurance
7 proceeds.
8 (12) Covenant as to the rights, liabilities, powers and
9 duties arising upon the breach by it of any covenant, condition
10 or obligation, provided that the authority shall not be
11 permitted to covenant that upon such breach any or all of its
12 bonds shall become or may be declared due before their stated
13 maturity or scheduled prior mandatory redemption.
14 (13) Vest in a trustee or holders of bonds, or any
15 proportion of them, the right to enforce the payment of the
16 bonds, or to enforce any covenants securing or relating thereto.
17 (14) Vest in a trustee the right, in the event of default in
18 payments of interest or on principal of bonds of the authority,
19 to take possession and use, operate and manage any real or
20 personal property and to collect the revenues and receipts of
21 the authority and to dispose of such moneys in accordance with
22 the agreement of the authority with the trustee.
23 (15) Provide for the powers and duties of a trustee and to
24 limit the liabilities thereof, as well as to provide the terms
25 and conditions upon which a trustee or holders of bonds, or any
26 proportion thereof, may enforce any covenant or right securing
27 or relating to the bonds.
28 (16) Enter into interest rate exchange agreements, interest
29 rate cap and floor agreements and other similar agreements which
30 in the judgment of the authority will assist the authority in
20010H0649B0705 - 24 -
1 managing interest costs of the authority.
2 (17) Obtain letters of credit, bond insurance and other
3 facilities for credit enhancement and liquidity.
4 (18) Exercise all or any part or combination of the powers
5 granted in this act, make covenants expressly authorized in this
6 act, make such covenants and do any and all such acts and things
7 as may be necessary or convenient or desirable in order to
8 secure its bonds, or, in the absolute discretion of the
9 authority, as will tend to accomplish the purposes of this act,
10 by making the bonds more marketable, notwithstanding that such
11 covenants, acts or things may not be specifically enumerated by
12 this act. Notwithstanding any provision of this act to the
13 contrary, the real property of the authority, if any, shall not
14 be mortgaged and shall not be subject to attachment nor levied
15 upon by execution or otherwise. The revenues of the authority
16 and the personal property of the authority shall be pledged or
17 otherwise encumbered only as expressly provided in this section
18 and except to the extent necessary to effectuate such pledge or
19 encumbrance, shall not be subject to attachment nor levied upon
20 by execution or otherwise.
21 (v) An obligee of the authority shall have the right, in
22 addition to all other rights which may be conferred on such
23 obligees subject only to any contractual restrictions bidding
24 upon such obligee:
25 (1) By mandamus, suit, action or proceeding at law or in
26 equity, to compel the authority and the members of the board,
27 officers, agents or employees thereof to:
28 (i) Perform each and every term, provision and covenant
29 contained in any bond, or any contract, agreement or trust
30 indenture of the authority, which term, provision or covenant
20010H0649B0705 - 25 -
1 was for the benefit of such obligee.
2 (ii) Require the carrying out of any or all such terms,
3 provisions or covenants, and such bonds, contracts, agreements
4 or trust indentures.
5 (iii) Require the fulfillment of all duties imposed upon the
6 authority by this act.
7 (2) By proceeding in equity, to obtain an injunction against
8 any acts or things which may be unlawful or the violation of any
9 of the rights of such obligee of the authority.
10 (3) To require the authority to account as if it were the
11 trustee of an express trust for the obligees of the authority
12 for any pledged revenues received.
13 (w) Any pledge or grant of a security interest in revenues
14 or personal property of the authority shall be valid and binding
15 from the time when such pledge or grant is made; the revenues or
16 other property so pledged and thereafter received by the
17 authority shall immediately be subject to the lien of any such
18 pledge or security interest without physical delivery thereof or
19 further act, and the lien of any such pledge or security
20 interest shall be valid and binding as against all parties
21 having claims of any kind in tort, contract or otherwise against
22 the authority irrespective of whether such parties have notice
23 thereof. Neither the resolution nor any other instrument of the
24 authority by which a pledge or security interest is created need
25 be recorded or filed to perfect such pledge or security
26 interest, but the authority shall nonetheless cause such
27 recording or filing to be made as is usual and customary in such
28 cases.
29 (x) (1) The Commonwealth does hereby pledge to and agree
30 with each and every obligee of the authority that the
20010H0649B0705 - 26 -
1 Commonwealth will not limit or alter the rights hereby vested in
2 the authority or otherwise created by this act in any manner
3 which impairs or is inconsistent with the obligations of the
4 authority to such obligees until all such bonds, together with
5 the interest thereon, shall have been fully paid and discharged.
6 (2) The Commonwealth does hereby pledge to and agree with
7 each and every person who, as owner thereof, leases or subleases
8 property, or rights to property, to or from the authority, that
9 the Commonwealth will not limit or alter the rights hereby
10 vested in the authority or otherwise created by this act in any
11 manner which impairs or is inconsistent with the obligations of
12 the authority to such persons until all such obligations of the
13 authority under the lease or sublease shall have been fully met,
14 paid and discharged.
15 (3) If and to the extent that the authority pledges as
16 security for any bonds any revenues to be derived from
17 assessments levied on health care providers, the Commonwealth
18 does hereby pledge to and agree with each and every obligee of
19 the authority acquiring bonds so secured, that the Commonwealth
20 itself will not, nor will it authorize any government agency
21 making such assessments, to reduce the amount of such
22 assessments, or other moneys made available to the authority,
23 until all bonds secured by the pledge of the authority, and all
24 interest thereon, are fully paid or provided for and until all
25 liens created to secure such bonds shall have been fully paid
26 and discharged.
27 (y) Except as otherwise provided in any resolution of the
28 authority authorizing or awarding bonds, the terms of such
29 resolution and any agreement authorized by such resolution and
30 the terms of this act as in effect when such bonds were
20010H0649B0705 - 27 -
1 authorized shall constitute a contract between the authority and
2 the obligees from time to time of the authority, subject to
3 modification by the affirmative vote of the holders of such
4 amount of bonds as the resolution or applicable agreements or
5 trust indentures shall provide.
6 (z) Bonds issued by the authority pursuant to this act are
7 hereby made securities in which all government agencies, all
8 insurance companies, trust companies, banking associations,
9 banking corporations, savings banks, investment companies,
10 executors, the trustees of any retirement, pension or annuity
11 fund or system of the Commonwealth or of a city, trustees and
12 other fiduciaries may properly and legally invest funds,
13 including capital, deposits or other funds in their control or
14 belonging to them. Such bonds are hereby made securities which
15 may properly and legally be deposited with and received by any
16 government agency for any purpose for which the deposit of bonds
17 or other obligations of the Commonwealth now or may hereafter be
18 authorized by law.
19 (aa) The obligees of the authority shall have the right to
20 enforce a pledge of or security interest in revenues of the
21 authority securing payment of bonds of the authority against all
22 government agencies in possession of any such revenues at any
23 time, which revenues may be collected directly from such
24 officials upon notice by such obligees or a trustee for such
25 obligees for application to the payment of such bonds as when
26 due or for deposit in any sinking, bond or debt service fund
27 established by this act or established by resolution of the
28 authority with such trustee at the times and in the amounts
29 specified in such bonds or in the resolution or indenture or
30 trust agreement securing such bonds. Any government agency in
20010H0649B0705 - 28 -
1 possession of any such revenues shall make payment against
2 receipt and shall thereby be discharged from any further
3 liability or responsibility for such revenues. If such payment
4 shall be made to a holder of such bonds, it shall be made
5 against surrender of such bonds to the payor for delivery to the
6 authority in the case of payment in full; otherwise, it shall be
7 made against production of such bonds for notation thereon of
8 the amount of the payment. The provisions of this section with
9 respect to the enforceability and collection of revenues which
10 secure bonds shall supercede any contrary or inconsistent
11 statutory provision or rule of law. This section shall be
12 construed and applied to fulfill the legislative purpose of
13 clarifying and facilitating the financing by the authority of
14 the obligations of the Medical Professional Liability
15 Catastrophe Loss Fund and the authority by assuring to the
16 obligees of the authority the full and immediate benefit of the
17 security for the bonds without delay, diminution or interference
18 based on any statute, decision, ordinance or administrative rule
19 or practice.
20 (bb) (1) All funds of the authority received from any
21 source shall be delivered to or upon the order of the treasurer
22 of the authority or to such other agent of the authority as the
23 board may designate. Such funds received by the authority shall
24 be promptly deposited in a bank or banks in this Commonwealth as
25 chosen by a qualified majority of the board. The moneys in such
26 account or accounts may be paid by the treasurer of the
27 authority or other designated agent of the authority on warrant
28 of the treasurer of the authority or by such persons as the
29 board may authorize to make such warrants. All such deposits of
30 moneys may, if required by the authority, be secured by
20010H0649B0705 - 29 -
1 obligations of the United States or of the Commonwealth of a
2 market value equal, determined at least weekly, to the amount of
3 the deposit, and all banks and trust companies are authorized to
4 give such security for such deposits.
5 (2) Subject to the provisions of any agreements with
6 obligees of the authority, all funds of the authority, including
7 the proceeds of any bonds, which are not required for immediate
8 use shall be invested by or on behalf of the authority in
9 obligations of the United States or of the Commonwealth or
10 obligations which are legal investments for Commonwealth funds.
11 All such investments shall be fully secured in such manner, and
12 shall be made upon such terms and conditions, as shall be
13 required from time to time for moneys of the Commonwealth.
14 (cc) Except as expressly provided for in subsection (p) or
15 (q), the authority may not issue bonds, notes or other evidence
16 of indebtedness in amounts that would cause the total amount of
17 outstanding indebtedness to exceed, at the time of issuance, the
18 most recent actuarial estimate of the authority's liabilities
19 for administering, paying, defending, settling, litigating,
20 financing and estimating claims covered under this act, plus
21 necessary reserves and contingencies, all as shall be set forth
22 in the most recent plan of finance of the authority under
23 section 706(g).
24 (dd) The authority shall create such funds and accounts as
25 it may determine to be necessary, proper or desirable to
26 effectuate its corporate purposes and shall pay into each such
27 fund or account any moneys of the authority available for such
28 purpose or any moneys made available to the authority by another
29 person for the purpose of such fund or account. No other
30 provision of this act shall be construed to prohibit the
20010H0649B0705 - 30 -
1 authority from creating within any fund one or more accounts
2 that may be pledged by the authority for a special purpose.
3 (ee) Any moneys deposited by or on behalf of the authority
4 into any fund or account created by the authority in accordance
5 with the provisions of this act and to be used or available to
6 pay debt service with respect to any issued bonds of the
7 authority, and all investments and proceeds of investments from
8 time to time held therein or accountable thereto shall, without
9 further action or filing, be subjected to a perfected security
10 interest for the obligees of the authority for whom such fund is
11 held until such moneys or investments shall be properly
12 disbursed by or on behalf of the authority in accordance with
13 the provisions of this act and with the terms and conditions of
14 the resolutions, trust indentures and other contract and
15 agreements with, or for the benefit of, such obligees.
16 (ff) Subject to the requirements and conditions of this act,
17 the first series of bonds issued by the authority shall be
18 issued in such a manner and time as shall be determined by the
19 authority so that net proceeds of the bonds will be available on
20 or before January 1, 2002, or as soon as practicable thereafter,
21 in an amount not less than the amount determined as necessary,
22 proper or desirable by the authority to effectuate the purposes
23 of this act and to implement the plan of finance adopted by the
24 authority under section 706(g), though in no event in an amount
25 greater than that provided for under subsection (cc).
26 (gg) Subject to the requirements and conditions of this act,
27 one or more additional series of bonds by the authority, other
28 than the initial issuance of bonds under subsection (ff), shall
29 be issued in such manner and time as shall be determined by the
30 authority so that net proceeds of the bonds will be available on
20010H0649B0705 - 31 -
1 or before the dates when such moneys are needed by the authority
2 to effectuate the purposes of this act and to implement the plan
3 of finance adopted by the authority under section 706(g). Except
4 for a refunding permitted by subsection (q), no bonds shall be
5 issued by the authority for any purpose on a date later than
6 December 31, 2021. The limitations of this subsection shall not
7 apply to any bonds to be issued by the authority to refund or
8 refinance any other bonds issued under this act and to pay any
9 costs and expenses associated with such refunding or
10 refinancing.
11 (hh) The authority shall have the power to adopt, use and
12 alter at will a corporate seal.
13 (ii) The authority shall have the power to acquire by gift
14 or otherwise, purchase, hold, receive, lease, sublease and use
15 any franchise, license, property, real, personal or mixed,
16 tangible or intangible, or any interest therein. However, the
17 authority shall be absolutely limited in its power to acquire
18 real property, to property that will be used solely for the
19 office space in which the authority will conduct its business.
20 (jj) The authority shall have the power to sell, transfer,
21 convey or otherwise dispose of any property, real, personal or
22 mixed, tangible or intangible, or any interest therein.
23 (kk) The authority shall have the power to enter into any
24 contracts for group insurance and to contribute to retirement
25 plans for the benefit of its employees and to enroll its
26 employees in an existing retirement system of a government
27 agency.
28 (ll) The authority shall have the power to accept, purchase
29 or borrow equipment, supplies, services or other things
30 necessary, proper or desirable to the work of the authority from
20010H0649B0705 - 32 -
1 other government agencies, and all government agencies are
2 hereby authorized and empowered to contract with the authority
3 for, and to sell, lend or grant to the authority, such
4 equipment, supplies, services or other things necessary, proper
5 or desirable to fulfill the duties of the authority hereunder.
6 (mm) The authority shall have the power to do all acts and
7 things necessary, proper or desirable to fulfill its duties and
8 obligations hereunder.
9 (nn) As used in this section, the term "board" means the
10 Medical Professional Liability Authority Governing Board.
11 Section 705. Liability of Excess Carriers.--(a) No insurer
12 providing excess professional liability insurance to any health
13 care provider eligible for coverage under the [fund] authority
14 shall be liable for payment of any claim against a health care
15 provider for any loss or damages except those in excess of the
16 [fund] authority coverage limits.
17 (b) No carrier providing excess professional liability
18 insurance for a health care provider covered by the [fund]
19 authority shall be liable for any loss resulting from the
20 insolvency or dissolution of the [fund] authority.
21 Section 706. [Advisory] Governing Board.--(a) There is
22 hereby established [an advisory] a governing board of eleven
23 members to be known as the Medical Professional Liability
24 [Insurance Catastrophe Loss Fund Advisory Board.] Authority
25 Governing Board to exercise the powers and duties of the
26 authority.
27 (b) The board shall be comprised of the following persons:
28 (1) The Insurance Commissioner.
29 (2) Four members, one each to be appointed by the President
30 pro tempore of the Senate, the Minority Leader of the Senate,
20010H0649B0705 - 33 -
1 the Speaker of the House of Representatives and the Minority
2 Leader of the House of Representatives. These members shall have
3 experience in the areas of law, health care, liability
4 insurance, finance or actuarial analysis.
5 (3) Six members appointed by the Governor as follows:
6 (i) One physician, who shall be appointed for a three-year
7 term.
8 (ii) One representative of a hospital provider, who shall be
9 appointed for a three-year term.
10 (iii) One representative of a casualty insurer with 1% or
11 less share of the medical professional liability insurance
12 market in this Commonwealth, who shall be appointed for a two-
13 year term.
14 (iv) One podiatrist or one representative of a nursing home,
15 who shall be appointed for a three-year term. The podiatrist and
16 the representative of a nursing home shall alternate terms.
17 (v) Two representatives of the public-at-large, one of whom
18 shall be appointed for a two-year term and the other for a one-
19 year term. These members shall have experience in the areas of
20 law, health care, liability insurance, finance or actuarial
21 analysis.
22 (c) Individuals serving on the Medical Professional
23 Liability Insurance Catastrophe Loss Fund Advisory Board on the
24 effective date of this act shall serve as members of the board
25 until the expiration of their current term and until a successor
26 is appointed and qualified, but in no event longer than six
27 months following the expiration of their current term. After the
28 initial terms under this paragraph have been completed, all
29 terms shall be for a period of three years.
30 (d) The members of the board shall serve without
20010H0649B0705 - 34 -
1 compensation, but shall be reimbursed for their actual and
2 necessary traveling and other expenses in connection with
3 attendance at meetings.
4 (e) The members of the board shall have the following powers
5 and duties:
6 (1) To review procedures and operations of the [fund]
7 authority.
8 (2) To commission audits to be paid for by the [fund]
9 authority, not to exceed more than one every two years.
10 (3) To appoint members of a claim committee whose members
11 shall be representatives of the health care provider classes
12 entitled to participate in the authority in substantially the
13 same proportion as those health care provider classes pay
14 assessments to the authority. The members of the claim committee
15 shall include at least one representative from one of the
16 following classes of health care providers as long as such
17 classes are entitled to participate in the authority: primary
18 health centers, certified nurse midwives, podiatrists, nursing
19 homes and birth centers. The members of the claim committee may
20 also be members of the board. The claim committee shall have the
21 exclusive power to adopt reasonable standards for prompt
22 investigation and settlement of claims arising under this act to
23 include, but not be limited to:
24 (i) Prompt acknowledgment of pertinent communications with
25 respect to claims.
26 (ii) Reasonable standards for prompt investigation and
27 settlement of claims.
28 (iii) Prompt and reasonable settlement of claims in which
29 liability has become reasonably clear.
30 (iv) Fair settlement of all claims.
20010H0649B0705 - 35 -
1 (v) Prevention of duplication in formal proof of loss and
2 subsequent verification.
3 (vi) Provision of reasonable and accurate explanations of
4 basis for claims denials or settlement offers.
5 (4) To retain a director, upon the approval of a majority of
6 the full board.
7 (5) To retain an independent general counsel to the
8 authority, upon the approval of a majority of the full board.
9 (6) To retain counsel, auditors and consultants and contract
10 for other professional services as the board deems appropriate,
11 upon the approval of a majority of the full board. The authority
12 shall not be considered either an executive agency or an
13 independent agency for the purpose of the act of October 15,
14 1980 (P.L.950, No.164), known as the "Commonwealth Attorneys
15 Act," but shall possess the same status for such purpose as the
16 Auditor General, State Treasurer and the Pennsylvania Public
17 Utility Commission; except that the provisions of section 204(b)
18 and (f) of the "Commonwealth Attorneys Act" shall not apply to
19 the authority; notwithstanding the provisions of section 221(l)
20 of the act of October 5, 1980 (P.L.693, No.142), known as the
21 "JARA Continuation Act of 1980," the authority, through its
22 legal counsel, shall defend actions brought against the
23 authority or its members, officers, officials and employees when
24 acting within the scope of their official duties.
25 (7) To contract for or receive the loan of services of
26 persons in the employ of other government agencies, upon the
27 approval of a majority of the full board, and other government
28 agencies shall be authorized to make such employees available.
29 (8) To delegate to the director such powers of the board as
30 the board shall deem necessary, proper or desirable to carry out
20010H0649B0705 - 36 -
1 the purposes of the authority, upon the approval of a majority
2 of the full board and subject in every case to the supervision
3 and control of the board.
4 (f) The board shall make annual reports to the Governor and
5 the General Assembly which shall include recommendations
6 regarding [management and] legislative changes[.] and which
7 shall make provisions for the accounting of revenues and
8 expenses for the fiscal year. The authority shall have its
9 books, accounts and records audited annually in accordance with
10 generally accepted auditing standards by an independent auditor
11 who shall be a certified public accountant, and a copy of the
12 audit report shall be attached to and made a part of the
13 authority's annual report. A concise financial statement of the
14 authority shall be published annually in the Pennsylvania
15 Bulletin.
16 (g) [The board shall undertake a study of the operations and
17 structure of the fund and shall report to the Governor and the
18 General Assembly, not later than September 1, 1997, its
19 recommendations concerning the future of the fund, including,
20 but not limited to, an opt-out provision for doctors and
21 hospitals, total elimination or phaseout of the fund and other
22 provisions for providing adequate medical professional liability
23 insurance, including evaluation of the unfunded liability and
24 financing options to retire any unfunded liabilities. The report
25 shall recommend measures to be taken by the General Assembly.]
26 Prior to the issuance of any bonds by the authority hereunder,
27 the board shall adopt, upon the approval of a majority of the
28 full board, a plan of finance which will provide for the payment
29 of claims, any and all debt service requirements with respect to
30 any bonds, issued or to be issued by the authority, all
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1 operating, administrative and financing costs and expenses, as
2 well as liquidity and insurance costs, if any, associated with
3 any bonds issued or to be issued by the authority. The plan of
4 finance of the authority shall be reviewed and updated at least
5 annually, and shall at all times provide for the payment of all
6 amounts due and payable or to become due and payable by the
7 authority to others. The plan of finance shall provide for a
8 balance between assessments and borrowing so as to satisfy the
9 ability of health care providers to financially manage the
10 transition to private coverage and the ability of the authority
11 to retire its liabilities.
12 (h) [As used in this section, the term "board" means the
13 Medical Professional Liability Insurance Catastrophe Loss Fund
14 Advisory Board.] Members of the board shall not be liable
15 personally on any obligations of the authority, including,
16 without limitation, bonds of the authority. It is hereby
17 declared to be the intent of the General Assembly that the
18 authority created by this act and its members, officers,
19 officials, agents and employees shall enjoy sovereign and
20 official immunity, as provided in 1 Pa.C.S. § 2310 (relating to
21 sovereign immunity reaffirmed; specific waiver), and shall
22 remain immune from suit except as provided by and subject to the
23 provisions of 42 Pa.C.S. § 8501 (relating to definitions)
24 through 8528 (relating to limitations on damages).
25 (i) The board shall meet as frequently as it deems
26 appropriate but at least once during each quarter of the fiscal
27 year. In addition, a meeting of the board shall be called by the
28 chairperson if a request for a meeting is submitted to the
29 chairperson in writing by at least two members of the board. A
30 majority of the board shall constitute a quorum for the purpose
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1 of conducting the business of the board and for all other
2 purposes. All actions of the board shall be taken by a simple
3 majority of the board members present, unless specific
4 provisions of this act require that action be taken by a
5 different majority.
6 Section 803. Plan Operation, Rates and Deficits.--(a)
7 Subject to the supervision and approval of the commissioner,
8 insurers may consult and agree with each other and with other
9 appropriate persons as to the organization, administration and
10 operation of the plan and as to rates and rate modifications for
11 insurance coverages provided under the plan. Rates and rate
12 modifications adopted or changed for insurance coverages
13 provided under the plan shall be approved by the commissioner in
14 accordance with the act of June 11, 1947 (P.L.538, No.246),
15 known as "The Casualty and Surety Rate Regulatory Act," except
16 as may be inconsistent with subsection (c).
17 (b) In the event that the Joint Underwriting Association
18 suffers a deficit in any calendar year, the board of directors
19 of the Joint Underwriting Association shall so certify to the
20 [director of the fund] authority and the commissioner. Such
21 certification shall be subject to the review and approval of the
22 commissioner. Within 60 days following such certification and
23 approval [the director of the fund] the authority shall make
24 sufficient payment to the Joint Underwriting Association to
25 compensate for said deficit. A deficit shall exist whenever the
26 sum of the earned premiums collected by the Joint Underwriting
27 Association and the investment income therefrom is exhausted by
28 virtue of payment of or allocation for the Joint Underwriting
29 Association's necessary administrative expenses, taxes, losses,
30 loss adjustment expenses and reserves, including reserves for:
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1 (1) losses incurred, (2) losses incurred but not reported, (3)
2 loss adjustment expenses, (4) unearned premiums.
3 (c) Within 60 days following the certification that the
4 Joint Underwriting Association has suffered a deficit, as set
5 forth in subsection (b), the board of directors of the Joint
6 Underwriting Association shall file with the commissioner. The
7 commissioner shall approve a premium increase sufficient to
8 generate the requisite income to:
9 (1) reimburse the [fund] authority for any payment made by
10 the [fund] authority to compensate for said deficit; and
11 (2) increase premiums to a level actuarially sufficient to
12 avoid an operating deficit by the Joint Underwriting Association
13 during the following 12 months.
14 (d) Upon dissolution of the authority, the authority shall
15 no longer be obligated to make payment to the Joint Underwriting
16 Association in the event that the Joint Underwriting Association
17 suffers a deficit. Therefore, upon dissolution of the authority,
18 the Joint Underwriting Association shall have the authority to
19 borrow money for periods of less than two years to compensate
20 for a deficit in any calendar year.
21 The Joint Underwriting Association shall reimburse the [fund]
22 authority with interest at a rate equal to that earned by the
23 [fund] authority on its invested assets within one year of any
24 payment made by the [fund] authority as compensation for any
25 deficit incurred by the Joint Underwriting Association.
26 Section 809. Reports to Commissioner and Claims
27 Information.--(a) By October 15 of each year, basic coverage
28 insurance carriers and self-insured providers shall report to
29 the [fund] authority the claims information specified in
30 subsection (b).
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1 (b) Sixty days after the end of any calendar year, the
2 [fund] authority shall prepare a report for the commissioner.
3 The report shall contain the total amount of claims paid and
4 expenses incurred therewith, the total amount of reserve set
5 aside for future claims, the date and place in which each claim
6 arose, the amounts paid, if any, and the disposition of each
7 claim, judgment of court, settlement or otherwise, and such
8 additional information as the commissioner shall require. For
9 final claims at the end of any calendar year, the report shall
10 include details by basic coverage insurance carriers and self-
11 insured providers of the amount of [surcharge] assessment
12 collected, the number of reimbursements paid and the amount of
13 reimbursements paid.
14 (c) A copy of any report prepared pursuant to this section
15 shall be submitted to the chairman and minority chairman of the
16 Banking and Insurance Committee of the Senate and the chairman
17 and minority chairman of the Insurance Committee of the House of
18 Representatives.
19 Section 811. Professional Corporations, Professional
20 Associations and Partnerships.--(a) The Joint Underwriting
21 Association shall offer basic coverage insurance to such
22 professional corporations, professional associations and
23 partnerships entirely owned by health care providers who cannot
24 conveniently obtain insurance through ordinary methods at rates
25 not in excess of those applicable to similarly situated
26 professional corporations, professional associations and
27 partnerships.
28 (b) In the event that a professional corporation,
29 professional association or partnership entirely owned by health
30 care providers elects to be covered by basic coverage insurance
20010H0649B0705 - 41 -
1 and upon payment of the annual [surcharge] assessment as
2 required by section 701(e), the professional corporation,
3 professional association or partnership shall be entitled to
4 such excess coverage from the [fund] authority as is provided in
5 this act.
6 (c) Any professional corporation, professional association,
7 or partnership which acquires basic coverage insurance from the
8 Joint Underwriting Association pursuant to subsection (a) or
9 from an insurer licensed or approved by the Commonwealth of
10 Pennsylvania shall be required to participate in and contribute
11 to the [fund] authority as provided in this act.
12 (d) Any professional corporation, professional association
13 or partnership which participates in or contributes to the
14 [fund] authority shall be subject to all other provisions of
15 this act.
16 Section 841-A. Mandatory Reporting.--(a) Each malpractice
17 insurer, including the [Medical Professional Liability
18 Catastrophe Loss Fund] authority established by this act, which
19 makes payment under a policy of insurance in settlement, or in
20 partial settlement of, or in satisfaction of a judgment in a
21 medical malpractice action or claim shall provide to the
22 appropriate licensure board a true and correct copy of the
23 report required to be filed with the Federal Government by
24 section 421 of the Health Care Quality Improvement Act of 1986
25 (Public Law 99-660, 42 U.S.C. § 11131). The copy of the report
26 required by this section shall be filed simultaneously with the
27 report required by section 421 of the Health Care Quality
28 Improvement Act of 1986. The Insurance Department shall monitor
29 and enforce compliance with this section. The Bureau of
30 Professional and Occupational Affairs and the licensure boards
20010H0649B0705 - 42 -
1 shall have access to information pertaining to compliance.
2 * * *
3 Section 3. The provisions of this act providing for security
4 for and rights and remedies of obligees of the Medical
5 Professional Liability Authority shall be liberally construed to
6 achieve the purposes stated and provided for by this act.
7 Section 4. The provisions of this act are severable. If any
8 provision of this act or its application to any person or
9 circumstance is held invalid, the invalidity shall not affect
10 other provisions or applications of this act which can be given
11 effect without the invalid provision or application.
12 Section 5. This act shall take effect immediately.
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