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A Philadelphia judge has dismissed a breach of contract action brought by a medical malpractice plaintiff who claims he settled with a hospital defendant after being promised a subsequent payment from the MCARE fund, only to later learn that the hospital had then instructed the fund to use the hospital’s MCARE coverage to settle a separate lawsuit. Judge Patricia A. McInerney stated in her opinion in Frisby v. Frankford Hospital that the hospital wields no real control over the Medical Care Availability and Reduction of Error (MCARE) Fund’s payments. She also called attention to the fact that the $775,000 settlement agreement entered into by Frankford Hospital (using its primary and excess insurance coverage) and Lester Frisby mentions no guarantee by the hospital that Frisby would subsequently be able to collect $700,000 under the hospital’s available MCARE coverage. “[Frisby] does not allege fraud, but claims breach of contract two-and-a-half years after the fact, when he learned that no additional MCARE funds would be paid,” McInerney wrote. “These allegations are meaningless given the settlement agreement’s clear and unambiguous terms. Nowhere in the language of the contract was there an agreement that MCARE Fund would pay additional funds, only that [Frisby] was not prohibited by the release from seeking them.” Frankford Hospital’s attorney in the case, Peter Hoffman of McKissock & Hoffman in Philadelphia, declined to comment on McInerney’s decision. Frisby’s lawyer, Alan Schwartz of Anapol Schwartz Weiss Cohan Feldman & Smalley in Philadelphia, said in an interview yesterday that in the future, he will make sure that settlement contracts entered into by his medical malpractice clients contain a statement forcing the defendant to promise money is available under the defendant’s MCARE coverage and that that money will not be used to settle other cases. “They essentially did something I’ve never seen before: Take money offered to you and turn around and give it to somebody else,” Schwartz said of the hospital. In addition to the hospital, the underlying medical malpractice action’s named defendants included two hospital technicians and one affiliated physician, according to Schwartz. That doctor-defendant, Marc Silver, was represented by his own attorney, Schwartz said. According to McInerney’s opinion, the November 2002 settlement between Frisby and the hospital included the hospital’s $500,000 primary coverage policy with Medical Inter-Insurance Exchange and $275,000 contributed by the hospital’s excess carrier. Under the terms of that agreement, McInerney wrote, Frisby was not prohibited from seeking further payment from the MCARE Fund, nor was the settlement conditioned on future payment from the fund. Schwartz said the November 2002 settlement was only part of the multimillion-dollar settlement package he was planning on behalf of his client. In addition to the $775,000 from the hospital’s primary and excess providers, Schwartz said he believed he would be able to seek $500,000 from Silver’s primary policy and $700,000 from the MCARE Fund as to both Silver and the hospital. Schwartz said that in pursuing the moneys available under Silver’s and the hospital’s MCARE coverages, it was important to ensure that he was able to settle both claims with the MCARE Fund at the same time. Schwartz said that in his experience, if the MCARE Fund is obligated to provide funds to more than one party as a result of a single litigation, it will only guarantee coverage if claims against all parties are settled at the same time. According to McInerney’s opinion, in May 2004, the MCARE Fund offered Frisby $700,000. Schwartz said that around the time the fund offered that $700,000 to the hospital, Silver’s primary insurer had agreed to pay $100,000 – $400,000 short of the doctor’s policy limits. At the time, Silver’s attorney assured Schwartz that the remaining $400,000 would be soon forthcoming, Schwartz said. Schwartz said that because the fund would not be able to offer dollar one as to Silver until Silver’s primary policy limits had been exhausted, he was concerned that if Frisby accepted the $700,000 as to the hospital without being able to simultaneously collect under Silver’s MCARE coverage, Frisby would never be able to any money under Silver’s MCARE coverage. Thus, Frisby rejected the fund’s May 2004 offer. “Only after he rejected this offer does he assert he was then told the funds had been applied to an unrelated matter involving the [hospital],” McInerney wrote. Schwartz claims that after Frisby turned down that May 2004 offer, the hospital instructed the fund to use the hospital’s existing MCARE coverage to settle a separate action not involving Silver. In rejecting Frisby’s breach of contract claim, McInerney found that the parol evidence rule precludes admission of evidence – including oral representations – extrinsic to a final contract. “These alleged representations made prior to the signing of the contract are not admissible to prove any element of a breach of contract claim,” McInerney wrote. “The settlement agreement is a fully integrated contract without ambiguity.” Nor was McInerney persuaded by the assertion that the hospital had intentionally interfered with the business relationship that existed between Frisby and the MCARE Fund. Frisby, she wrote, “knew or had to know that [the hospital] had no control over MCARE’s payments. With whom and at what amount the fund will settle a case is totally in the fund’s discretion. Even if [the hospital] did encourage MCARE to apply the last of the funds elsewhere, two-and-one-half years later the decision was totally up to the fund itself.” The Superior Court has not yet set an argument or brief schedule for the appeal in Frisby. (Copies of the 10-page opinion in Frisby v. Frankford Hospital , PICS No. 06-0762, are available from The Legal Intelligencer . Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.)

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