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The state-run medical malpractice liability fund does not have to pay a $1.432 million default judgment entered against a physician because the doctor’s malpractice insurance policy had lapsed by the time the plaintiff filed a claim against him, the Pennsylvania Supreme Court has ruled. In Paternaster v. Lee, the 6-1 court announced that requiring the Pennsylvania Medical Professional Liability Catastrophe Loss Fund (the CAT Fund) to pay excess coverage in the absence of any underlying primary coverage would “fly in the face” of the statute that created the fund — the Health Care Services Malpractice Act of 1975. That act “plainly sought to place the burden on health care providers to maintain a certain level of primary coverage in order to qualify for CAT Fund excess coverage,” reasoned Justice Russell M. Nigro, who wrote the majority opinion.The defendant doctor, Dong P. Lee, hadn’t maintained the coverage, the court said. The court relied in part on regulations adopted by the administrative director of the CAT Fund, which explicitly release the fund from liability for claims arising under these circumstances. The majority rejected the plaintiff’s argument that the fund regulations were unenforceable as they were inconsistent with the act. Nigro said the relevant regulations were within the director’s scope of rule-making authority because they related to the fund’s operation. Justice Thomas G. Saylor wrote separately to concur with the majority, noting that a 2000 high court decision, Dellenbaugh v. CAT Fund, controlled the result of Paternaster. But Saylor had joined the Dellenbaugh dissent, which said the court’s approach “was in substantial tension with one prominent purpose of the [Health Care Services Malpractice Act], namely, to protect the interests of those injured by tortious conduct of (or breach of contract by) their health care providers,” Saylor wrote. The plaintiff’s lawyer, Kenneth Chestek, echoed Saylor’s concern. “The idea that there’s a fund out there that injured patients can rely on, that opinion doesn’t appear to be foremost in the court’s thoughts,” Chestek said. Justice Max Baer was the sole dissenter in Paternaster.”Because I agree with [the plaintiff] that the CAT Fund may not exonerate itself from liability by adopting regulations with change the substantive rights of malpractice victims as adopted by the Legislature, I would reverse the Commonwealth Court’s grant of summary judgment in favor of the CAT Fund,” Baer wrote. Lee treated the plaintiff, Damon Paternaster, in 1986 while Paternaster was living in Erie, Pa. Lee’s malpractice insurance policy lapsed in 1987, and he did not purchase a “tail” policy to cover any claims — like the plaintiff’s — filed after his primary policy expired but related to acts that occurred while he was still covered, according to the opinion. By the time Paternaster sued Lee in 1995, Lee had moved to Korea and did not respond. A trial court entered the default judgment against Lee in 1995, and Paternaster filed a writ of execution on the judgment against both Lee and the CAT Fund, according to the opinion. The CAT Fund was succeeded by the Medical Care Availability and Reduction of Error Fund in 2002. As Nigro notes in his opinion, the liabilities of the CAT Fund were transferred to the MCARE Fund, but the court decided this case by interpreting provisions of state insurance law that have since been repealed. However, some language from the old CAT Fund statute that Chestek relied upon has been carried through to the MCARE Act, Chestek noted. Thus, the opinion might be relevant in other cases. In 2002, Paternaster was transferred to the Commonwealth Court, where both parties filed motions for summary judgment. Paternaster argued that the CAT Fund had a statutory duty to defend and indemnify Lee. He contended that when a doctor had a primary policy in place at the time of an alleged negligent act, the fund is required to cover a claim relating to that act — “even if, at the time the claim was filed, the provider no longer had a primary policy to cover the claim,” according to the opinion. The CAT Fund asserted that it wasn’t obligated to indemnify Lee because Lee wasn’t covered by a primary insurance policy for Paternaster’s claims, and that coverage is necessary for CAT Fund coverage to apply, according to the opinion. The Commonwealth Court granted summary judgment in favor of the fund. It found that nothing in the statute “expressly or impliedly” required the CAT Fund to pay toward Paternaster’s claim under the circumstances. The Commonwealth Court also noted the CAT Fund regulations explicitly stating the fund wasn’t responsible for paying claims under these circumstances. The Supreme Court’s decision on Dec. 22 affirmed the Commonwealth Court. Given the “essential character” of CAT Fund coverage as an excess carrier and the statute’s explicit requirement that providers maintain a certain level of coverage, “we conclude that the CAT Fund director’s regulations, which require health care providers to obtain a tail or similar policy to maintain CAT Fund coverage, are completely consistent with the act and were properly enacted,” Nigro wrote. Section 701(d) of the Health Care Services Malpractice Act said that the CAT Fund would cover claims to the extent that such claims exceeded the provider’s “basic coverage in effect at the time of occurrence.” Paternaster, whose widow succeeded him in the lawsuit after his death in 2002, argued that this section indicated that the actual coverage available to a doctor at the time a claim is brought is irrelevant to the CAT Fund’s excess obligations under the act, according to the opinion. The high court said the section’s language “was merely meant to convey that the CAT Fund’s obligations were limited to providing excess coverage over the primary coverage that the health care provider had purchased to cover the time period in which the acts giving rise to liability occurred.” Guy A. Donatelli of Lamb McErlane in West Chester, Pa., represented the CAT Fund. He was not immediately available for comment.

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