Senate Bill No. 6011
(By Senators Tomblin, Mr. President, and Sprouse,
By Request of the Executive)
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[Introduced October 21, 2001; referred to the Committee on
Banking and Insurance; and then to the Committee on Finance.]
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A BILL to amend chapter twenty-nine of the code of West Virginia,
one thousand nine hundred thirty-one, as amended, by adding
thereto a new article, designated article twelve-b, relating
to establishment and operation of medical professional
liability insurance programs as an alternative to commercial
coverage for malpractice claims when commercial coverage is
not available or affordable; providing short title and
legislative findings; defining certain terms; establishing
medical liability programs, including a preferred medical
liability program and a high-risk medical liability program
and exceptions to participation; creating a medical liability
board and specifying powers and duties of the board; providing
for appointment of executive director and specifying powers and duties of the director; specifying duties of board of risk
and insurance management; establishing special revenue account
in state treasury for deposit of collected premiums and for
expenditure and investment of funds in the account; providing
for payment of start-up operating expenses of medical
liability board and a pool from which claims may be paid and
for amounts so paid to be reimbursed from collected premiums;
requiring certain documentation to pay a medical malpractice
settlement or judgment; requiring medical liability board to
submit certain reports to licensing authorities; exempting
specific claim reserve information from disclosure under state
freedom of information act; requiring medical liability board
to post supersedeas bond when it appeals a medical malpractice
judgment against a health care provider; providing for
apportionment of interest accruing prejudgment or post-
judgment on certain claims; specifying effective date; and
allowing policies written after the effective date to be
retroactive to the effective date.
Be it enacted by the Legislature of West Virginia:
That chapter twenty-nine of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, be amended by adding
thereto a new article, designated article twelve-b, to read as follows:
ARTICLE 12B. WEST VIRGINIA INSURANCE AVAILABILITY AND
AFFORDABILITY ACT.
§29-12B-1. Short title.
This article may be cited as the "West Virginia Insurance
Availability and Affordability Act."
§29-12B-2. Legislative findings.
The Legislature finds and declares that in recent years the
cost of medical malpractice insurance has risen dramatically and
the nature, extent and availability of the insurance has
diminished, leaving health care providers and the injured without
the full benefit of professional liability insurance coverage; that
the lack of availability and the high cost of medical malpractice
insurance will have a deleterious effect on health care providers
practicing in the state of West Virginia; that the state of West
Virginia will lose needed generalists and specialists who will be
able to find medical malpractice insurance at a lesser cost and
greater availability in other areas of the country; that remedial
measures for problems concerning affordability and availability of
medical malpractice insurance are in the best interest of the
state; that the remedial measures for problems concerning
affordability and availability of medical malpractice insurance must be balanced among the various interests, including the rights
of health care providers, the rights of the patient receiving
medical care and the needs of the state; that the various interests
involved require that health care providers have financial
accountability to their patients through adequate medical
malpractice insurance; that in order to maintain a stable medical
malpractice insurance program, the cost of medical malpractice
insurance needs a certain level of predictability through
provisions which fairly address the needs of all the parties
involved; that presently there has been a failure of the private
market system in responding to the interests and needs of all
parties; that the state board of risk and insurance management is
in a unique position to address the needs of various interests
involved by establishing a medical malpractice insurance program
for preferred and high risk health care providers; that operation
of such programs through the state board of risk and insurance
management would be cost effective through control of agent
commissions and exemption of state guaranty fund assessments and
premium taxes; that the Legislature finds the current commercial
market to be inadequate in addressing the needs of the state; and
that all of these provisions are necessary and mutual ingredients
of an appropriate legislative response.
§29-12B-3. Definitions.
As used in this article, the following terms have the meanings
set forth below:
(a) "Medical liability board" or "board" means the board
created by section seven of this article, to administer the
preferred medical liability program created by section five of this
article and the high risk medical liability program created by
section six of this article.
(b) "Commissioner" means the commissioner of insurance for
West Virginia.
(c) "Health care provider" means:
(1) A person licensed to practice any branch of medicine in
this state by the state board of medicine;
(2) A person licensed to practice medicine in this state by
the board of osteopathy;
(3) A podiatrist licensed by the state board of medicine;
(4) An optometrist licensed by the state board of optometry;
(5) A pharmacist licensed by the state board of pharmacy;
(6) A registered nurse holding an advanced practice
announcement from the state board of registered nurses authorizing
the registered nurse to practice as a nurse anesthetist;
(7) A dentist licensed by the state board of dentists and dental hygienists;
(8) A physical therapist licensed by the state board of
physical therapy;
(9) A professional limited liability company or medical
corporation certified by the state board of medicine;
(10) An association, partnership or other entity organized for
the purpose of rendering professional services by persons who are
health care providers;
(11) A health maintenance organization issued a certificate of
authority by the insurance commissioner of this state;
(12) A hospital, medical clinic, psychiatric hospital or other
medical facility authorized by law to provide professional medical
services; or
(13) Such other health care provider as the medical liability
board may from time to time approve, and for whom an adequate rate
can be established.
"Health care provider" does not include any provider of
professional medical services that has medical malpractice
insurance pursuant to article twelve of this chapter.
(d) "Claims made coverage" means coverage for a claim made
during the policy period including any prior acts and/or extended
reporting endorsements.
(e) "Sexual acts" means that sexual conduct which constitutes
a criminal or tortious act under the laws of West Virginia.
§29-12B-4. Medical liability programs.
(a) There is hereby established optional insurance for health
care providers consisting of a preferred medical liability program
and a high risk medical liability program. In order to participate
in either program, a health care provider must accept patients on
a regular basis whose health care coverage is provided pursuant to
the West Virginia public employees insurance act, the West Virginia
children's health program, West Virginia medicaid, and the West
Virginia workers' compensation fund.
(b) Each of the programs described in subsection (a) of this
section shall provide claims made coverage together with an
optional prior acts endorsement for any covered act or omission
resulting in injury or death arising out of the rendering of or the
failure to render professional services by a health care provider,
and for which there is no other policy or guaranty fund protection.
The premium for the coverage may be phased in over a five-year
maturity schedule depending on the years of prior acts exposure, as
more specifically set forth in a written rating manual approved by
the medical liability board.
(c) Each of the programs described in subsection (a) of this section shall further provide an option to purchase, upon
termination, an extended reporting endorsement with respect to any
claim arising during the policy period, including any prior acts
endorsement, but not made until after said termination. Each
participant shall receive an annual credit pursuant to amounts and
vesting terms more specifically set forth in a written rating
manual approved by the medical liability board. Extended
reporting, after ten years participation, shall be provided without
further charge.
(d) Each of the programs described in subsection (a) of this
section shall offer limits of one million dollars per claim,
including repeated exposure to the same event or series of events,
and all derivative claims, and three million dollars
($3,000,000.00) in the annual aggregate.
(e) Each of the programs described in subsection (a) of this
section shall cover any act or omission resulting in injury or
death arising out of the rendering of, or the failure to render,
professional services except sexual acts as defined in subdivision
(e), section three of this article.
(f) Each of the programs described in subsection (a) of this
section shall cover all damages arising from injury or death except
punitive damages.
(g) Each of the programs described in subsection (a) of this
section shall provide excess verdict liability in the event that
the insured health care provider and the claimant were each willing
to settle, pretrial, within policy limits, but the medical
liability board declined to do so.
(h) Rates for each of the programs described in subsection (a)
of this section may not be excessive, inadequate or unfairly
discriminatory.
(i) The premiums for each of the programs described in
subsection (a) of this section are not subject to premium taxes
imposed by article three, chapter thirty-three of this code, or
assessments pursuant to the West Virginia insurance guaranty
association act set forth in article twenty-six, chapter
thirty-three of this code, or any other assessment against
premiums.
(j) Neither the state, the board of risk and insurance
management, the medical liability board, any individual member or
employee of any of the preceding entities, nor any vendor to which
any services are outsourced, or any employee of the vendor, are
liable for any alleged negligence, unfair trade practices, unfair
claims settlement practices, bad faith or failure to act in good
faith with respect to a claim. Further, no insured, codefendant or codefendant's insurer may be vicariously liable for any alleged
negligence, unfair trade practices, unfair claims settlement
practices, bad faith or failure to act in good faith by the state,
the board of risk and insurance management, the medical liability
board, any individual member or employee of any of the preceding
entities, any vendor to which any services are outsourced, or any
employee of such vendor.
§29-12B-5. Preferred medical liability program.
(a) Participation in the preferred medical liability program
shall be (1) determined by underwriting criteria approved by the
medical liability board and set forth in a written underwriting
manual, and (2) subject to rates approved by the medical liability
board and set forth in a written rating manual. Participation in
the preferred medical liability program may not be limited based on
specialty, type of practice or geographic location, but may be
limited based upon indemnity loss history, number of patient
exposures, refusal to participate in risk management/loss control
programs or any other grounds the medical liability board may
approve, as set forth in a written underwriting manual. The
medical liability board shall periodically review its underwriting
manual and make any changes it considers necessary or appropriate.
(b) Health care providers qualifying for the preferred medical liability program have the option to purchase higher limits of up
to two million dollars per claim, including repeated exposure to
the same event or series of events, and all derivative claims, and
up to four million dollars in the annual aggregate.
(c) Qualification for participation in the preferred medical
liability program shall be reviewed at each annual renewal with the
possibility of transfer to the high risk medical liability program,
as set forth in the written underwriting manual approved by the
medical liability board.
§29-12B-6. High risk medical liability program.
(a) Participation in the high risk medical liability program
is subject to higher rates than those established for participants
qualifying as preferred and approved by the medical liability
board, as set forth in a written rating manual. Only extreme risks
may be excluded under criteria approved by the medical liability
board, as set forth in a written underwriting manual approved by
the medical liability board. The board shall periodically review
its underwriting manual and make any changes it deems necessary or
appropriate.
(b) The high risk medical liability program shall provide full
defense but only ninety percent indemnity with the health care
provider bearing ten percent of the risk. Neither the state, the board of risk and insurance management, the medical liability
board, any individual member or employee of the preceding entities,
nor any vendor to which services are outsourced or any employee of
the vendor, is liable for the ten percent copayment.
(c) Participants in the high risk medical liability program
are not eligible for limits in excess of those set forth in
subsection (d), section four of this article.
(d) Participants placed in the high risk medical liability
program due to prior indemnity payments, but who remain claims-free
for a period of three consecutive policy years, and who otherwise
are eligible for the preferred program, will then be eligible for
transfer to the preferred medical liability program.
(e) Two or more indemnity payments in excess of one hundred
thousand dollars each during any three consecutive policy years
may, at the discretion of the medical liability board, result in
application of a claims history debit approved by the medical
liability board, as set forth in the written rating manual.
§29-12B-7. Medical liability board.
(a) There is hereby created a medical liability board which
has the powers, duties and functions prescribed in this article or
elsewhere in this code.
(b) The board consists of the commissioner, who serves as chairperson, the executive director of the West Virginia investment
management board, or a representative designated by the executive
director, and five qualified persons appointed by the governor, by
and with the advice and consent of the Senate, with expertise in
the following areas:
(1) One member shall be licensed by the state board of
medicine or state board of osteopathy to practice medicine in West
Virginia;
(2) One member shall be a chief executive officer or chief
financial officer of a hospital;
(3) One member shall be a consumer or consumer representative;
(4) One member shall have training or experience in
underwriting; and
(5) One member shall have training or experience in insurance
industry management.
(c) Board members shall serve at the will and pleasure of the
governor. When a vacancy occurs in the membership of the medical
liability board resulting from expiration of a term, the governor
shall appoint a successor of like qualifications. Initial
appointments to the medical liability board shall be divided into
one-, two-, three-, and four-year terms. At the expiration of the initial terms, successors shall be appointed to four-year terms, so
that no more than two board members change each year. No member
may be appointed for more than two successive terms. Each member
shall serve until a successor is appointed and qualified. Whenever
a vacancy occurs in the membership of the medical liability board
for any reason other than the expiration of a member's term of
office, the governor shall appoint a successor of like
qualifications to fill the unexpired term.
(d) The executive director shall pay each citizen member of
the medical liability board the same compensation as is paid to
members of the Legislature for their interim duties, as authorized
by law, for each day or portion thereof the member is engaged in
the discharge of official duties. The citizen members shall be
reimbursed his or her actual and necessary expense incurred in the
discharge of official duties, except that the per mile rate to be
reimbursed shall be the same rate as authorized for members of the
Legislature. All such payments shall be made from the special
revenue fund created pursuant to section eleven of this article.
(e) The medical liability board shall organize, as soon as
practicable, following the effective date of this article and on
the first day of July, or as soon as practicable thereafter, of each succeeding year. The board shall choose from among its
membership a vice-chairperson.
(f) Regular board meetings shall be held no less than four
times per year. Special meetings may be called by the chairperson.
The chairperson shall call a special meeting upon receipt of a
written request for a special meeting signed by four members of the
board.
(g) Board members may participate in meetings through the use
of video conferencing or other method deemed appropriate by the
medical liability board in order to allow for the participation of
members. Four board members constitute a quorum. A vote of the
majority of the quorum participating is required for a motion to be
approved by the medical liability board.
§29-12B-8. Medical liability board; powers and duties.
The medical liability board is hereby granted and may exercise
all powers necessary or appropriate to carry out and effectuate the
purposes of this article. The board shall:
(1) Administer the preferred medical liability program and the
high risk medical liability program, and exercise and perform other
powers, duties and functions specified in this article;
(2) Obtain and implement, at least annually, from an independent outside source, such as a medical liability actuary or
a rating organization experienced with the medical liability line
of insurance, written rating plans for the preferred medical
liability program and high risk medical liability program on which
premiums shall be based;
(3) Prepare and annually review written underwriting criteria
for the preferred medical liability program;
(4) Prepare and publish, before each regular legislative
session, separate summaries for the preferred medical liability
program and high risk medical liability program activity during the
preceding fiscal year, each summary to include, but not be limited
to, an audited financial statement which shall follow the
accounting practices and procedures prescribed by the national
association of insurance commissioners accounting practices and
procedures manual, as amended, a balance sheet, income statement
and cash flow statement, an actuarial opinion addressing adequacy
of reserves, the highest and lowest premiums assessed, the number
of judgments paid from the program, the number of settlements paid
from the program, and the number of dismissals without payment;
(5) Determine and annually review the claims history debit for
the high risk medical liability program;
(6) Determine and annually review the criteria for transfer
from the preferred medical liability program to the high risk
medical liability program;
(7) Determine and annually review the extreme risks to be
excluded from the high risk medical liability program;
(8) Determine and annually review the extended reporting
endorsement credit and vesting terms;
(9) Determine and annually review the role of independent
agents, the amount of commission to be paid therefore, and agent
appointment criteria;
(10) Study and annually evaluate the operation of the
preferred medical liability program and the high risk medical
liability program, and make recommendations to the Legislature, as
may be appropriate, to ensure their viability;
(11) Establish a five-year plan to ensure an adequate premium
base to cover the long tail nature of the claims made coverage
provided by the preferred medical liability program and the high
risk medical liability program;
(12) Purchase reinsurance, in the amounts as it may from time
to time consider appropriate, and the cost thereof shall be
considered to be operating expenses for the purpose of section eleven of this article;
(13) Review and approve, reject or modify rules that are
proposed for promulgation by the executive director to implement,
clarify or explain this article. Notwithstanding any provisions in
this code to the contrary, rules promulgated pursuant to this
section are not subject to the provisions of sections nine through
sixteen, article three, chapter twenty-nine-a of this code. The
medical liability board shall follow the remaining provisions of
article three and shall hold hearings or receive public comments
before promulgating any proposed rules filed in the state register;
and
(14) Enter into structured settlement agreements whenever
settlement is appropriate, and may own or assign any annuity
purchased by the medical liability board.
§29-12B-9. Executive director; appointment; powers and duties.
(a) The governor, with the advice and consent of the Senate,
shall appoint an executive director of the medical liability
insurance programs created by this article. The executive director
shall serve at the will and pleasure of the governor and shall
receive an annual salary of eighty-five thousand dollars and actual
expenses incurred in the performance of official business, which compensation shall be in full for all services.
(b) The executive director may appoint attorneys and
actuaries, all of whom shall be in the classified-exempt class of
service under section four, article six, chapter twenty-nine of
this code.
(c) The executive director may also employ legal assistants,
agents, underwriters, adjusters, claims managers, compliance
auditors, and other necessary personnel, all of whom shall be in
classified service under section three, article six, chapter
twenty-nine of this code.
(d) The executive director may out source any services the
medical liability board may from time to time consider appropriate.
The provisions of article three, chapter five-a of this code,
relating to the purchasing division of the department of
administration, do not apply to any contracts or agreements
executed by or on behalf of the medical liability board or the
executive director under the provisions of this article.
(e) Notwithstanding any provision of this code to the
contrary, the executive director may acquire legal services as are
considered necessary, including representation of the insured or
the medical liability board before any court or administrative body. Attorneys may be employed either on a salaried basis or on
a reasonable fee basis. In addition, the executive director may
call upon the attorney general for legal assistance and
representation as provided by law.
§29-12B-10. Board of risk and insurance management.
The board of risk and insurance management shall:
(1) Provide administrative support, including, but not limited
to, payroll and administrative direction, in addition to serving as
a liaison with the office of the governor and the secretary of the
department of administration.
(2) Upon request of the medical liability board, provide
technical and administrative assistance to the medical liability
board with respect to administration of the preferred medical
liability program and the high risk medical liability program; and
(3) Provide such expertise as the medical liability board may
reasonably request with respect to evaluation of claims or
potential claims.
§29-12B-11. Deposit, expenditure and investment of premiums.
(a) The premiums charged and collected by the medical
liability board under this article shall be deposited into a
special revenue account hereby created in the state treasury known as the "Medical Liability Fund," and shall not be part of the
general revenues of the state. Disbursements from the special
revenue fund shall be upon requisition of the executive director
and in accordance with the provisions of chapter five-a of this
code. Disbursements shall pay operating expenses of the board and
the board's share of any judgments or settlements of medical
malpractice claims. Funds shall be invested with the consolidated
fund managed by the West Virginia investment management board and
interest earned shall be used for purposes of this article.
(b) Start up operating expenses of the medical liability
board, not to exceed five hundred thousand dollars, shall be
transferred to the medical liability board by the board of risk and
insurance management from any special revenue funds available. The
medical liability board shall reimburse the board of risk and
insurance management by the thirtieth day of June, two thousand two
or a later date agreed to by the medical liability board and the
board of risk and insurance management.
(c) For purposes of establishing a pool from which settlements
and judgments may be paid, the medical liability board is
authorized to withdraw from the West Virginia tobacco settlement
medical trust fund, established in article eleven-a, chapter four of this code, an amount not to exceed eight million dollars,
notwithstanding any provision of this code to the contrary. The
medical liability board shall reimburse the tobacco settlement
trust fund for the amount withdrawn by the first day of July, two
thousand three.
§29-12B-12. Payments for settlement or judgment.
All payments made in satisfaction of any settlement or
judgment shall be in accordance with the procedures established by
the board. No settlement or judgment may be paid until there is
recorded in the office of the executive director (1) a certified
copy of a final judgment against a health care provider insured by
either of the medical liability programs created pursuant to this
article, or a certified copy of an order approving settlement in a
summary proceeding; or (2) appropriate settlement documentation to
include a written settlement determination issued by or on behalf
of the board.
§29-12B-13. Reports to licensing authorities.
(a) The medical liability board shall submit expert witness
reports to the licensing authority for the health care provider
which have been made available to the opposing parties in the case.
(b) Upon written request of the licensing authority, depositions, interrogatories, admissions or other relevant
information concerning the case, which was made available to the
opposing parties in the case, shall also be submitted.
(c) The medical liability board shall submit to the licensing
authority for any attorney any order wherein the court determines
that any complaint or answer was without merit.
(d) The medical liability board may not be required to furnish
information not in its possession. Reasonable expenses incurred in
reproducing the documents, other than expert witness reports or
court orders, shall be paid by the licensing authority.
(e) Immunity from suit is hereby granted to any expert witness
or judicial officer who makes any finding which is later the
subject of a report forwarded to a disciplinary board and,
likewise, the state, board of risk and insurance management,
medical liability board, and members and employees thereof are also
immune from any claim arising out of reports forwarded to
disciplinary boards pursuant to this section.
§29-12B-14. Information exempt from disclosure.
Any specific claim reserve information is exempt from public
disclosure under the freedom of information act set forth in
article one, chapter twenty-nine-b of this code.
§29-12B-15. Appeal bond.
In the event of a judgment against a health care provider from
which the health care provider or the medical liability board
wishes to appeal, the medical liability board is not liable for
more than its share of the judgment and, as to that portion, a
supersedeas bond signed by the chairperson of the medical liability
board, or the chairperson's designee, shall suffice without further
surety or other security.
§29-12B-16. Interest.
Any interest accruing prejudgment or post-judgment on a claim
asserted against a health care provider insured through the high
risk medical liability program shall be apportioned ten percent to
the health care provider and ninety percent to the medical
liability board, until such time as one or the other pays that
respective share.
§29-12B-17. Effective date of act.
This act shall be effective from the date of passage. Any
policies written under this article may have an effective date
retroactive to the date of passage.
NOTE: The purpose of this bill is to establish a preferred
medical liability program and a high risk medical liability program
to provide medical liability insurance for health care providers licensed in this state, as an alternative to the commercial market,
and to set forth provisions relating to the operation of the
programs.
This article is new; therefore, strike-throughs and
underscoring have been omitted.