NORTH CAROLINA GENERAL ASSEMBLY

1975 SESSION

 

 

CHAPTER 978

SENATE BILL 959

 

 

AN ACT TO CREATE THE NORTH CAROLINA HEALTH CARE EXCESS LIABILITY FUND.

 

The General Assembly of North Carolina enacts:

 

Section 1.  The General Assembly finds that the cost of professional liability insurance has risen to levels which many health care providers find intolerable; and that the cost of one million dollars excess coverage is approximately twice this inflated cost of primary coverage of one hundred-three hundred thousand dollars; and that health care providers in North Carolina are unable to obtain excess liability insurance above one million dollars; that said excess coverage has been made unavailable in the past by the withdrawal of the major health care liability insurer from the State, and there is no assurance that said excess coverage will continue to remain available; and that the ever increasing costs of health care, the inflationary economic trends in North Carolina and the nation, the acceleration of the frequency of claims against North Carolina's health care providers, and the increased risks commensurate with advanced health care treatments and procedures are mandating the necessity of the availability of liability insurance in excess of limits presently obtainable.

Sec. 2.  The General Assembly further finds that the inability of health care providers to obtain such insurance at reasonable rates is endangering the health of the people of this State, and threatens the curtailment of health care The General Assembly finds and declares that the uninterrupted delivery of health care services is essential to the health and welfare of the citizens of North Carolina. The General Assembly further finds and declares that it is essential to the health and welfare of the citizens of North Carolina that all health care providers have excess health care liability insurance. It is declared to be the policy and intent of the General Assembly that a health care provider who participates in the plan set forth in this Act, maintains the designated amounts of professional liability protection, and contributes to the Fund for the protection of his patients shall be deemed to have fulfilled the objectives of this public policy.

Sec. 3.  Chapter 58 of the General Statutes is amended by adding a new Article 26B to read as follows:

"ARTICLE 26B.

"North Carolina Health Care Excess Liability Fund.

"§ 58-254.20.  Definitions. — The following terms as used in this Article shall have the meanings hereinafter respectively ascribed to them:

(1)        'Board' means the Board of Governors of the North Carolina Health Care Excess Liability Fund provided for in G.S. 58-254.23.

(2)        'Commissioner' means the Commissioner of Insurance of the State of North Carolina.

(3)        'Fund' means the North Carolina Health Care Excess Liability Fund provided for in G.S. 58-254.21.

(4)        'Health Care Provider' means any person who pursuant to the provisions of Chapter 90 of the General Statutes is licensed, or is otherwise registered or certified to engage in the practice of, or otherwise performs duties associated with any of the following: medicine, surgery, dentistry, pharmacy, optometry, midwifery, osteopathy, podiatry, chiropractic, radiology, nursing, physiotherapy, pathology, anesthesiology, anesthesia, laboratory analysis, rendering assistance to a physician, dental hygiene, psychiatry, psychology; or a hospital as defined by G.S. 131-126.1(3); or a nursing home as defined by G.S. 130-9(e)(2); or any other person who is legally responsible for the negligence of such person, hospital or nursing home; or any person acting at the direction or under the supervision of a health care provider.

(5)        'Manager' means the person appointed by the Board to administer the Fund as provided for in G.S. 58-254.23.

"§ 58-254.21.  North Carolina Health Care Excess Liability Fund; creation; investment; coverage. — (a) The North Carolina Health Care Excess Liability Fund is created to be collected and received by the Board for exclusive use for the purposes stated in this Article.

(b)        All monies which belong to the Fund and are collected or received under this Article shall be held in trust, deposited in a segregated account, invested and reinvested by the Board in accordance with the reserve investment requirements of G.S. 58-79.1, and shall not become a part of the General Fund of the State. All interest and revenues from monies belonging to the Fund shall inure solely to the benefit and use of the Fund. The Board shall be authorized to withdraw funds from such account as amounts payable under G.S. 58-254.26 and other expenses become due and payable. No part of the revenues or assets of the Fund shall inure to the benefit of or be distributable to the Board or any member thereof or any officer or employee of the Board, except for services rendered. All expenses and salaries connected with the administration and operation of the Fund shall be paid out of the Fund.

(c)        Profits of the Fund. The Board shall establish a surplus account which in the sound business judgment of the Board will be sufficient to meet the normal contingencies of its operations. All other profits shall be returned to the participating health care providers by adjustment of the assessments.

(d)        Restrictions of use by State. No monies, funds, reserves, investments and property, whether real or personal, acquired, administered, possessed or held by the Fund, nor any profits earned by the Fund, may be taken, used or appropriated by the State of North Carolina for any purpose whatsoever.

"§ 58-254.22.  Fund accounting and audit — (a) Monies shall be withdrawn from the Fund only upon vouchers approved and as authorized by the Board.

(b)        Persons authorized to receive deposits, withdraw, issue vouchers or otherwise disburse any Fund monies shall post a blanket fidelity bond in an amount to be determined by the Board and reasonably sufficient to protect Fund assets. The cost of such bond shall be paid from the Fund.

(c)        Annually, the Board shall furnish an audited financial report to the Commissioner, the State Auditor and to Fund participants upon request. The report shall be prepared by an independent certified public accountant in accordance with accepted accounting procedures.

(d)        The Board shall report annually to the General Assembly and the Governor on the financial condition of the Fund and its statistical claims experience and may make recommendations as to any further legislative actions which may be needed to carry out the intent of this Article. All such reports shall be made freely available to the public.

"§ 58-254.23.  Board of Governors; creation; membership; terms; powers and duties. — (a) There is hereby created the Board of Governors of the North Carolina Health Care Excess Liability Fund with the power to:

(1)        Adopt such rules and regulations as may be necessary for the interpretation and implementation of this Article.

(2)        Employ such officers and employees as it deems necessary to carry out the provisions of this Article or to perform the duties and exercise the powers conferred upon it by law. The compensation for such officers and employees shall be fixed by the Board.

(3)        Sue and be sued in all actions arising out of any act or omission in connection with the business or affairs of the Fund.

(4)        Enter into any contracts or obligations relating to the Fund which are authorized or permitted by law, including, but not limited to, contracts for claims-management services such as the evaluation, negotiation, defense and settlement of medical malpractice claims against participating health care providers.

(5)        Conduct all business affairs and perform all acts relating to the Fund, whether or not specifically designated in this Article.

(b)        The membership of and appointments to the Board shall be as follows:

(1)        Two members to be appointed by the Lieutenant Governor from a list of two nominees per appointment submitted by the North Carolina Medical Society;

(2)        Two members to be appointed by the Speaker of the House from a list of two nominees per appointment submitted by the North Carolina Hospital Association;

(3)        One member to be appointed by the Governor from a list of two nominees submitted by the North Carolina Nurses' Association;

(4)        One member to be appointed by the Governor from a list of two nominees submitted by the North Carolina Dental Society; and

(5)        One member from a health care profession other than those enumerated in subdivisions (1) through (4) of this subsection to be appointed by the Governor.

(c)        Members appointed pursuant to this section shall be residents of the State and shall serve terms of four years: Provided that the initial appointees shall serve terms as follows:

(1)        Members appointed by the Governor shall serve initial terms of two, three and four years.

(2)        Members appointed by the Lieutenant Governor shall serve initial terms of two and three years; and

(3)        Members appointed by the Speaker of the House shall serve initial terms of two and four years.

(d)        The Commissioner shall be an ex officio member of the Board. The Commissioner or his designee shall have a vote on all matters before the Board.

(e)        Initial appointments to the Board shall be made within 30 days of the effective date of this Article. The organizational meeting of the Board shall be held upon the call of the Commissioner and within 30 days after initial appointments are completed.

(f)         Any appointment to fill a vacancy on the Board created by the resignation, dismissal, death, or disability of a member shall be for the balance of the unexpired term. At the expiration of each member's term, the appointing authority shall reappoint or replace the member with a member from the same category. At its organizational meeting and on or after July 1 of each year thereafter, the Board shall designate by election one of its members as Chairman. The Board shall also elect or appoint, and prescribe the duties of such other officers as the Board deems necessary or advisable, including a secretary and treasurer.

(g)        Any appointing authority shall have the power to remove any member for misfeasance, malfeasance, or nonfeasance in accordance with G.S. 143B-13. Compensation and allowances for members of the Board shall be as provided in G.S. 138-5. The Commission shall not receive said compensation and allowances.

(h)        There shall be a manager of the Fund who shall be appointed by the Board. The manager shall conduct the business affairs of the Fund under the general direction of the Board. Before entering the duties of the office, the manager shall qualify by giving an official bond approved by the Board. The Board may delegate to the manager of the Fund, under such rules and regulations and subject to such conditions as it from time to time prescribes, any power, function or duty conferred by law on the Board in connection with the administration, management and conduct of the business affairs of the Fund. The manager may exercise such powers and functions and perform such duties with the same force and effect as the Board.

(i)         There shall not be any personal liability on the part of any member of the Board, or any officer or employee of the Fund, for, or on account of, any act performed or obligation entered into in an official capacity, when done in good faith, without intent to defraud, and in connection with the administration, management, or conduct of the Fund or affairs relating thereto.

"§ 58-254.24.  Participation in the Fund. — (a) When a health care provider has proved to the satisfaction of the Board that he is insured by an insurer licensed and approved by the Commissioner or under a self-insurance plan approved by the Board against legal liability for damages arising out of professional malpractice in the sums required under subsection (b) of this section, and if the health care provider has paid the current assessment required under G.S. 58-254.25, the health care provider shall be deemed to be a bona fide participant in the Fund and shall become subject to the provisions of this Article and the rules and regulations of the Board. The financial responsibility requirements herein shall include an obligation of the insurer or self-insurer to defend an action against the participating health care provider irrespective of payment or offer of payment of the limits provided by such insurer or self-insurer.

(b)        The minimum amount of professional liability insurance or self-insurance required to be maintained by a participating health care provider shall be one hundred thousand dollars ($100,000) for each occurrence or claim made and one hundred thousand dollars ($100,000) aggregate for occurrences or claims made in any one year.

(c)        If a health care provider participating in the Fund has insurance or self-insurance coverage in excess of the amounts stated in subsection (b) of this section, the Board may grant an appropriate reduction of his assessment for the Fund.

(d)        The Board shall afford a participating health care provider the same type of coverage, occurrence or claims made, as is provided by his insurer or approved self-insurer in subsection (a) of this section.

"§ 58-254.25.  Assessment for the Fund. — (a) A health care provider who wishes to participate in the Fund and be subject to the provisions of this Article and the rules and regulations of the Board shall, in addition to complying with the provisions of G.S. 58-254.24, not later than the date or dates specified by the Board in each year, pay to the Fund an assessment to be determined by the Board.

(b)        Monies received by the Board under subsection (a) of this section shall be handled in accordance with the provisions of G.S. 58-254.21 and G.S. 58-254.22.

(c)        Any health care provider who carries a claims-made policy or is protected by an approved self-insurance plan and who discontinues participation in the Fund may obtain full occurrence coverage from the Board by purchasing a reporting endorsement on the claims-made policy or self-insurance plan by payment of the assessment then required by the Board on the same basis as the insurer or self-insurer requires a reporting endorsement premium to be paid.

(d)        The Fund shall be subject to the premium tax law as stated in North Carolina General Statutes Chapter 105-228.5.

"§ 58-254.26.  Payment of claims by the Fund. — (a) Any amount due from a judgment, arbitration award or Board-approved settlement which is in excess of a participating health care provider's insurance or self-insurance coverage required by G.S. 58-254.24 shall be paid from the Fund in an amount not to exceed two million dollars ($2,000,000) for each occurrence or claim made and two million dollars ($2,000,000) aggregate for occurrences in or claims made in any one year. The purpose of this Article is to afford a participating health care provider with effective excess coverage of $2,000,000 per occurrence or claim made and $2,000,000 aggregate per annum.

(b)        Payment of claims by the Fund as provided in subsection (a) of this section shall only be made when the Board issues a voucher or other appropriate request after the Board receives either of the following:

(1)        A certified copy of a final judgment or arbitration award against a participating health care provider.

(2)        A certified copy of a Board-approved settlement between a participating health care provider and a claimant.

Any and all payments of claims from the Fund on behalf of a participating health care provider shall inure to the benefit of said health care provider.

(c)        A participating health care provider or his insurer or self-insurer or any claimant shall notify the Board of all claims made or reported or actions filed against said health care provider. Such notice shall be in writing, mailed to the Board within a reasonable time to provide the Board adequate preparation time to defend or negotiate said claim or action, and shall include the date of the alleged occurrence, the date of the making, reporting or filing of said claim or action, and the amount demanded, if declared, by the claimant. The Board shall not pay claims on behalf of or provide the services in subsection (d) of this section to any participating health care provider unless adequate notice to the Board has been provided.

(d)        The Board may provide for claims management and services, including the legal defense of participating health care providers in actions filed against them and in settlement negotiations.

(e)        Nothing in this Article shall be deemed or construed to:

(1)        limit the personal liability of any participating health care provider for malpractice arising out of the performance of or failure to perform professional services;

(2)        limit the amount of compensation from any final judgment, arbitration award or Board-approved settlement to any claimant injured as a result of said malpractice; or

(3)        permit the filing by any claimant of an action against the board or fund except upon a final judgment obtained by the claimant against a participating health care provider or upon a board-approved settlement agreement.

(f)         The Fund shall not be liable for awards for punitive damages against participating health care providers.

"§ 58-254.27.  Commencement of operations; effective date of coverage. — (a) The Fund shall provide the excess coverage provided in this Article only for causes of action arising out of occurrences on or after the effective date of participation of a health care provider.

(b)        The Board may provide coverage by the Fund when, in the Board's discretion, the Fund has sufficient monies and a sufficient number of participation agreements.

"§ 58-254.28.  Acceptance of and compliance with Article and rules and regulations of the Board. — Compliance with the provisions of G.S. 58-254.24 and G.S. 58-254.25 shall constitute, on the part of a participating health care provider, a conclusive and unqualified acceptance of the provisions of this Article and the rules and regulations of the Board.

"§ 58-254.29.  Records. — Records held by the Fund shall not be subject to the provision of Chapter 132 of the General Statutes pertaining to public records."

Sec. 4.  If any provision of this act or the application thereof to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of the act which can be given effect without the invalid provision or application, and to this end the provisions of this act are declared severable.

Sec. 5.  This act shall become effective upon ratification.

In the General Assembly read three times and ratified, this the 13th day of May, 1976.