McCarthy v. Bainbridge

BECK, J.:

¶ 1 This case presents a question of first impression involving the proper interpretation to be given to § 991.1817 (Non-duplication of recovery) of Article XVIII of the Insurance Department Act, in which the functions and responsibilities of the Pennsylvania Property and Casualty Insurance Guaranty Association (PIGA) are set forth. 40 P.S. § 991.1817, the non-duplication of recovery provision, The question is whether section 991.1817 permits PIGA to offset amounts received by a claimant under a life insurance policy against the amount PIGA would otherwise owe the claimant. Under the statutue PIGA is the guarantor of of monies owed a claimant by a medical malpractice insurer who is insolvent. The trial court concluded that the statute does not permit such an offset. We affirm.

¶ 2 On September 25, 1992, appellees (collective by “the MeCarthys”) initiated a suit for malpractice against appellants in the death of David McCarthy. In January 1998, the parties reached a negotiated settlement in the total amount of $950,000. The liability insurer for the appellants, PIC Insurance Group, Inc. (“PIC”) was responsible for payment of $200,000 of the negotiated settlement.¹ Two days after the parties agreed to the settlement, the Commonwealth Court issued an Order of Liquidation placing PIC in liquidation and appointing the Insurance Commissioner as statutory liquidator of PIC. Since PIC was insolvent, it did not pay its portion of the settlement. By operation of law, the McCarthy’s claim against PIC became a claim against PIGA. See generally 10 P.S. § 991.1801 et seq.

¶ 3 PIGA refused to honor the MeCar-thys’ claim on the ground that the decedent had a life insurance policy providing a benefit of $584,216.84, all of which had already been paid to the MeCarthys. PIGA argued that under the “Non-duplication of Recovery” provision of the Insurance Department Act, the $200,000 claim against PIGA was entirely offset by the life insurance proceeds the MeCarthys had received. Therefore, PIGA contended that it was not compelled to make any contribution toward payment of the negotiated settlement.

¶ 4 On June 9, 1998, the MeCarthys filed a Petition to Enforce the Settlement. PIGA petitioned for and was granted leave to intervene. The trial court conducted a hearing and, on October 8, 1998, issued an order granting the Petition to Enforce. This timely appeal ensued.

¶ 5 The statutory provision at the center of this controversy is § 991.1817 of the Insurance Department Act,² which provides:

Non-duplication of recovery

(a) Any person having a claim under an insurance policy shall be required to exhaust first his right under such policy. For purposes of this section, a claim under an insurance policy shall include a claim under any kind of insurance, whether it is a first-party or third-party claim, and shall include, without limitation, accident and health insurance, worker’s compensation, Blue Cross and Blue Shield and all other coverages except for policies of an insolvent insurer. Any amount payable on a covered claim under this act shall be reduced by the amount of any recovery under other insurance.

¶ 6 The trial court concluded that when this provision is read in the context of the PIGA statute as a whole, the provision must be interpreted only to require a set-off from any other property or casualty insurance benefits payable for the same loss since the entire statutory scheme concerns itself with property and casualty insurance. Appellants argue that despite the general applicability of the statute to property and casualty claims, the non-duplication of recovery provision refers to “any kind of insurance,” and must be interpreted and applied regardless of the general purposes or applicability of the statute.

¶ 7 We are required by well established principles of statutory construction to give effect to all of a statute’s provisions and to presume that the legislature does not intend an absurd or unreasonable result. 1 Pa.C.S.A. §§ 1921, 1922. Therefore, we must construe § 991.1817, the non-duplication of recovery provision, in a manner that produces a just and reasonable result. In doing so, we must keep in mind that the primary function of PIGA is to provide protection to claimants whose insurers have become insolvent. As the Purpose section of the PIGA statute states:

¶8 The purposes of this article are as follows:

(1)To provide a means for the payment of covered claims under certain property and casualty insurance policies, to avoid excessive delay in the payment of such claims and to avoid financial loss to claimants or policyholders as a result of the insolvency of an insurer.

(2) To assist in the detection and prevention of insurer insolvencies.

(3) To provide for the formulation and administration by the Pennsylvania Property and Casualty Insurance Guaranty Association of a plan of operation necessary to effectuate the provisions of this article.

40 P.S. § 991.1801

¶ 9 As the Supreme Court of Pennsylvania has stated, PIGA was created “to give a measure of protection to policyholders and claimants who are faced with financial loss because of the insolvency of certain carriers of property and casualty insurance.” Bethea v. Forbes, 519 Pa. 422, 424-25, 548 A.2d 1215, 1216 (1988). Thus, PIGA is a statutory insurer specifically created for the protection of claimants, like the McCarthys, who are the innocent victims of an insurer’s insolvency.

¶ 10 Appellants .assert that the non-duplication of recovery provision is clear on its face and requires the setoff of every conceivable claim any claimant against PIGA has under any kind of insurance. They ask us to focus exclusively on one phrase in the section, i.e., “any kind of insurance.” Such an interpretation leads to an unjust, unreasonable and absurd result. Broadly applied, appellants’ interpretation would mean that there need be no connection between the claim asserted against PIC, the doctors’ insolvent malpractice insurer, and the other claim that must be offset under § 991.1817. Hypothetically, then, if appellees in. this case had a totally unrelated claim for a loss of property under an ocean marine policy, they would be required under § 991.1817 to offset that claim against their claim against PIGA resultirig from the alleged medical malpractice of the insolvent insurer’s insured doctors. Since this is a clearly absurd result, and yet is a necessary corollary of appellants’ argument, we must reject appellants’ overly simplistic construction of this statutory provision.

¶ 11 Rather, we conclude that there must be some relationship between the claim against PIGA and the claim under other insurance that must be offset. The only reasonable reading of the offset provision is to require that the claim to be offset must be for the same loss as the claim asserted against PIC. In other words, the claim must be under insurance that sought to protect the insured against the same risk as was covered by the now insolvent insurer for whom PIGA is providing coverage. That is not the situation with which we are presented in this case. Here, the medical malpractice insurance provided by the now insolvent insurer was casualty insurance, which is generally defined as:

That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to the property of others.

Black’s Law Dictionary, at 721 (5th ed.1979).

¶ 12 In contrast, life insurance is generally defined as:

A contract between the holder of a policy and an insurance company (i.e., the carrier) whereby the company agrees, in return for premium payments, to pay a specified sum (i.e., the face value or maturity value of the policy) to the designated beneficiary upon the death of the insured.

That kind of insurance in which the risk contemplated is the death of a particular person.

Id. at 723.

¶ 18 As these rudimentary definitions indicate, life insurance and medical malpractice liability casualty insurance are fundamentally different, most notably because they insure against different risks and protect against different types of loss. Life insurance provides a defined benefit payable upon death, whether accidental or from natural causes, to designated beneficiaries. Medical malpractice liability insurance provides coverage for amounts the insured (ie., the doctor) is held legally liable to pay others because of the doctor’s own negligence and the harm it caused.

¶ 14 Our conclusion is further buttressed by the heading of § 991.1817, “Non-duplication of recovery.”³ The heading itself raises a question — recovery for what? The answer to that question determines the circumstances under which a claimant can be seen as recovering twice, i.e., “duplicate” recoveries, since it is not duplicative to recover twice when each recovery is for a different loss. Clearly, the provision only prohibits recovering dupli-catively, ie. twice for the same loss.

¶ 15 Interpreting § 991.1817 in this manner achieves a fair result and furthers the purposes of the PIGA statute.⁴ It recognizes that PIGA should not be responsible for paying a claimant who has already received coverage for his or her claim from other insurance provided by a solvent insurer that protects the claimant against the same loss. However, it also recognizes that PIGA cannot avoid liability where a claimant has no other insurance to look to for that loss.

¶ 16 Since in the instant case the appel-lees would not recover duplicatively if they are allowed to recover against PIGA without any offset of the life insurance proceeds they have already received, they should not be required to offset those proceeds. PIGA should be hable to the same extent it would be had appellees not received any life insurance proceeds.

¶ 17 The order of the trial court is affirmed.

¶ 18 MONTEMURO, J., files a Dissenting Opinion.

1 . The remaining $750,000 was to be paid by the Medical Professional Liability Catastrophe Fund. This portion of the settlement is not in dispute in this appeal.

2 . As an alternative ground for affirmance, ap-pellees argue that this version of section 991.1817 does not apply to this case because it includes amendments to the section that were adopted in 1995, several years after ap-pellees’ cause of action arose. Appellees argue that the former version of section 991.1817 applies and that under the clear language of that version, PIGA may not offset life insurance proceeds against a covered claim. The trial court did not address this issue. We need not devote significant analysis to it since we decide that even under the present form of section 991.1817, offset of life insurance proceeds is not permitted. However, we do note that the statute itself states that it is applicable to unpaid claims against an insurer that was declared insolvent after the statute's effective date, i.e., 60 days after December 12, 1994. The fact that appellees’ cause of action arose prior to that date is irrelevant and does not exempt appellees from the applicability of the amended statute.

3 . Although statutory section headings are not controlling in interpreting a statute, they may be considered. 1 Pa.C.S.A. § 1924.

4 . We note that M. Diane Koken, the Pennsylvania Insurance Commissioner, has filed an amicus curiae brief in which the Commissioner agrees that only other insurance protecting the insured or claimant against the same loss should be considered to fall within the offset requirement of§ 991.1817.