S.B. No. 1410
AN ACT
1-1 relating to state indemnification of and liability insurance
1-2 premiums for certain health care claims.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Article 5.15-4, Insurance Code, is amended to
1-5 read as follows:
1-6 Art. 5.15-4. Reduction in Certain Professional Liability
1-7 Insurance Premiums
1-8 Sec. 1. Definitions. In this article, "charity care or
1-9 services," "eligible health care liability <medical malpractice>
1-10 claim," "health care professional," "health center," "health
1-11 clinic," "insurer," "health care liability <medical malpractice>
1-12 claim," and "patient encounter" have the meanings assigned by
1-13 Section 110.001, Civil Practice and Remedies Code.
1-14 Sec. 2. Qualification for discount. A health care
1-15 professional, <or> health center, or health clinic is entitled to a
1-16 premium discount for medical professional liability insurance
1-17 coverage if the professional, <or> center, or health clinic meets
1-18 the criteria stated in Section 4 of this article.
1-19 Sec. 3. Amount of premium discount. The Texas Department
1-20 <State Board> of Insurance shall approve premium discounts to be
1-21 used by each insurer on premiums to be charged to a health care
1-22 professional, <or> health center, or health clinic covered by this
1-23 section. Each insurer shall file proposed premium discounts and
2-1 any loss and statistical data required by department <board> rule.
2-2 The insurer has the burden of demonstrating to the department
2-3 <board>, by a preponderance of the evidence, that the proposed
2-4 premium discount is adequate to reflect the reduction in the
2-5 insurer's liability exposure based on the state's indemnification
2-6 of the first $100,000 or $25,000 under Chapter 110, Civil Practice
2-7 and Remedies Code, of an eligible malpractice claim against a
2-8 health care professional, <or> health center, or health clinic.
2-9 The information required to be filed with the Texas Department
2-10 <State Board> of Insurance under this section is public information
2-11 and shall be made available to the public on written request.
2-12 Sec. 4. Qualification for premium discount. (a) A health
2-13 care professional is entitled to a premium discount for medical
2-14 professional liability insurance coverage if:
2-15 (1) the projected patient encounters of the health
2-16 care professional during the policy year will involve providing
2-17 charity care or services in 10 percent or more of the health care
2-18 professional's patient encounters; and
2-19 (2) the health care professional completes 15 hours of
2-20 continuing education during the calendar year in which the policy
2-21 is in effect <term of the policy> on patient safety and risk
2-22 reduction subjects related to the health care professional's
2-23 practice that are sponsored, approved, endorsed, or accredited by
2-24 the Texas Department <State Board> of Insurance or the health care
2-25 professional's licensing or certifying agency, an "insurer" as
3-1 defined in this Act, or state or nationally recognized accrediting
3-2 organizations or continuing medical or nurse education programs.
3-3 (b) A health center is entitled to a premium discount for
3-4 <medical> professional liability coverage if the health center
3-5 adopts a quality assurance program.
3-6 (c) A health clinic or health care professional under
3-7 Section 110.001(3)(D), Civil Practice and Remedies Code, is
3-8 entitled to a premium discount for professional liability coverage
3-9 if the health clinic or health care professional under Section
3-10 110.001(3)(D), Civil Practice and Remedies Code, provides at least
3-11 10 percent or more of charity care or services and adopts a quality
3-12 assurance program.
3-13 (d) The Texas Department <State Board> of Insurance may
3-14 adopt rules governing health center or health clinic quality
3-15 assurance programs.
3-16 Sec. 5. Request for premium discount. A health care
3-17 professional, <or> health center, or health clinic that desires a
3-18 premium discount for medical professional liability insurance
3-19 coverage shall submit to the insurer, at the time coverage is
3-20 applied for, a written verified application for a new policy or a
3-21 verified statement for a policy to be renewed stating that the
3-22 health care professional, <or> health center, or health clinic
3-23 desires a premium discount and qualifies for a premium discount
3-24 under this article. The application or statement also shall
3-25 provide for each policy for which a discount is requested necessary
4-1 information to determine the eligibility of the health care
4-2 professional, <or> health center, or health clinic and the amount
4-3 of the discount.
4-4 Sec. 6. Audit; penalty. (a) At the end of a policy year,
4-5 an insurer may audit the records of any health care professional,
4-6 <or> health center, or health clinic to which the insurer has
4-7 provided a discount under this article to determine if the health
4-8 care professional, <or> health center, or health clinic provided
4-9 the charity care and services necessary under Section 4 of this
4-10 article to qualify for the premium discount during the preceding
4-11 policy year.
4-12 (b) To conduct the audit, the insurer is entitled to access
4-13 to any books and records necessary to determine if the verified
4-14 application or statement submitted for the coverage was correct and
4-15 the health care professional, <or> health center, or health clinic
4-16 was eligible for the premium discount. If a health care
4-17 professional, <or> health center, or health clinic denies access to
4-18 the property or to the books and records, the insurer may obtain an
4-19 appropriate court order from a court of competent jurisdiction to
4-20 gain access to the books and the records.
4-21 (c) If an insurer's audit indicates that a health care
4-22 professional, <or> health center, or health clinic did not provide
4-23 charity care or services as required under Section 4 of this
4-24 article <in 10 percent or more of the health care professional's or
4-25 health center's patient encounters>, the insurer may charge the
5-1 health care professional, <or> health center, or health clinic an
5-2 amount equal to the difference between the premium paid and the
5-3 premium that would have been due if the health care professional,
5-4 <or> health center, or health clinic had not received the premium
5-5 discount plus 20 percent of the amount of the premium that would
5-6 have been due without the premium discount.
5-7 (d) If a health care professional, <or> health center, or
5-8 health clinic that has received the premium discount for the policy
5-9 year submits the difference between the premium paid and the
5-10 premium that would have been due if the health care professional,
5-11 <or> health center, or health clinic had not received the premium
5-12 discount plus interest at the legal rate for the unpaid premium
5-13 prior to 30 days before the expiration of the policy year, the
5-14 health care professional, <or> health center, or health clinic will
5-15 not be subject to the penalty provided in Subsection (c).
5-16 Sec. 7. Prohibitions on insurer; sanctions. (a) An insurer
5-17 may not cancel or refuse to renew <medical> professional liability
5-18 insurance coverage solely on the basis that the covered health care
5-19 professional, <or> health center, or health clinic is eligible for
5-20 a premium discount under this article except for the following
5-21 reasons:
5-22 (1) fraud or misrepresentation in obtaining coverage;
5-23 (2) failure to pay premiums when due; or
5-24 (3) the insurer's being placed under supervision or in
5-25 conservatorship or receivership, if the cancellation or nonrenewal
6-1 is approved by the supervisor, conservator, or receiver.
6-2 (b) A health care professional, <or> health center, or
6-3 health clinic who files the appropriate verified application or
6-4 statement under this article will be entitled to a premium discount
6-5 as approved by the department <board> under Section 3 of this
6-6 article. When consent to rate is used, a health care professional,
6-7 <or> health center, or health clinic will be entitled to the
6-8 appropriate discount from the rate agreed to by consent.
6-9 (c) An insurer who violates this article is subject to the
6-10 sanctions authorized under Section 7, Article 1.10, of this code.
6-11 Sec. 8. AUTHORITY OF TEXAS DEPARTMENT <STATE BOARD> OF
6-12 INSURANCE. The Texas Department <State Board> of Insurance shall
6-13 administer this article and shall adopt necessary rules, forms,
6-14 endorsements, and procedures to carry out this article.
6-15 Sec. 9. Expiration. Unless continued in existence this
6-16 article expires September 1, 1997 <1995>.
6-17 SECTION 2. Sections 110.001 through 110.003 and 110.005
6-18 through 110.007, Civil Practice and Remedies Code, are amended to
6-19 read as follows:
6-20 Sec. 110.001. Definitions. In this chapter:
6-21 (1) "Charity care or services" means care or services
6-22 provided by a health care professional or health clinic under:
6-23 (A) Chapter 31, 32, 35, or 61, Health and Safety
6-24 Code;
6-25 (B) the Medicaid program under Chapter 32, Human
7-1 Resources Code;
7-2 (C) a contract with a migrant, community, or
7-3 homeless health center that receives funds under 42 U.S.C. Section
7-4 254b, 254c, or 256; <or>
7-5 (D) Subchapter B, Chapter 311, Health and Safety
7-6 Code, or 42 U.S.C. Section 1395dd, to the extent the professional
7-7 or the hospital in which the care or services are provided is not
7-8 compensated;
7-9 (E) an approved family practice residency
7-10 training program established under Subchapter I, Chapter 66,
7-11 Education Code, to the extent the professional is not compensated
7-12 for the services;
7-13 (F) an indigent health care program of a
7-14 hospital district created under the authority of Article IX,
7-15 Sections 4 through 11, of the Texas Constitution; or
7-16 (G) a county correctional institution to inmates
7-17 who are in custody of such county correctional institution operated
7-18 by such county or under contract with such county.
7-19 (2) "Eligible health care liability <medical
7-20 malpractice> claim" means a health care liability <medical> claim
7-21 as defined in the Medical Liability and Insurance Improvement Act
7-22 of Texas (Article 4590i, Vernon's Texas Civil Statutes) against a
7-23 health care professional or health clinic that <who> renders
7-24 charity care in at least 10 percent of the patient encounters
7-25 engaged in by said health care professional or health clinic during
8-1 the policy year in which the claim was made, a claim <or> against a
8-2 health center, or a claim against a health care professional who
8-3 participates in a Medicaid managed care project established under
8-4 Section 32.041, Human Resources Code.
8-5 (3) "Health care professional" means:
8-6 (A) a person who is licensed to practice
8-7 medicine under the Medical Practice Act (Article 4495b, Vernon's
8-8 Texas Civil Statutes);
8-9 (B) a person registered by the Board of Nurse
8-10 Examiners as an advanced nurse practitioner or a certified nurse
8-11 midwife; <or>
8-12 (C) a person recognized by the Board of Medical
8-13 Examiners as a physician assistant; or
8-14 (D) a health care professional who participates
8-15 in a Medicaid managed care project established under Section
8-16 32.041, Human Resources Code.
8-17 (4) "Health center" means a federally qualified health
8-18 center, as that term is defined by 42 U.S.C. Section 1396d.
8-19 (5) "Health clinic" means a clinic or other facility
8-20 providing health care in conjunction with an approved family
8-21 residency practice program.
8-22 (6) "Insurer" means an insurance company chartered to
8-23 write or admitted to write and writing health care liability or
8-24 medical professional liability insurance in this state, the Texas
8-25 Medical Liability Insurance Underwriting Association (Article
9-1 21.49-3, Insurance Code), any self-insurance trust created under
9-2 Article 21.49-4, Insurance Code, for the purpose of providing
9-3 health care liability or medical professional liability insurance,
9-4 or a purchasing group domiciled, registered, and writing health
9-5 care liability or medical professional liability insurance for
9-6 health centers in this state. The term "insurer" includes <does
9-7 not include> an institution of higher education that provides
9-8 health care liability or medical professional liability coverage
9-9 under Chapter 59, Education Code.
9-10 (7) "Health Care Liability <(6) "Medical malpractice>
9-11 claim" means a claim or action against a health care professional,
9-12 <or> health center, or health clinic for treatment, lack of
9-13 treatment, or other claimed departure from accepted standards of
9-14 medical care or health care or safety which proximately results in
9-15 injury to or death of a patient, whether the patient's claim or
9-16 cause of action sounds in tort or contract <alleging one or more
9-17 negligent acts or omissions in the diagnosis, care, or treatment of
9-18 a patient and alleging that injury to or death of a patient
9-19 resulted therefrom, without regard to whether said claim or action
9-20 is based upon tort or contract principles>.
9-21 (8) <(7)> "Patient encounter" means an occasion on which a
9-22 health care professional, health center, or health clinic renders
9-23 professional health care services to a patient.
9-24 Sec. 110.002. State Liability: Persons Covered. In a
9-25 health care liability cause of action against a health care
10-1 professional, <or> health center, or health clinic based on
10-2 conduct described in Section 110.003, the state shall indemnify the
10-3 health care professional, <or> health center, or health clinic for
10-4 actual damages adjudged against the health care professional, <or>
10-5 health center, or health clinic or which the health care
10-6 professional, <or> health center, or health clinic becomes
10-7 obligated to pay pursuant to a settlement reached in accordance
10-8 with this chapter.
10-9 Sec. 110.003. State Liability: Conduct Covered. (a) The
10-10 state is liable for indemnification under this chapter only if the
10-11 damages are based on an eligible health care liability <medical
10-12 malpractice> claim against a health care professional, <or> health
10-13 center, or health clinic in the course and scope of providing
10-14 professional health care.
10-15 (b) The state is <not> liable for indemnification in a case
10-16 unless the jury or, if a jury is waived, the trial judge in a cause
10-17 of action against a health care professional, health center, or
10-18 health clinic returns a verdict and judgment against the applicable
10-19 defendant finding that such person or entity committed gross
10-20 negligence or an intentional act found to be a proximate cause of
10-21 the damages of the plaintiff <for an intentional act or an act of
10-22 gross negligence>.
10-23 Sec. 110.005. TIMELY NOTICE TO ATTORNEY GENERAL REQUIRED.
10-24 The state is not liable for indemnification for damages under this
10-25 chapter unless the health care professional, <or> health center, or
11-1 health clinic against whom the cause of action is asserted:
11-2 (1) is covered under a valid professional health care
11-3 liability or medical liability insurance policy that is issued by
11-4 an insurer and that provides coverage for the health care liability
11-5 <medical malpractice> claim that is the subject of the claim or
11-6 action with a policy limit of not less than $100,000 per occurrence
11-7 and $300,000 aggregate for the policy period; and
11-8 (2) delivers or causes to be delivered to the attorney
11-9 general a true copy of <any written notice of said medical
11-10 malpractice claim and> any summons or citation in a health care
11-11 liability claim served on the health care professional, <or> health
11-12 center, or health clinic, which <written notice,> summons<,> or
11-13 citation shall be delivered to the attorney general not later than
11-14 the 60th <45th> day after the receipt thereof by the health care
11-15 professional, <or> health center, or health clinic. However,
11-16 subsequent notification of such summons or citation shall not be a
11-17 basis for denial of a claim for indemnification unless the attorney
11-18 general proves by clear and convincing evidence that such delay
11-19 would unduly prejudice the state's ability to evaluate the
11-20 reasonableness of the settlement offer or agreement. No such claim
11-21 may be asserted by the state unless, within 10 days of the receipt
11-22 of such late notification by the attorney general (or such greater
11-23 or lesser period of time as the court in which the action is filed
11-24 may allow), the attorney general files in said court (or, if no
11-25 action is pending in any court, in a district court in Travis
12-1 County, Texas) a pleading setting forth the reasons why the state's
12-2 ability to evaluate the reasonableness of the settlement offer or
12-3 agreement has been prejudiced.
12-4 Sec. 110.006. Information Provided to Attorney General;
12-5 Settlements. (a) The insurer for a health care professional, <or>
12-6 health center, or health clinic that is the subject of an eligible
12-7 health care liability <malpractice> claim shall designate an
12-8 attorney or other representative assigned to the claim who shall
12-9 keep the attorney general or his designee reasonably informed of
12-10 significant developments in the claim or action, including all
12-11 settings for trials or dispositive motions, all settlement offers
12-12 and demands, all pleadings by or against the health care
12-13 professional, <or> health center, or health clinic, all judgments
12-14 or other dispositive orders, and all written recommendations of
12-15 counsel for the health care professional, <or> health center, or
12-16 health clinic regarding settlement.
12-17 (b) If a settlement agreement is reached between the health
12-18 care professional, <or> health center, or health clinic and a
12-19 claimant, the insurer for the health care professional, <or> health
12-20 center, or health clinic shall promptly notify the attorney general
12-21 of same. The settlement shall become final and binding upon the
12-22 state unless, within 10 days of the receipt of said notice by the
12-23 attorney general (or such greater or lesser period of time as the
12-24 court in which the action is filed may allow), the attorney general
12-25 files in said court (or, if no action is pending in any court, in a
13-1 district court of Travis County, Texas) a written objection to the
13-2 settlement setting forth in detail why <the court should find that>
13-3 the reasonable settlement value of the total claim being settled is
13-4 significantly less than the amount for which the state would be
13-5 liable for indemnification if the settlement were to be consummated
13-6 and any other reason why the state should not be liable for
13-7 indemnification under this chapter based upon all the facts and
13-8 circumstances of the case. A hearing shall promptly be held upon
13-9 any such objection, either before the court or a special master
13-10 appointed by the court for that purpose. At any such hearing, the
13-11 burden shall be upon the attorney general to prove by clear and
13-12 convincing evidence that the reasonable settlement value of the
13-13 total claim being settled is significantly less than the amount for
13-14 which the state would be liable for indemnification if the
13-15 settlement were to be consummated or any other reason why the state
13-16 should not be liable for indemnification under this chapter based
13-17 upon all the facts and circumstances of the case. Unless the court
13-18 finds that the reasonable settlement value of the total claim being
13-19 settled is significantly less than the amount for which the state
13-20 would be liable for indemnification if the settlement were to be
13-21 consummated or that there are other reasons why the state should
13-22 not be liable for indemnification under this chapter based upon all
13-23 the facts and circumstances of the case, the court shall enter an
13-24 order approving the settlement and directing the state to make the
13-25 required indemnity payment thereunder. Such an order shall be
14-1 reviewable by an appellate court only upon the filing of an
14-2 application for writ of mandamus within 15 days of the date said
14-3 order is signed, and only for an abuse of discretion by the trial
14-4 court. Any such application for writ of mandamus shall be given
14-5 priority in the appellate court in which it is filed above all
14-6 other applications for writ of mandamus docketed in said court.
14-7 (c) If the attorney general files an objection under
14-8 Subsection (b), the court may, with the agreement of the parties to
14-9 the settlement agreement, permit the payment of any other sums due
14-10 to be paid under said agreement by parties other than the state
14-11 while the objection of the attorney general is pending
14-12 adjudication.
14-13 (d) If a suit involving an eligible health care liability
14-14 <medical malpractice> claim is imminently scheduled for jury trial
14-15 or alternative dispute resolution, or if the defendant seeking
14-16 indemnity is subject to a time limit under the Stowers Doctrine or
14-17 other applicable law to respond to a settlement proposal, or is
14-18 being tried before a jury, and settlement negotiations are ongoing
14-19 between the health care professional, <or> health center, or health
14-20 clinic and any claimant, either of those parties may request the
14-21 court to require the attorney general or his designee to assign an
14-22 attorney to monitor such negotiations so that if a settlement
14-23 agreement is reached between the parties, the attorney so assigned
14-24 by the attorney general can immediately advise the court of any
14-25 objection, in which event the hearing described in Subsection (b)
15-1 <regarding the reasonableness of the settlement amount> shall be
15-2 held immediately after the settlement agreement is reduced to
15-3 writing or announced on the record in open court, so that the trial
15-4 court may render its determination before the petit jury or jury
15-5 panel is discharged.
15-6 (e) Except to the extent that the attorney general is
15-7 authorized under this section to object to the reasonableness of a
15-8 settlement, the attorney general shall not be authorized to
15-9 intervene in any court proceeding involving an eligible health care
15-10 liability <medical malpractice> claim. The insurer for the health
15-11 care professional, <or> health center, or health clinic shall be in
15-12 charge of the defense of any such claim.
15-13 (f) Upon final disposition of an eligible health care
15-14 liability <medical malpractice> claim by settlement or judgment,
15-15 funds shall be paid by the comptroller on vouchers that shall be
15-16 promptly prepared, verified, and signed by the attorney general.
15-17 Sec. 110.007. Expiration. Unless continued in existence,
15-18 this chapter expires September 1, 1997 <1995>.
15-19 SECTION 3. (a) Section 2 of this Act applies to any cause
15-20 of action or claim for indemnification which was filed before or
15-21 after the effective date of this Act.
15-22 (b) Section 1 of this Act applies only to professional
15-23 liability or health care liability insurance policies delivered,
15-24 issued for delivery, or renewed on or after January 1, 1994.
15-25 Policies delivered, issued for delivery, or renewed before January
16-1 1, 1994, are governed by the law that existed immediately before
16-2 the effective date of this Act, and that law is continued in effect
16-3 for that purpose.
16-4 SECTION 4. This Act takes effect September 1, 1993.
16-5 SECTION 5. The importance of this legislation and the
16-6 crowded condition of the calendars in both houses create an
16-7 emergency and an imperative public necessity that the
16-8 constitutional rule requiring bills to be read on three several
16-9 days in each house be suspended, and this rule is hereby suspended.