1-1 By: Parker, Lucio S.B. No. 1410
1-2 (In the Senate - Filed April 22, 1993; April 22, 1993, read
1-3 first time and referred to Committee on Economic Development;
1-4 May 5, 1993, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 9, Nays 0; May 5, 1993,
1-6 sent to printer.)
1-7 COMMITTEE VOTE
1-8 Yea Nay PNV Absent
1-9 Parker x
1-10 Lucio x
1-11 Ellis x
1-12 Haley x
1-13 Harris of Dallas x
1-14 Harris of Tarrant x
1-15 Leedom x
1-16 Madla x
1-17 Rosson x
1-18 Shapiro x
1-19 Wentworth x
1-20 COMMITTEE SUBSTITUTE FOR S.B. No. 1410 By: Parker
1-21 A BILL TO BE ENTITLED
1-22 AN ACT
1-23 relating to state indemnification of and liability insurance
1-24 premiums for certain health care claims.
1-25 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-26 SECTION 1. Article 5.15-4, Insurance Code, is amended to
1-27 read as follows:
1-28 Art. 5.15-4. Reduction in Certain Professional Liability
1-29 Insurance Premiums
1-30 Sec. 1. Definitions. In this article, "charity care or
1-31 services," "eligible <medical> malpractice claim," "health care
1-32 professional," "health center," "health clinic," "hospital,"
1-33 "insurer," "<medical> malpractice claim," and "patient encounter"
1-34 have the meanings assigned by Section 110.001, Civil Practice and
1-35 Remedies Code.
1-36 Sec. 2. Qualification for discount. A health care
1-37 professional, <or> health center, health clinic, or hospital is
1-38 entitled to a premium discount for medical professional liability
1-39 insurance coverage if the professional, <or> center, health clinic,
1-40 or hospital meets the criteria stated in Section 4 of this article.
1-41 Sec. 3. Amount of premium discount. The Texas Department
1-42 <State Board> of Insurance shall approve premium discounts to be
1-43 used by each insurer on premiums to be charged to a health care
1-44 professional, <or> health center, health clinic, or hospital
1-45 covered by this section. Each insurer shall file proposed premium
1-46 discounts and any loss and statistical data required by department
1-47 <board> rule. The insurer has the burden of demonstrating to the
1-48 department <board>, by a preponderance of the evidence, that the
1-49 proposed premium discount is adequate to reflect the reduction in
1-50 the insurer's liability exposure based on the state's
1-51 indemnification of the first $100,000 or $25,000 under Chapter 110,
1-52 Civil Practice and Remedies Code, of an eligible malpractice claim
1-53 against a health care professional, <or> health center, health
1-54 clinic, or hospital. The information required to be filed with the
1-55 Texas Department <State Board> of Insurance under this section is
1-56 public information and shall be made available to the public on
1-57 written request.
1-58 Sec. 4. Qualification for premium discount. (a) A health
1-59 care professional is entitled to a premium discount for medical
1-60 professional liability insurance coverage if:
1-61 (1) the projected patient encounters of the health
1-62 care professional during the policy year will involve providing
1-63 charity care or services in 10 percent or more of the health care
1-64 professional's patient encounters; and
1-65 (2) the health care professional completes 15 hours of
1-66 continuing education during the calendar year in which the policy
1-67 is in effect <term of the policy> on patient safety and risk
1-68 reduction subjects related to the health care professional's
2-1 practice that are sponsored, approved, endorsed, or accredited by
2-2 the Texas Department <State Board> of Insurance or the health care
2-3 professional's licensing or certifying agency, an "insurer" as
2-4 defined in this Act, or state or nationally recognized accrediting
2-5 organizations or continuing medical or nurse education programs.
2-6 (b) A health center is entitled to a premium discount for
2-7 <medical> professional liability coverage if the health center
2-8 adopts a quality assurance program.
2-9 (c) A health clinic, hospital, or health care professional
2-10 under Section 110.001(3)(D), Civil Practice and Remedies Code, is
2-11 entitled to a premium discount for professional liability coverage
2-12 if the health clinic, hospital, or health care professional under
2-13 Section 110.001(3)(D), Civil Practice and Remedies Code, provides
2-14 at least 10 percent or more of charity care or services and adopts
2-15 a quality assurance program.
2-16 (d) The Texas Department <State Board> of Insurance may
2-17 adopt rules governing health center, health clinic, or hospital
2-18 quality assurance programs.
2-19 Sec. 5. Request for premium discount. A health care
2-20 professional, <or> health center, health clinic, or hospital that
2-21 desires a premium discount for medical professional liability
2-22 insurance coverage shall submit to the insurer, at the time
2-23 coverage is applied for, a written verified application for a new
2-24 policy or a verified statement for a policy to be renewed stating
2-25 that the health care professional, <or> health center, health
2-26 clinic, or hospital desires a premium discount and qualifies for a
2-27 premium discount under this article. The application or statement
2-28 also shall provide for each policy for which a discount is
2-29 requested necessary information to determine the eligibility of the
2-30 health care professional, <or> health center, health clinic, or
2-31 hospital and the amount of the discount.
2-32 Sec. 6. Audit; penalty. (a) At the end of a policy year,
2-33 an insurer may audit the records of any health care professional,
2-34 <or> health center, health clinic, or hospital to which the insurer
2-35 has provided a discount under this article to determine if the
2-36 health care professional, <or> health center, health clinic, or
2-37 hospital provided the charity care and services necessary under
2-38 Section 4 of this article to qualify for the premium discount
2-39 during the preceding policy year.
2-40 (b) To conduct the audit, the insurer is entitled to access
2-41 to any books and records necessary to determine if the verified
2-42 application or statement submitted for the coverage was correct and
2-43 the health care professional, <or> health center, health clinic, or
2-44 hospital was eligible for the premium discount. If a health care
2-45 professional, <or> health center, health clinic, or hospital denies
2-46 access to the property or to the books and records, the insurer may
2-47 obtain an appropriate court order from a court of competent
2-48 jurisdiction to gain access to the books and the records.
2-49 (c) If an insurer's audit indicates that a health care
2-50 professional, <or> health center, health clinic, or hospital did
2-51 not provide charity care or services as required under Section 4 of
2-52 this article <in 10 percent or more of the health care
2-53 professional's or health center's patient encounters>, the insurer
2-54 may charge the health care professional, <or> health center, health
2-55 clinic, or hospital an amount equal to the difference between the
2-56 premium paid and the premium that would have been due if the health
2-57 care professional, <or> health center, health clinic, or hospital
2-58 had not received the premium discount plus 20 percent of the amount
2-59 of the premium that would have been due without the premium
2-60 discount.
2-61 (d) If a health care professional, <or> health center,
2-62 health clinic, or hospital that has received the premium discount
2-63 for the policy year submits the difference between the premium paid
2-64 and the premium that would have been due if the health care
2-65 professional, <or> health center, health clinic, or hospital had
2-66 not received the premium discount plus interest at the legal rate
2-67 for the unpaid premium prior to 30 days before the expiration of
2-68 the policy year, the health care professional, <or> health center,
2-69 health clinic, or hospital will not be subject to the penalty
2-70 provided in Subsection (c).
3-1 Sec. 7. Prohibitions on insurer; sanctions. (a) An insurer
3-2 may not cancel or refuse to renew <medical> professional liability
3-3 insurance coverage solely on the basis that the covered health care
3-4 professional, <or> health center, health clinic, or hospital is
3-5 eligible for a premium discount under this article except for the
3-6 following reasons:
3-7 (1) fraud or misrepresentation in obtaining coverage;
3-8 (2) failure to pay premiums when due; or
3-9 (3) the insurer's being placed under supervision or in
3-10 conservatorship or receivership, if the cancellation or nonrenewal
3-11 is approved by the supervisor, conservator, or receiver.
3-12 (b) A health care professional, <or> health center, health
3-13 clinic, or hospital who files the appropriate verified application
3-14 or statement under this article will be entitled to a premium
3-15 discount as approved by the department <board> under Section 3 of
3-16 this article. When consent to rate is used, a health care
3-17 professional, <or> health center, health clinic, or hospital will
3-18 be entitled to the appropriate discount from the rate agreed to by
3-19 consent.
3-20 (c) An insurer who violates this article is subject to the
3-21 sanctions authorized under Section 7, Article 1.10, of this code.
3-22 Sec. 8. AUTHORITY OF TEXAS DEPARTMENT <STATE BOARD> OF
3-23 INSURANCE. The Texas Department <State Board> of Insurance shall
3-24 administer this article and shall adopt necessary rules, forms,
3-25 endorsements, and procedures to carry out this article.
3-26 Sec. 9. Expiration. Unless continued in existence this
3-27 article expires September 1, 1997 <1995>.
3-28 SECTION 2. Sections 110.001 through 110.003 and 110.005
3-29 through 110.007, Civil Practice and Remedies Code, are amended to
3-30 read as follows:
3-31 Sec. 110.001. Definitions. In this chapter:
3-32 (1) "Charity care or services" means care or services
3-33 provided by a health care professional, health clinic, or hospital
3-34 under:
3-35 (A) Chapter 31, 32, 35, or 61, Health and Safety
3-36 Code;
3-37 (B) the Medicaid program under Chapter 32, Human
3-38 Resources Code;
3-39 (C) a contract with a migrant, community, or
3-40 homeless health center that receives funds under 42 U.S.C. Section
3-41 254b, 254c, or 256; <or>
3-42 (D) Subchapter B, Chapter 311, Health and Safety
3-43 Code, or 42 U.S.C. Section 1395dd, to the extent the professional
3-44 or the hospital in which the care or services are provided is not
3-45 compensated;
3-46 (E) an approved family practice residency
3-47 training program established under Subchapter I, Chapter 66,
3-48 Education Code, to the extent the professional is not compensated
3-49 for the services; or
3-50 (F) an indigent health care program of a
3-51 hospital district created under the authority of Article IX,
3-52 Sections 4 through 11, of the Texas Constitution.
3-53 (2) "Eligible <medical> malpractice claim" means a
3-54 <medical> claim against a health care professional, health clinic,
3-55 or hospital that <who> renders charity care in at least 10 percent
3-56 of the patient encounters engaged in by said health care
3-57 professional, health clinic, or hospital during the policy year in
3-58 which the claim was made, a claim <or> against a health center, or
3-59 a claim against a health care professional who participates in a
3-60 Medicaid managed care project established under Section 32.041,
3-61 Human Resources Code.
3-62 (3) "Health care professional" means:
3-63 (A) a person who is licensed to practice
3-64 medicine under the Medical Practice Act (Article 4495b, Vernon's
3-65 Texas Civil Statutes);
3-66 (B) a person registered by the Board of Nurse
3-67 Examiners as an advanced nurse practitioner or a certified nurse
3-68 midwife; <or>
3-69 (C) a person recognized by the Board of Medical
3-70 Examiners as a physician assistant; or
4-1 (D) a health care professional who participates
4-2 in a Medicaid managed care project established under Section
4-3 32.041, Human Resources Code.
4-4 (4) "Health center" means a federally qualified health
4-5 center, as that term is defined by 42 U.S.C. Section 1396d.
4-6 (5) "Health clinic" means a clinic or other facility
4-7 providing health care in conjunction with an approved family
4-8 residency practice program.
4-9 (6) "Hospital" means a general or special hospital
4-10 licensed under Chapter 241, Health and Safety Code.
4-11 (7) "Insurer" means an insurance company chartered to
4-12 write or admitted to write and writing medical professional
4-13 liability insurance in this state, the Texas Medical Liability
4-14 Insurance Underwriting Association (Article 21.49-3, Insurance
4-15 Code), any self-insurance trust created under Article 21.49-4,
4-16 Insurance Code, for the purpose of providing medical professional
4-17 liability insurance, or a purchasing group domiciled, registered,
4-18 and writing medical professional liability insurance for health
4-19 centers in this state. The term "insurer" does not include an
4-20 institution of higher education that provides medical professional
4-21 liability coverage under Chapter 59, Education Code.
4-22 (8) "Malpractice <(6) "Medical malpractice> claim"
4-23 means a claim or action against a health care professional, <or>
4-24 health center, health clinic, or hospital alleging one or more
4-25 negligent acts or omissions in the diagnosis, care, or treatment of
4-26 a patient and alleging that injury to or death of a patient
4-27 resulted therefrom, without regard to whether said claim or action
4-28 is based upon tort or contract principles.
4-29 (9) <(7)> "Patient encounter" means an occasion on
4-30 which a health care professional, health center, health clinic, or
4-31 hospital renders professional health care services to a patient.
4-32 For purposes of determining the number of patient encounters and
4-33 amount of charity care provided by a hospital or a health care
4-34 professional employed by or under contract with a hospital, the
4-35 calculations will be based on the hospital's emergency room visits
4-36 or inpatient admissions, as appropriate.
4-37 Sec. 110.002. STATE LIABILITY: PERSONS COVERED. In a cause
4-38 of action against a health care professional, <or> health center,
4-39 health clinic, or hospital based on conduct described in Section
4-40 110.003, the state shall indemnify the health care professional,
4-41 <or> health center, health clinic, or hospital for actual damages
4-42 adjudged against the health care professional, <or> health center,
4-43 health clinic, or hospital or which the health care professional,
4-44 <or> health center, health clinic, or hospital becomes obligated to
4-45 pay pursuant to a settlement reached in accordance with this
4-46 chapter.
4-47 Sec. 110.003. State Liability: Conduct Covered. (a) The
4-48 state is liable for indemnification under this chapter only if the
4-49 damages are based on an eligible <medical> malpractice claim
4-50 against a health care professional, <or> health center, health
4-51 clinic, or hospital in the course and scope of providing
4-52 professional health care.
4-53 (b) The state is not liable for indemnification in a case in
4-54 which the finder of fact determines that the defendant committed
4-55 gross negligence or an intentional act found to be a proximate
4-56 cause of the damages <for an intentional act or an act of gross
4-57 negligence>.
4-58 Sec. 110.005. TIMELY NOTICE TO ATTORNEY GENERAL REQUIRED.
4-59 The state is not liable for indemnification for damages under this
4-60 chapter unless the health care professional, <or> health center,
4-61 health clinic, or hospital against whom the cause of action is
4-62 asserted:
4-63 (1) is covered under a valid professional liability
4-64 insurance policy that is issued by an insurer and that provides
4-65 coverage for the <medical> malpractice claim that is the subject of
4-66 the claim or action with a policy limit of not less than $100,000
4-67 per occurrence and $300,000 aggregate for the policy period; and
4-68 (2) delivers or causes to be delivered to the attorney
4-69 general a true copy of any written notice of said <medical>
4-70 malpractice claim and any summons or citation served on the health
5-1 care professional, <or> health center, health clinic, or hospital,
5-2 which written notice, summons, or citation shall be delivered to
5-3 the attorney general not later than the 60th <45th> day after the
5-4 receipt thereof by the health care professional, <or> health
5-5 center, health clinic, or hospital. However, subsequent notice
5-6 shall not be a basis for denial of a claim for indemnification
5-7 unless the attorney general proves by clear and convincing evidence
5-8 that such delay would unduly prejudice the state's ability to
5-9 evaluate the reasonableness of the settlement offer or agreement.
5-10 Sec. 110.006. INFORMATION PROVIDED TO ATTORNEY GENERAL;
5-11 SETTLEMENTS. (a) The insurer for a health care professional, <or>
5-12 health center, health clinic, or hospital that is the subject of an
5-13 eligible malpractice claim shall designate an attorney or other
5-14 representative assigned to the claim who shall keep the attorney
5-15 general or his designee reasonably informed of significant
5-16 developments in the claim or action, including all settings for
5-17 trials or dispositive motions, all settlement offers and demands,
5-18 all pleadings by or against the health care professional, <or>
5-19 health center, health clinic, or hospital, all judgments or other
5-20 dispositive orders, and all written recommendations of counsel for
5-21 the health care professional, <or> health center, health clinic, or
5-22 hospital regarding settlement.
5-23 (b) If a settlement agreement is reached between the health
5-24 care professional, <or> health center, health clinic, or hospital
5-25 and a claimant, the insurer for the health care professional, <or>
5-26 health center, health clinic, or hospital shall promptly notify the
5-27 attorney general of same. The settlement shall become final and
5-28 binding upon the state unless, within 10 days of the receipt of
5-29 said notice by the attorney general (or such greater or lesser
5-30 period of time as the court in which the action is filed may
5-31 allow), the attorney general files in said court (or, if no action
5-32 is pending in any court, in a district court of Travis County,
5-33 Texas) a written objection to the settlement setting forth in
5-34 detail why the court should find that the reasonable settlement
5-35 value of the total claim being settled is significantly less than
5-36 the amount for which the state would be liable for indemnification
5-37 if the settlement were to be consummated based upon all the facts
5-38 and circumstances of the case. A hearing shall promptly be held
5-39 upon any such objection, either before the court or a special
5-40 master appointed by the court for that purpose. At any such
5-41 hearing, the burden shall be upon the attorney general to prove by
5-42 clear and convincing evidence that the reasonable settlement value
5-43 of the total claim being settled is significantly less than the
5-44 amount for which the state would be liable for indemnification if
5-45 the settlement were to be consummated based upon all the facts and
5-46 circumstances of the case. Unless the court finds that the
5-47 reasonable settlement value of the total claim being settled is
5-48 significantly less than the amount for which the state would be
5-49 liable for indemnification if the settlement were to be consummated
5-50 based upon all the facts and circumstances of the case, the court
5-51 shall enter an order approving the settlement and directing the
5-52 state to make the required indemnity payment thereunder. Such an
5-53 order shall be reviewable by an appellate court only upon the
5-54 filing of an application for writ of mandamus within 15 days of the
5-55 date said order is signed, and only for an abuse of discretion by
5-56 the trial court. Any such application for writ of mandamus shall
5-57 be given priority in the appellate court in which it is filed above
5-58 all other applications for writ of mandamus docketed in said court.
5-59 (c) If the attorney general files an objection under
5-60 Subsection (b), the court may, with the agreement of the parties to
5-61 the settlement agreement, permit the payment of any other sums due
5-62 to be paid under said agreement by parties other than the state
5-63 while the objection of the attorney general is pending
5-64 adjudication.
5-65 (d) If a suit involving an eligible <medical> malpractice
5-66 claim is imminently scheduled for jury trial or alternative dispute
5-67 resolution, or if the defendant seeking indemnity is subject to a
5-68 time limit under the Stowers Doctrine to respond to a settlement
5-69 proposal, or is being tried before a jury, and settlement
5-70 negotiations are ongoing between the health care professional, <or>
6-1 health center, health clinic, or hospital and any claimant, either
6-2 of those parties may request the court to require the attorney
6-3 general or his designee to assign an attorney to monitor such
6-4 negotiations so that if a settlement agreement is reached between
6-5 the parties, the attorney so assigned by the attorney general can
6-6 immediately advise the court of any objection, in which event the
6-7 hearing described in Subsection (b) regarding the reasonableness of
6-8 the settlement amount shall be held immediately after the
6-9 settlement agreement is reduced to writing or announced on the
6-10 record in open court, so that the trial court may render its
6-11 determination before the petit jury or jury panel is discharged.
6-12 (e) Except to the extent that the attorney general is
6-13 authorized under this section to object to the reasonableness of a
6-14 settlement, the attorney general shall not be authorized to
6-15 intervene in any court proceeding involving an eligible <medical>
6-16 malpractice claim. The insurer for the health care professional,
6-17 <or> health center, health clinic, or hospital shall be in charge
6-18 of the defense of any such claim.
6-19 (f) Upon final disposition of an eligible <medical>
6-20 malpractice claim by settlement or judgment, funds shall be paid by
6-21 the comptroller on vouchers that shall be promptly prepared,
6-22 verified, and signed by the attorney general.
6-23 Sec. 110.007. EXPIRATION. Unless continued in existence,
6-24 this chapter expires September 1, 1997 <1995>.
6-25 SECTION 3. (a) Section 2 of this Act applies to any cause
6-26 of action in which no final judgment has been entered prior to the
6-27 effective date of this Act.
6-28 (b) Section 1 of this Act applies only to professional
6-29 liability insurance policies delivered, issued for delivery, or
6-30 renewed on or after January 1, 1994. Policies delivered, issued
6-31 for delivery, or renewed before January 1, 1994, are governed by
6-32 the law that existed immediately before the effective date of this
6-33 Act, and that law is continued in effect for that purpose.
6-34 SECTION 4. This Act takes effect September 1, 1993.
6-35 SECTION 5. The importance of this legislation and the
6-36 crowded condition of the calendars in both houses create an
6-37 emergency and an imperative public necessity that the
6-38 constitutional rule requiring bills to be read on three several
6-39 days in each house be suspended, and this rule is hereby suspended.
6-40 * * * * *
6-41 Austin,
6-42 Texas
6-43 May 5, 1993
6-44 Hon. Bob Bullock
6-45 President of the Senate
6-46 Sir:
6-47 We, your Committee on Economic Development to which was referred
6-48 S.B. No. 1410, have had the same under consideration, and I am
6-49 instructed to report it back to the Senate with the recommendation
6-50 that it do not pass, but that the Committee Substitute adopted in
6-51 lieu thereof do pass and be printed.
6-52 Parker,
6-53 Chairman
6-54 * * * * *
6-55 WITNESSES
6-56 FOR AGAINST ON
6-57 ___________________________________________________________________
6-58 Name: Edwin H. Fisher, Jr. x
6-59 Representing: The Medical Protective Co.
6-60 City: Ft. Wayne
6-61 -------------------------------------------------------------------
6-62 Name: Bob Fields x
6-63 Representing: TX Medical Liability Trust
6-64 City: Austin
6-65 -------------------------------------------------------------------