For purposes of this chapter, the following words and phrases shall have the respective meanings ascribed by this section:
(1) MEDICAL PRACTITIONER. Anyone licensed to practice medicine or osteopathy in the State of Alabama, engaged in such practice, and shall include medical professional corporations, associations, and partnerships.
(2) DENTAL PRACTITIONER. Anyone licensed to practice dentistry in the State of Alabama, engaged in such practice, and such term includes professional dental corporations, associations and partnerships.
(3) MEDICAL INSTITUTION. Any licensed hospital, or any physicians' or dentists' offices or clinics containing facilities for the examination, diagnosis, treatment or care of human illnesses.
(4) PROFESSIONAL CORPORATION. Any medical or dental professional corporation or any medical or dental professional association.
(5) PHYSICIAN. Any person licensed to practice medicine in Alabama.
(6) DENTIST. Any person licensed to practice dentistry in Alabama.
(7) HOSPITAL. Such institutions as are defined in Section 22-21-20 as hospitals.
(8) OTHER HEALTH CARE PROVIDERS. Any professional corporation or any person employed by physicians, dentists and hospitals who are directly involved in the delivery of health care services.
(9) MEDICAL LIABILITY. A finding by a judge, jury or arbitration panel that a physician, dentist, medical institution or other health care provider did not meet the applicable standard of care and that such failure was the proximate cause of the injury complained of, resulting in damage to the patient.
(10) BOARD. The board of directors of the joint underwriting association created by Section 27-26-22.
It is hereby declared by the Legislature of the State of Alabama that the availability of medical liability insurance at reasonable rates for the medical profession, medical institutions and other health care providers is essential to provide adequate health services to the people of Alabama, and without such insurance, medical services by the medical profession may be curtailed, and that while the need for such insurance is increasing, availability is limited and likely to become increasingly so, unless remedial legislation is enacted. The Legislature further finds and declares that by reason of complicated and highly technical medical concepts, and the existence of sophisticated medical techniques, decisions with respect to optional procedures of diagnosis and treatment have become increasingly complex and are necessarily made on the basis of professional judgment, on which opinions may and often will reasonably vary. It is the purpose of this chapter to insure that the citizens of the State of Alabama are able to receive necessary health services by providing an environment in which the medical profession can be assured of medical liability insurance coverage and be afforded reasonable protection against personal liability for consequences proximately resulting from decisions with respect to diagnosis and treatment arrived at in the bona fide exercise of professional judgment.
The purpose of the joint underwriting association shall be to provide a market for medical liability insurance on a self-supporting basis without subsidy from its members.
A joint underwriting association is hereby created, consisting of all insurers authorized to write and engage in writing, within this state on a direct basis, property and casualty insurance as defined in Sections 27-5-5 and 27-5-6. Every such insurer shall be a member of the association and shall remain a member as a condition of its authority to continue to transact such kind of insurance in this state.
The association shall be governed by a board of 11 directors, to be appointed for one-year terms by the commissioner. Two of such 11 shall represent insurers which write property and casualty insurance in Alabama, as defined in Sections 27-5-5 and 27-5-6 in Alabama and are members of the National Association of Independent Insurers, two shall represent insurers which write property and casualty insurance in Alabama, as defined in Sections 27-5-5 and 27-5-6 and are members of the American Insurance Association, two shall represent insurers which write property and casualty insurance in Alabama, as defined in Sections 27-5-5 and 27-5-6 and are members of the American Mutual Insurance Alliance, two shall represent insurers which write property and casualty insurance in Alabama, as defined in Sections 27-5-5 and 27-5-6 but are not members of any of the foregoing trade associations. Three directors shall be appointed by the Commissioner of Insurance as representatives of accident and health insurers and prepaid medical, surgical and dental service plan providers. Directors shall be reimbursed out of the administrative funds of the joint underwriting association for necessary and actual expenses incurred for attending meetings of the governing board.
The association shall, pursuant to the provisions of this chapter and the plan of operation with respect to medical liability insurance, have the power on behalf of its members to:
(1) Issue, or to cause to be issued, policies of insurance to applicants, including incidental coverages and subject to limits as specified in the plan of operation but not to exceed $1,000,000.00 for each claimant under one policy in any one year;
(2) Underwrite such insurance and adjust and pay losses with respect thereto, or appoint service companies to perform those functions;
(3) Assume reinsurance from its members; and
(4) Cede reinsurance.
The association and its members are authorized and encouraged to cooperate with the board and the association's actual or prospective policyholders on all matters pertaining to the board's duties and the insurance issued or to be issued by the association.
(a) Within 45 days following the creation of the association, the directors of the association shall submit to the commissioner, for his review, a proposed plan of operation, consistent with the provisions of this chapter.
(b) The plan of operation shall provide for economic, fair and nondiscriminatory administration and for the prompt and efficient provisions of medical liability insurance, and shall contain other provisions, including, but not limited to, preliminary assessment of all members for initial expenses necessary to commence operations, establishment of necessary facilities, management of the association, assessment of members to defray losses and expenses, commission arrangements, reasonable and objective underwriting standards, acceptance and cession of reinsurance, appointment of servicing carriers or other servicing arrangements and procedures for determining amounts of insurance to be provided by the association.
(c) The plan of operation shall be subject to approval by the commissioner after consultation with the members of the association, representatives of the public and other affected individuals and organizations. If the commissioner disapproves all or any part of the proposed plan of operation, the directors shall within 15 days submit for review an appropriate revised plan of operation or part thereof. If the directors fail to do so, the commissioner shall promulgate a plan of operation or part thereof, as the case may be. The plan of operation approved or promulgated by the commissioner shall become effective and operational upon order by the commissioner.
(d) Amendments to the plan of operation may be made by the directors of the association, subject to the approval of the commissioner, or shall be made at the direction of the commissioner.
The association shall not commence underwriting operations for physicians until the commissioner, after due hearing and investigation, has determined that medical liability insurance cannot be made available for physicians in the voluntary market. Upon such determination the association shall be an agency through which medical liability insurance may be written in this state on a primary basis for physicians. The association may also issue premises liability insurance to physicians, but need not be the exclusive agency through which either medical liability or premises liability insurance may be issued.
The association shall not commence underwriting operations for hospitals until the commissioner, after due hearing and investigation, has determined that medical liability insurance is not readily available for hospitals in the voluntary market. Upon such determination the association shall be authorized to issue policies of medical liability insurance and premises liability insurance to physicians, but need not be the exclusive agency through which such insurance may be written on a primary basis in this state.
The association shall not commence underwriting operations for other licensed health care providers until the commissioner, after due hearing and investigation, has determined that medical liability insurance cannot be made available for a specific type of licensed health care provider in the voluntary market. Upon such determination the association shall be the exclusive agency through which medical liability insurance may be written in this state on a primary basis for such specific type of health provider.
If the commissioner determines at any time that medical liability insurance can be made available in the voluntary market for either physicians, hospitals or any specific type of other licensed health care provider, the association shall thereby cease its underwriting operations for such medical liability insurance which he has determined can be made available in the voluntary market.
(a) There is hereby created a stabilization reserve fund. The fund shall be administered by three directors, one of whom shall be the commissioner or his deputy. The remaining two directors shall be appointed by the commissioner. One shall be a representative of the association, the other a representative of its policyholders.
(b) The directors shall act by majority vote with two directors constituting a quorum for the transaction of any business or the exercise of any power of the fund. The directors shall serve without salary, but each director shall be reimbursed for actual and necessary expenses incurred in the performance of his official duties as a director of the fund. The directors shall not be subject to any personal liability or accountability with respect to the administration of the fund.
(a) Each policyholder shall pay to the association a stabilization reserve fund charge equal to one third of each premium payment due for insurance through the association. Such charge shall be separately stated in the policy. The association shall cancel the policy of any policyholder who fails to pay the stabilization reserve fund charge.
(b) The association shall promptly pay to the trustee of the fund all stabilization reserve fund charges which it collects from its policyholders and any retrospective premium refunds payable under the group retrospective rating plan authorized by this chapter.
(a) The association shall certify to the commissioner the estimated amount of any deficit remaining after the stabilization reserve fund has been exhausted in payment of the maximum final premium for all policyholders of the association. Within 60 days after such certification the commissioner shall authorize the members of the association to commence recoupment of their respective shares of the deficit by one of the following procedures:
(1) Applying a surcharge to be determined by the association at a rate not to exceed two percent of the annual premiums on future policies affording those kinds of insurance which form the basis for their participation in the association under procedures established by the association; or
(2) Deducting their share of the deficit from past or future (franchise and/or premium) taxes due the State of Alabama.
(b) If the commissioner fails within 60 days to authorize one of the above procedures, each member of the association may commence recoupment of its deficit by the second procedure described above. The association shall amend the amount of its certification of deficit to the commissioner as the values of its incurred losses become finalized and the members of the association shall amend their recoupment procedure accordingly.
Any insurance company writing casualty insurance in the State of Alabama which sells medical liability insurance in other states must make medical liability insurance available to Alabama physicians, hospitals and other health care providers as a condition of doing business in Alabama.
All money received by the fund shall be held in trust by a corporate trustee selected by the directors. The corporate trustee may invest the money held in trust, subject to the approval of the directors. All investment income shall be credited to the fund. All expenses of administration of the fund shall be charged against the fund. The money held in trust shall be used solely for the purpose of discharging when due any retrospective premium charges payable by policyholders of the association under the group retrospective rating plan authorized by this chapter. Payment of retrospective premium charges shall be made by the directors upon certification to them by the association of the amount due. If all money accruing to the fund is finally exhausted in payment of retrospective premium charges, all liability and obligations of the association's policyholders with respect to the payment of retrospective premium charges have been paid shall be returned to policyholders upon procedures authorized by the directors.
In the event that sufficient funds are not available for the sound financial operation of the association, pending recoupment, as provided in subsection (a) of Section 27-26-25, all members shall, on a temporary basis contribute to the financial requirements of the association in the manner provided for in Section 27-26-37. Any such contribution shall be reimbursed to the members by recoupment as provided in Section 27-26-29.
Any licensed physician, hospital or other licensed health care provider shall, on or after the effective date of the plan of operation, be entitled to apply to the association for such coverage. Such application may be made on behalf of an applicant by a broker or agent authorized by the applicant.
All policies issued by the association shall be issued subject to the group retrospective rating plan for each of the groups described in Section 27-26-26 and the stabilization reserve fund authorized by this chapter. All such policies shall be written so as to apply to injury which results from acts or omissions during the policy period, commonly designated as occurrence type policies. No policy form shall be used by the association unless it has been filed with the commissioner and either he has approved it or 30 days have elapsed and he has not disapproved it as misleading or violative of public policy.
If the association determines that the applicant meets the underwriting standards of the association as prescribed in the plan of operation and there is no unpaid, uncontested premium due from the applicant for prior insurance (as shown by the insured having failed to make written objection to premium charges within 30 days after billing) then the association, upon receipt of the premium, or such portion thereof as is prescribed in the plan of operation, shall cause to be issued a policy of medical liability insurance.
Cancellation of the association's policies shall be governed by the same laws governing other insurance policies; except, that the association may also cancel any of its policies in the event of nonpayment of any stabilization reserve fund charge by mailing or delivering to the insured at the address shown on the policy written notice stating when, not less than 10 days after such notice, cancellation shall be effective.
(a) The rates, rating plans, rating rules, rating classifications and territories applicable to the insurance written by the association and statistics relating thereto shall be subject to the same laws applicable to casualty policies, giving due consideration to the past and prospective loss and expense experience for medical liability insurance written and to be written in this state, trends in the frequency and severity of losses, the investment income of the association, and such other information as the commissioner may require. All rates shall be on an actuarially sound basis, giving due consideration to the group retrospective rating plan and the stabilization reserve fund, and shall be calculated to be self-supporting. The commissioner shall take all appropriate steps to make available to the association the loss and expense experience of insurers previously writing medical liability insurance in this state.
(b) All policies issued by the association shall be subject to a nonprofit group retrospective rating plan to be approved by the commissioner under which the final premiums for all policyholders of the association, as a group, will be equal to the administrative expenses, loss and loss adjustment expenses and taxes, plus a reasonable allowance for contingencies and servicing. Policyholders shall be given full credit on all investment income, net of expenses and a reasonable management fee, on policyholder supplied funds. The standard premium (before retrospective adjustment) for each policy period issued by the association shall be established for portions of the policy period coinciding with the association's fiscal year on the basis of the association's rates, rating plans, rating rules, rating classifications, and territories then in effect. The maximum final premium for all policyholders of the association, as a group, shall be limited as provided in Section 27-26-30. Since the business of the association is subject to the nonprofit group retrospective rating plan required by this subsection, there shall be a strong presumption that the rates filed and premiums for the business of the association are not unreasonable or excessive.
(c) The commissioner shall examine the business of the association as often as he deems appropriate to make certain that the group retrospective rating plan is being operated in a manner consistent with this section. If he finds that it is not being so operated, he shall issue an order to the association specifying in what respects its operation is deficient and stating what corrective action shall be taken.
All insurers which are members of the association shall participate in its writings, expenses, servicing allowance, management fees and losses in the proportion that the net direct premiums of each such member (excluding that portion of premium attributable to the operation of the association) written during the preceding calendar year bears to the aggregate net direct premiums written in this state by all members of the association. Each insurer's participation in the association shall be determined annually on the basis of such net direct premiums written during the preceding calendar year, as reported in the annual statements and other reports filed by the insurer with the commissioner.
The association shall file in the office of the commissioner annually on or before the first day of March, a statement which shall contain information with respect to its transactions, condition, operations and affairs during the preceding year. Such statement shall contain such matters and information as are prescribed and shall be in such form as is approved by the commissioner. The commissioner may, at any time, require the association to furnish additional information with respect to its transactions, condition or any matter connected therewith considered to be material and of assistance in evaluating the scope, operation and experience of the association.
The commissioner shall make an examination into the affairs of the association at least annually.
All insurance carriers writing medical liability insurance policies shall be required to make annual reports of the number of claims and cost incurred to the commissioner on such forms and in such manner as the commissioner may require.
There shall be no liability on the part of, and no cause of action of any nature shall arise against, the board, the association, the commissioner or his authorized representatives or any other person or organization, for any statements made in good faith by them during any proceedings or concerning any matters within the scope of this chapter.
No member of the board or the directors of the stabilization reserve fund who is otherwise a public officer or employee shall suffer a forfeiture of his office or employment or any loss or diminution in the rights and privileges appertaining thereto, by reason of membership on the board or serving as a director of the stabilization reserve fund.
Any applicant to the association, any person insured pursuant to this chapter or their representatives, or any affected insurer, may appeal to the commissioner within 30 days after any ruling, action or decision by or on behalf of the association, with respect to those items the plan of operation defines as appealable matters.
All orders of the commissioner made pursuant to this chapter shall be subject to judicial review; provided, that notwithstanding any other provisions of law, proceedings for review shall act as a stay of enforcement of any order or decision of the commissioner disapproving or ordering the withdrawal, adjustment or termination of the effectiveness of any rate filing made by or on behalf of the association on the ground that the rates or premiums for the business of the association are unreasonable or excessive, and the association may continue to charge rates pursuant to such filing pending final order of the court.
(a) Any insurance company which sells medical liability insurance to Alabama physicians or their professional corporations or professional associations, or to hospitals or other health care providers shall be required to report to the state licensing agency which issues the license of the physician, hospital or other health care provider any final judgment or any settlement in or out of court resulting from a claim or action for damages for personal injuries caused by an error, omission or negligence in the performance of professional services with or without consent rendered by its policyholder within 30 days after entry of a judgment in court or agreement to settle a claim in or out of court.
(b) The report rendered to the appropriate state agency shall consist of the name of the policyholder, or if the policyholder is a professional corporation or professional association, the name of the physician or physicians against whom the claim was made, the name of the claimant, a summary of the allegations made in the lawsuit, the injuries incurred by the claimant and the terms of the judgment or settlement.
(c) The report rendered pursuant to the requirements of this section, and any and all information, interviews, reports, statements, memorandum, or other documents produced by the licensing board as a result of any investigation of the subject matter of the report are declared to be privileged and confidential. All such records, reports, proceedings or other documents and any findings, conclusions, recommendations or actions of the licensing board shall be confidential and shall not be public records nor available for court subpoena or for discovery proceedings. Nothing contained herein shall apply to records made in the regular course of business of a physician, hospital or other health care provider and information, documents or records otherwise available from original sources are not to be construed as immune from discovery or use in civil proceedings merely because they were presented to or considered by the licensing board.
(d) The failure to make the reports required by this section within the time periods which are provided shall be punishable under Section 27-1-12.