PPCIGA Ruling - Pleas Judge: Can't Withhold Settlement Until Similar Case is Decided.

The Legal Intelligencer Court Orders Immediate Payment to Policyholder
The Legal Intelligencer
October 26, 2000.

Common Pleas Judge: PPCIGA Can't Withhold Settlement Until Similar Case is Decided by Ruth Bryna Choen, Legal Staff

Apending allocatur in a similar case won't allow the Pennsylvania Property and Casualty Insurance Guaranty Association to defer its payments to policyholders, the common pleas court said last week.

In a one-page order in Snowden v. Kraman, Philadelphia Judge Arnold New said PPCIGA was not entitled to a set-off for life insurance proceeds or for medical bills paid by a federally funded health-insurance program. The matter is on review by the high court in another case, however, and lawyers say that PPCIGA has asserted it shouldn't have to pay the $128,000 it owes Ellen Snowden pursuant to a settlement until the court reviews the analogous case of first impression, McCarthy v. Bainbridge.

Snowden is the administratrix of her husband Vincent's estate. She sued Dr. David J. Kraman and Urological Associates P.C. for their failure to timely diagnose and treat Vincent's bladder cancer in 1994 and 1995. Vincent Snowden died in March 1996.

The Snowden wrongful death trial was scheduled to begin May 26, 2000, but settled the same day for $900,000. The Pennsylvania Catastrophe Loss Fund agreed to pay $700,000 of that figure, leaving $200,000 for which Kraman was liable.

According to the plaintiffs' motion to enforce the settlement, Kraman "fully tendered the limits of his underlying medical malpractice insurance policy," in the amount of $200,000. But Kraman's insurer, PIC, has gone into liquidation and was taken over by PPCIGA.

According to the petition, PPCIGA claimed it was entitled to set-off for all amounts paid by Blue Cross/Blue Shield and for all Vincent's life insurance proceeds payable to Ellen. As a result, the guarantor paid her only $72,000 of the $200,000 figure from the settlement.


The plaintiffs' petition pointed out that in McCarthy v. Bainbridge, a 1999 Superior Court case, the court decided that PPCIGA is not entitled to a set-off of life insurance proceeds, nor may it claim an offset for proceeds paid by an ERISA plan that has a federally protected subrogation lien.

In McCarthy, PPCIGA refused to honor the plaintiffs' claim on the grounds that the decedent had life insurance providing a benefit of more than $500,000, which should have completely offset the PPCIGA liability. The Superior Court concluded that PPCIGA was not entitled to the offset, saying that McCarthy established a precedent for interpretation and application of the "non-duplication of recovery" provision in the PIGA Act.

But the McCarthy court stated that in order to get an offset, "the claim must be under insurance that sought to protect the insured against the same risk as was covered by the now insolvent insurer form whom [PPCIGA] is providing coverage."

Life insurance and medical malpractice liability insurance were "fundamentally different," the court concluded, since they insure against different risks and protect against different types of losses.

The McCarthy decision was expanded later this summer in Brusilow v. Swartz. In an unpublished memorandum decision, the Superior Court held that health insurance payments should be prohibited from offsets as well.

Now that McCarthy has been granted allocatur by the state Supreme Court, no one knows what effect if could have on Snowden. Still, Kenneth M. Rothweiler of Eisenberg, Rothweiler, Winkler, Eisenberg & Jeck said that shouldn't make a difference as to payment in the meantime. Rothweiler and Daniel Jeck represent Snowden.

"PIGA said it would wait to see the result of the McCarthy allocatur before it would pay," he said. "Judge New's order clearly says the payment is due now." He said that if McCarthy were to be reversed, his client would probably have to pay the money back to PPCIGA with interest, but that isn't at issue now.

Lise Luborsky of Britt Hankins Schaible & Moughan represents PPCIGA. She said it was never the position of PPCIGA that life insurance was available as a setoff. As to the issue of health insurance, it was Snowden who stalled things, she said. Disputed in the Snowden case were some payments made by the Teamsters Health & Welfare Fund.

"We needed information from the plaintiffs about health insurance issues and requested it from the plaintiffs," she said. Once they received the information, PPCIGA "found there was not an offset for some of the claims. But there are still factual issues left to be resolved."

Luborsky said PPCIGA did not use McCarthy's allocatur as a reason to hold up payment, although she said Britt Hankins "would be happy if the case were stayed" until the resolution of McCarthy. But she did not indicate when, or whether, PPCIGA will pay the remaining $128,000.

Tracy Blitz Newman of the Pennsylvania Law Weekly contributed to this article.