West Virginia Code
This article shall be known and may be cited as the "Physicians' Mutual Insurance Company Act."
This article applies only to the physicians' mutual insurance company created as a novation of the medical professional liability insurance programs created in article twelve-b, chapter twenty-nine of this code.
§33-20F-2. Findings and purpose.
(a) The Legislature finds that:
(1) There is a nationwide crisis in the field of medical liability insurance;
(2) Similar crises have occurred at least three times during the past three decades;
(3) Such crises are part of a naturally recurring cycle of a hard market period, when medical professional liability coverage is difficult to obtain, and a soft market period, when coverage is more readily available;
(4) Such crises are particularly acute in this state due to the small size of the insurance market;
(5) During a hard market period, insurers tend to flee this state, creating a crisis for physicians who are left without professional liability coverage;
(6) During the current crisis, physicians in West Virginia find it increasingly difficult, if not impossible, to obtain medical liability insurance either because coverage is unavailable or unaffordable;
(7) The difficulty or impossibility of obtaining medical liability insurance may result in many qualified physicians leaving the state;
(8) Access to quality health care is of utmost importance to the citizens of West Virginia;
(9) A mechanism is needed to provide an enduring solution to this recurring medical liability crisis;
(10) A physicians’ mutual insurance company or a similar entity has proven to be a successful mechanism in other states for helping physicians secure insurance and for stabilizing the insurance market;
(11) The state has attempted to temporarily alleviate the current medical crisis by the creation of programs to provide medical liability coverage through the Board of Risk and Insurance Management;
(12) The state-run program is a substantial actual and potential liability to the state;
(13) There is substantial public benefit in transferring the actual and potential liability of the state to the private sector;
(14) A stable, financially viable insurer in the private sector will provide a continuing source of insurance funds to compensate victims of medical malpractice; and
(15) Because the public will greatly benefit from the formation of a physicians’ mutual insurance company, state efforts to encourage and support the formation of such an entity, including providing a low-interest loan for a portion of the entity’s initial capital, is in the clear public interest.
(b) The purpose of this article is to create a mechanism for the formation of a physicians’ mutual insurance company that will provide:
(1) A means for physicians to obtain medical liability insurance that is available and affordable; and
(2) Compensation to persons who suffer injuries as a result of medical professional liability as defined in subsection (d), section two, article seven-b, chapter fifty-five of this code.
For purposes of this article, the term:
(a) “Board of medicine” means the West Virginia Board of Medicine as provided in §30-3-5 of this code.
(b) “Board of Osteopathy” means the West Virginia Board of Osteopathy as provided in §30-14-3 of this code.
(c) “Commissioner” means the Insurance Commissioner of West Virginia as provided in §33-2-1 of this code.
(d) “Company” means the Physicians’ Mutual Insurance Company created pursuant to the terms of this article.
(e) “Medical liability insurance” means, for the purposes of this article: All policies previously issued by the Board of Risk and Insurance Management pursuant to §29-12B-1 et seq. of this code which are transferred by the Board of Risk and Insurance Management to the company, pursuant to §33-20F-9(b) of this code and all policies of insurance subsequently issued by the company to physicians, physician corporations, physician-operated clinics, and such other individual health care providers as the commissioner may, upon written application of the company, approve.
(f) “Physician” means an individual who is licensed by the Board of Medicine or the Board of Osteopathy to practice medicine or podiatry in West Virginia, or who is licensed by a licensing board or body in another state to practice medicine or podiatry.
(g) “Transfer date” means the date on which the assets, obligations, and liabilities resulting from the Board of Risk and Insurance Management’s issuance of medical liability policies to physicians, physician corporations, and physician-operated clinics pursuant to §29-12B-1 et seq. of this code are transferred to the company.
§33-20F-4. Authorization for creation of company; requirements and limitations.
(a) Subject to the provisions of this article, a physicians’ mutual insurance company may be created as a domestic, private, nonstock corporation. The company must remain for the duration of its existence a domestic mutual insurance company owned by its policyholders and may not be converted into a stock corporation or any other entity not owned by its policyholders.
(b) For the duration of its existence, the company is not and may not be considered a department, unit, agency, instrumentality of the state, state actor, quasi-state actor or quasi-public entity for any purpose. Any debts, claims, obligations and liabilities of the company, whenever incurred, are the debts, claims, obligations and liabilities of the company only and not of the state or of any department, unit, agency, instrumentality, officer or employee of the state.
(c) The moneys of the company are not and may not be considered part of the General Revenue Fund of the state. The debts, claims, obligations and liabilities of the company are not and may not be considered a debt of the state or a pledge of the credit of the state.
(d) The company is not subject to the provisions of article nine-a, chapter six of this code or the provisions of article one, chapter twenty-nine-b of this code.
(e) All premiums collected by the company are subject to the premium taxes, additional premium taxes, additional fire and casualty insurance premium taxes and surcharges contained in sections fourteen, fourteen-a, fourteen-d and thirty-three, article three of this chapter.
(a) The Board of Risk and Insurance Management shall implement the initial formation and organization of the company as provided by this article.
(b) The company shall be governed by a board of directors consisting of 11 directors, as follows:
(1) Six directors who are physicians licensed to practice medicine in this state by the Board of Medicine or the Board of Osteopathy, including at least one general practitioner and one specialist: Provided, That only physicians who have purchased medical professional liability coverage from the Board of Risk and Insurance Management are eligible to serve as physician representatives on the company’s first board of directors;
(2) Three directors who have substantial experience as an officer or employee of a company in the insurance industry;
(3) Two directors with general knowledge and experience in business management who are officers and employees of the company and are responsible for the daily management of the company;
(c) In addition to the eleven directors required by subsection (b) of this section, the bylaws of the company may provide for the election of at least two additional directors.
(d) The directors and officers of the company are to be chosen in accordance with the articles of incorporation and bylaws of the company. The initial board of directors selected in accordance with the provisions of subdivision (3), subsection (a) of this section shall serve for the following terms: (1) Three for four-year terms; (2) three for three-year terms; (3) three for two-year terms; and (4) two for one-year terms. Thereafter, the Directors shall serve staggered terms of four years. If an additional director is added to the board as provided in subsection (c) of this section, his or her initial term shall be for four years.
(e) The incorporators are to prepare and file articles of incorporation and bylaws in accordance with the provisions of this article and the provisions of this chapter and chapter thirty-one of this code.
(a) There is hereby created in the State Treasury a special revenue account designated as the "Board of Risk and Insurance Management Physicians' Mutual Insurance Company Account" solely for the purpose of receiving moneys transferred from the West Virginia Tobacco Medical Trust Fund pursuant to sub-section (c), section two, article eleven-a, chapter four of this code for the company's use as initial capital and surplus.
(b) On July 1, 2003, a special one-time assessment, in the amount of $1,000, shall be imposed on every physician licensed by the Board of Medicine or by the board of osteopathy for the privilege of practicing medicine in this state: Provided, That the following physicians shall be exempt from the assessment:
(1) A faculty physician who meets the criteria for full-time faculty under subsection (f), section one, article eight, chapter eighteen-b of this code, who is a full-time employee of a school of medicine or osteopathic medicine in this state, and who does not maintain a private practice;
(2) A resident physician who is a graduate of a medical school or college of osteopathic medicine enrolled and who is participating in an accredited full-time program of post-graduate medical education in this state;
(3) A physician who has presented suitable proof that he or she is on active duty in Armed Forces of the United States and who will not be reimbursed by the Armed Forces for the assessment;
(4) A physician who receives more than fifty percent of his or her practice income from providing services to federally qualified health center as that term is defined in 42 U.S.C. §1396d(l)(2);
(5) A physician who practices solely under a special volunteer medical license authorized by section ten-a, article three or section twelve-b, article fourteen, chapter thirty of this code. The assessment is to be imposed and collected by the Board of Medicine and the board of osteopathy on forms prescribed by each licensing board;
(6) A physician who is licensed on an inactive basis pursuant to subsection (b), section twelve, article three, chapter thirty of this code or section ten, article fourteen, chapter thirty or a physician who voluntarily surrenders his license: Provided, That a retired osteopathic physician, who submits to the board of osteopathy an affidavit asserting that he or she receives no monetary remuneration for any medical services provided, executed under the penalty of perjury and if executed outside the State of West Virginia, verified, may be considered to be licensed on an inactive basis: Provided, however, That if a physician elects to resume an active license to practice in the state and the physician has never paid the assessment, then as a condition of receiving an active status license, the physician must pay the special one-time assessment; and
(7) A physician who practices less than forty hours a year providing medical genetic services to patients within this state.
(c) The entire proceeds of the special assessment collected pursuant to subsection (b) of this section shall be dedicated to the company. The Board of Medicine and the board of osteopathy shall promptly pay over to the company all amounts collected pursuant to this section to be used as policyholder surplus for the company.
(d) Any physician who applies to purchase insurance from the company and who has not paid the assessment pursuant to subsection (b) of this section shall pay $1,000 to the company as a condition of obtaining insurance from the company.
(e) A physician who fails to pay the special one-time assessment imposed on July 1, 2003, pursuant to subsection (b) of this section, on or before June 30, 2004, or when the license is due for renewal, whichever is earlier, and has received written notice of the assessment and option to elect inactive status, at least thirty days before the licensure renewal date or by May 30, 2004, is subject to a civil penalty in the amount of $250 payable to either the Board of Medicine or the board of osteopathy. Furthermore, and notwithstanding any provision of chapter thirty to the contrary, the Board of Medicine or the board of osteopathy shall immediately suspend the license to practice medicine or podiatry of any physician who received notice and failed to pay the special assessment by July 1, 2004. Any license to practice medicine suspended pursuant to this section shall remain suspended until both the special assessment and the civil penalty are paid in full.
(f) The entire proceeds of the civil penalty collected pursuant to subsection (e) of this section shall be dedicated to the company. The Board of Medicine and the board of osteopathy shall promptly pay over to the company all amounts collected pursuant to subsection (e) of this section to be used as policyholder surplus for the company.
(g) The requirements of subsection (b), (c), (d), (e) and (f) of this section shall terminate on January 1, 2008 unless continued or reestablished.
(a) As soon as practical, the company established pursuant to the provisions of this article shall file its corporate charter and bylaws with the commissioner and apply for a license to transact insurance in this state. Notwithstanding any other provision of this code, the commissioner shall act on the documents within fifteen days of the filing by the company.
(b) In recognition of the medical liability insurance crisis in this state at the time of enactment of this article and the critical need to expedite the initial operation of the company, the Legislature hereby authorizes the commissioner to review the documentation submitted by the company and to determine the initial capital and surplus requirements of the company, notwithstanding the provisions of section five-b, article three of this chapter. The commissioner has the sole discretion to determine the capital and surplus funds of the company and to monitor the economic viability of the company during its initial operation and duration on not less than a monthly basis. The company shall furnish the commissioner with all information and cooperate in all respects necessary for the commissioner to perform the duties set forth in this section and in other provisions of this chapter, including annual audited financial statements required by article thirty-three of this chapter and fidelity bond coverage for each of the directors of the company.
(c) Subject to the provisions of subsection (d) of this section, the commissioner may waive other requirements imposed on mutual insurance companies by the provisions of this chapter as the commissioner determines is necessary to enable the company to begin insuring physicians in this state at the earliest possible date.
(d) Within forty months of the date of the issuance of its license to transact insurance, the company shall comply with the capital and surplus requirements set forth in section five-b, article three of this chapter.
(a) Upon approval by the commissioner for a license to transact insurance in this state, the company may issue nonassessable policies of malpractice insurance, as defined in §33-1-10 (e)(9) of this code, insuring a physician. Additionally, the company may issue other types of casualty or liability insurance as may be approved by the commissioner.
(b) On the transfer date:
(1) The company shall accept from the Board of Risk and Insurance Management the transfer of any and all medical liability insurance obligations and risks of existing or in-force contracts of insurance covering physicians, physician corporations, and physician-operated clinics issued by the board pursuant to §29-12B-1 et seq. of this code: Provided, That the company may decline or refuse to renew any and all such contracts of insurance transferred to the company from the Board of Risk and Insurance Management upon the expiration of the respective terms of each contract of insurance so transferred and nothing in this section is intended to or shall be construed to otherwise obligate the company to accept, underwrite or renew any contract of insurance whatsoever. The transfer shall not include medical liability insurance obligations and risks of existing or in-force contracts of insurance covering hospitals and nonphysician providers;
(2) The company shall assume all responsibility for and defend, indemnify, and hold harmless the Board of Risk and Insurance Management and the state with respect to any and all liabilities and duties arising from the assets and responsibilities transferred to the company pursuant to §29-12B-1 et seq. of this code;
(3) The Board of Risk and Insurance Management shall disburse and pay to the company any funds attributable to premiums paid for the insurance obligations transferred to the company pursuant to subdivision (1) of this subsection, with earnings thereon, less paid losses and expenses, and deposited in the Medical Liability Fund created by §29-12B-1 et seq. of this code as reflected on the ledgers of the Board of Risk and Insurance Management;
(4) The Board of Risk and Insurance Management shall disburse and pay to the company any funds in the Board of Risk and Insurance Management Physicians’ Mutual Insurance Company account created by §33-20F-7 of this code. All funds in this account shall be transferred pursuant to terms of a surplus note or other loan arrangement satisfactory to the Board of Risk and Insurance Management and the Insurance Commissioner.
(c) The Board of Risk and Insurance Management shall cause an independent actuarial study to be performed to determine the amount of all paid losses, expenses and assets associated with the policies the board has in force pursuant to §29-12B-1 et seq. of this code. The actuarial study shall determine the paid losses, expenses and assets associated with the policies to be transferred to the company pursuant to subsection (b) of this section and the paid losses, expenses and assets associated with those policies retained by the board. The determination shall not include liabilities created by issuance of new tail insurance policies for nonphysician providers authorized by §29-12B-6 (n) of this code.
(d) The Board of Risk and Insurance Management may enter into such agreements, including loan agreements, with the company that are necessary to accomplish the transfers addressed in this section.
(e) The company shall make policies of insurance available to physicians in this state, regardless of practice type or specialty. Policies issued by the company to each class of physicians are to be essentially uniform in terms and conditions of coverage.
(f) Notwithstanding the provisions of subsection (b), (c) or (e) of this section, the company may:
(1) Establish reasonable classifications of physicians, insured activities, and exposures based on a good faith determination of relative exposures and hazards among classifications;
(2) Vary the limits, coverages, exclusions, conditions, and loss-sharing provisions among classifications;
(3) Establish, for an individual physician within a classification, reasonable variations in the terms of coverage, including rates, deductibles, and loss-sharing provisions, based on underwriting criteria established by the company, from time to time, which underwriting criteria may take into account factors considered by other medical malpractice insurance companies, from time to time, in underwriting similar risks and which factors may include, but are not limited to, the insured’s prior loss experience; current professional training and capability; disciplinary action taken against the physician by the Board of Medicine, Board of Osteopathy or a licensing board or body of another state in which the physician has been licensed; felonies or other criminal offenses committed by the physician; evidence of alcohol or chemical dependency or abuse; evidence of sexual misconduct; and any other factors relevant to the liability risk profile of the physician.
(4) Refuse to provide insurance coverage for individual physicians who do not meet underwriting criteria established by the company, from time to time, which underwriting criteria may take into account factors considered by other medical malpractice insurance companies, from time to time, in underwriting or declining to underwrite similar risks and which factors may include, but are not limited to, prior loss experience, current professional training and capability, disciplinary action taken against the physician by the Board of Medicine, Board of Osteopathy or a licensing board or body of another state in which the physician has been licensed; felonies or other criminal offenses committed by the physician; evidence of alcohol or chemical dependency or abuse; evidence of sexual misconduct; and any other factors relevant to the liability risk profile of the physician and which do or may indicate that the physician represents an unacceptable risk of loss if coverage is provided.
(g) The company shall establish reasonable risk management and continuing education requirements which policyholders must meet in order to be and remain eligible for coverage.
To the extent applicable, and when not in conflict with the provisions of this article, the provisions of chapters thirty-one and thirty-three of this code apply to the company created pursuant to the provisions of this article. If a provision of this article and another provision of this code are in conflict, the provision of this article controls.
This article is enacted to address a situation critical to the citizens of the State of West Virginia by providing a mechanism for the speedy and deliberate creation of a company to begin offering medical liability insurance to physicians in this state at the earliest possible date; and to accomplish this purpose, this article shall be liberally construed.
If any provision of this article or the application thereof to any person or circumstance is held invalid, such invalidity may not affect other provisions or applications of this article and to this end, the provisions of this article are declared to be severable.