N.Y. Insurance Law § 5502: Medical malpractice insurance association

§ 5502. Medical malpractice insurance association. (a) The medical

malpractice insurance association is continued consisting of all

insurers authorized to write and engaged in writing, within this state,

on a direct basis, personal injury liability insurance but excluding

assessment cooperative fire insurance companies transacting business

pursuant to article sixty-six of this chapter. Every such insurer shall

be and remain a member of the association as a condition of its

authority to continue to transact personal injury liability insurance in

this state.

(b) The association shall be a non-profit unincorporated association

constituting a legal entity separate and distinct from its members. All

funds and reserves of the association shall be separately held and

invested. It shall maintain complete accounts of all monies received and

all losses and expenses incurred in connection with its operations,

including investment income on policyholder-supplied funds. For the

purpose of any contributions required by insurers to the

property/casualty insurance security fund pursuant to article

seventy-six of this chapter, and for the purpose of the protection

afforded policyholders by such fund, the association is an authorized

insurer. The association shall include in the premiums charged for

medical malpractice insurance an amount sufficient to offset any such

contributions.

(c) (1) The purpose of the association is to provide, for the period

July first, nineteen hundred seventy-five through June thirtieth, two

thousand one, a market for medical malpractice insurance pursuant to

this article and subject to regulation pursuant to section two thousand

three hundred seventeen of this chapter. If, after June thirtieth, two

thousand one, the surcharges on premiums imposed pursuant to section

forty, as amended, of chapter two hundred sixty-six of the laws of

nineteen hundred eighty-six, by the superintendent to satisfy any

actuarially projected deficiency that is attributable to the premium

levels for policies providing coverage for physicians and surgeons

medical malpractice for the periods commencing July first, nineteen

hundred eighty-five and ending June thirtieth, two thousand one, are

still in effect or may still be reasonably imposed, the association

shall continue in existence until June thirtieth next following such

time as such surcharges are no longer imposed or may no longer be

reasonably imposed.

** (2) (A) The association shall, no later than December thirtieth,

nineteen hundred ninety-nine, submit to the superintendent for approval

a plan for the final dissolution of the association, including a

transfer or extinguishment of all liabilities of the association and a

plan for the servicing of existing policies of the association. The

dissolution of the association and cessation of its activities shall be

fully accomplished and the association shall be deemed dissolved at such

time and under such conditions as the superintendent deems proper;

provided, however, that all policies of insurance written by the

association shall expire or be transferred prior to such dissolution.

(B) In the preparation of a plan for the final dissolution of the

association, the board of directors of the association shall: (i)

solicit proposed plans for the dissolution of the association from at

least three outside entities; (ii) arrange for an independent actuarial

review of the association, its operations, assets and liabilities; and

(iii) recommend, by a majority vote of its board of directors, that

proposal which maximizes the value of the association to the state. The

association shall thereafter file all proposed plans, along with the

plan recommended by the board, to the superintendent for approval.

(C) (i) The superintendent shall, by April thirtieth, two thousand,

review all proposed plans, along with the recommended plan, filed by the

board of directors of the association with the superintendent and may

approve a plan of dissolution. The superintendent may determine to add

provisions which may vary from those submitted by the association or

delete others as proposed by the association or adopt an alternate plan.

Any plan of dissolution of the association which provides for the sale

or transfer of its operations, assets and/or liabilities to a private

entity shall do so net of any appropriated and encumbered amounts

required by subsection (c) of section five thousand five hundred

sixteen, subsection (c) of section five thousand five hundred sixteen-a,

subsection (c) of section five thousand five hundred sixteen-b,

subsection (c) of section five thousand five hundred sixteen-c and

subsection (c) of section five thousand five hundred sixteen-e of this

article and, in the event such plan is approved and implemented, such

sections five thousand five hundred sixteen, five thousand five hundred

sixteen-a, five thousand five hundred sixteen-b, five thousand five

hundred sixteen-c, and five thousand five hundred sixteen-e are hereby

deemed repealed. A public hearing shall be held to examine the proposed

plan of dissolution, the plans reviewed, and the superintendent's

recommended plan of approval. Such public hearing shall be held not

later than thirty days prior to the superintendent's approval of that

plan which maximizes the value of the association to the state while not

impairing or impeding the operation of the voluntary medical malpractice

insurance market or limiting the access to medical malpractice coverage

for health care practitioners or facilities insured by the association.

Upon approval, the superintendent shall certify the estimated amount of

funds to be transferred pursuant to subsection (b) of section five

thousand five hundred sixteen-f of this article and shall transmit such

certification to the director of the division of the budget.

To assist in making such determination, the superintendent may appoint

one or more qualified disinterested persons or institutions as

consultants to advise on any matters related to the dissolution. The

appointment of a consultant shall be in writing and shall set forth the

duties and responsibilities of the consultant. The association shall

provide access to the superintendent, and any consultants appointed by

the superintendent, to its books and records and any information in its

possession necessary to make valuations and determinations required by

this section. For the purposes of this section, all expenses and costs

associated with such appointment shall be deemed and considered expenses

pursuant to section three hundred thirteen of this chapter.

(ii) (I) Any action challenging the validity of or arising out of acts

taken or proposed to be taken under this paragraph two of this

subsection must be commenced within two months after a copy of the plan

of final dissolution of the association, with the superintendent's

approval endorsed thereon, has been filed in the office of the

superintendent.

(II) In any action arising out of acts taken or proposed to be taken

under this paragraph two of this subsection, the superintendent shall be

entitled to, at any stage of the proceedings before final judgment,

petition the court to give security for the costs and charges which may

be incurred by the superintendent in connection with such action and by

any other parties defendant in connection therewith or for which the

superintendent or the association may become liable under this chapter,

under any contract or otherwise by law, to which security the

superintendent shall have recourse in such amount as the court having

jurisdiction of such action shall determine upon termination of such

action. The amount of security may thereafter from time to time be

increased or decreased in the discretion of the court having

jurisdiction of such action upon showing that the security provided has

or may become inadequate or excessive.

(III) Any person aggrieved by any act taken or order, regulation, or

rule issued pursuant to this paragraph two of this subsection may

petition for judicial review of such acts taken or orders, regulations

or rules, pursuant to the limitations period prescribed in clause (I) of

item (ii) of this subparagraph. The petition shall be brought in the

appellate division of the supreme court in the third judicial

department. The jurisdiction of the appellate division of the supreme

court in the third judicial department shall be exclusive and its

judgment and order shall be final subject to review by the court of

appeals in the same manner and form and with the same effect as provided

for appeals in a special proceeding. All such proceedings shall be heard

and determined by the appellate division and by the court of appeals as

expeditiously as possible and with lawful precedence over other matters.

Acts taken or orders, regulations or rules issued pursuant to this

section shall not be stayed or enjoined except upon application to the

appellate division of the supreme court in the third judicial department

after notice to the superintendent and to the attorney general and upon

a showing that the petitioner has a substantial likelihood of success

and will suffer irreparable harm if the stay or injunction is not

granted.

(IV) Provided, however, that if a determination by a judicial

proceeding prevents the final consummation of the determination by the

superintendent that the association be dissolved, and if the amounts

required to be transferred and deposited from the association to the

miscellaneous special revenue fund pursuant to the requirements of

section five thousand five hundred sixteen-f of this article are not in

fact so transferred and deposited in the miscellaneous special revenue

fund, then the provisions of subsections (a) through (f) of section nine

thousand one hundred eleven-c of this chapter shall become operative and

the tax imposed by subsections (a) through (e) of such section shall be

imposed. Provided, further, however, that if there is thereafter a final

judicial determination that the final consummation of the dissolution of

the association may be effectuated, and the full transfer and deposit

shall be made to the miscellaneous special revenue fund, then in such

event the amount of the tax imposed and paid pursuant to the provisions

of subsections (a) through (e) of section nine thousand one hundred

eleven-c of this chapter shall be returned to the companies that paid

such assessment on a pro rata basis, in a manner consistent with the

procedures set forth in subsections (f) and (g) of section nine thousand

one hundred eleven-c of this chapter.

* (D) Prior to July first, two thousand, the superintendent shall,

after a public hearing to be held not less than thirty days before such

promulgation, promulgate regulations prescribing a plan for the

equitable distribution to authorized medical malpractice insurers

writing such coverage in the state the insureds of the association and

health care practitioners and facilities which are otherwise unable to

secure coverage in the voluntary market following the dissolution of the

association. Such plan shall provide that upon initial distribution to

the voluntary market the insureds of the association receive policies in

the voluntary market with provisions and at a rate which are at least as

favorable to the insured as those which they would have received if they

were issued a renewal policy by the association, provided, however, that

subsequent to the initial distribution, the plan shall not be required

to make available a second layer of excess medical malpractice insurance

to insureds. Such plan shall also ensure that all health care

practitioners or facilities have access to medical malpractice insurance

from an authorized insurer pursuant to the provisions of this chapter.

Such plan may also provide for, and the superintendent may designate, in

lieu of the plan for the equitable distribution of policies from the

association and the availability of coverages to health care

practitioners and facilities, a single entity or entities to provide

such coverages consistent with such a plan if the superintendent

determines that such entity or entities can provide the coverages

necessary to meet the purposes and objectives of an equitable plan of

distribution were it to have been effectuated. Notice of the hearing

required by this subparagraph shall be no less than thirty days before

the date of the hearing and shall include a summary of the plan proposed

by the superintendent.

* NB Effective until July 1, 2028

* (D) Prior to July first, two thousand, the superintendent shall,

after a public hearing to be held not less than thirty days before such

promulgation, promulgate regulations prescribing a plan for the

equitable distribution to authorized medical malpractice insurers

writing such coverage in the state the insureds of the association and

health care practitioners and facilities which are otherwise unable to

secure coverage in the voluntary market following the dissolution of the

association. Such plan shall provide that upon initial distribution to

the voluntary market the insureds of the association receive policies in

the voluntary market with provisions and at a rate which are at least as

favorable to the insured as those which they would have received if they

were issued a renewal policy by the association. Such plan shall also

ensure that all health care practitioners or facilities have access to

medical malpractice insurance from an authorized insurer pursuant to the

provisions of this chapter. Such plan may also provide for, and the

superintendent may designate, in lieu of the plan for the equitable

distribution of policies from the association and the availability of

coverages to health care practitioners and facilities, a single entity

or entities to provide such coverages consistent with such a plan if the

superintendent determines that such entity or entities can provide the

coverages necessary to meet the purposes and objectives of an equitable

plan of distribution were it to have been effectuated. Notice of the

hearing required by this clause shall be no less than thirty days before

the date of the hearing and shall include a summary of the plan proposed

by the superintendent.

* NB Effective July 1, 2028

** NB The plan referred to herein is Title 11 NYCRR, Chapter XX, Part

430

(d) Upon dissolution, the association shall not resume underwriting

operations for physicians, dentists, podiatrists, certified

nurse-midwives, certified registered nurse anesthetists or for hospitals

respectively, until the superintendent, after consultation with the

commissioner of health, has determined that medical malpractice

insurance is not readily available for physicians, dentists,

podiatrists, certified nurse-midwives, certified registered nurse

anesthetists or for hospitals, as the case may be, in the voluntary

market and has approved or promulgated a new plan of operation. If the

superintendent determines during such period that insurance is readily

available for physicians, dentists, podiatrists, certified

nurse-midwives, certified registered nurse anesthetists or for

hospitals, as the case may be, in the voluntary market, the

superintendent shall not authorize its underwriting operations for the

respective categories.

(e) The association shall, pursuant to the provisions of this article

and the plan of operation with respect to medical malpractice insurance,

have the power:

(1) To issue, or to cause to be issued, policies of insurance to

physician, dentist and podiatrist applicants subject to primary limits

specified in the plan of operation not in excess of one million dollars

for each claimant under one policy and three million dollars for all

claimants under one policy in any one year, and excess coverage as

provided in this paragraph. Each applicant shall be entitled to

purchase a policy providing primary limits not to exceed one million

dollars for each claimant and three million dollars for all claimants in

any one year. In addition, any applicant insured by the association in

an amount equal to or greater than one million dollars for each

claimant and three million dollars for all claimants in any one year, or

any other applicant covered under a policy or policies providing such

primary levels of insurance against liability for medical, dental or

podiatric malpractice that is issued by an authorized insurer, shall be

entitled to purchase a policy from the association providing excess

coverage of at least one million dollars per claimant and three million

dollars for all claimants in any one year. The association shall,

subject to the approval of the superintendent, make available, and if

requested by the applicant, provide additional excess coverage in an

amount requested by such applicant. With respect to the coverage

required to be made available on and after July first, nineteen hundred

eighty-five by this paragraph, the superintendent shall establish and

promulgate rates to be charged for such excess coverage and additional

excess coverage and shall require that the association accept payment

for such coverage from the hospital excess liability pool pursuant to a

payment schedule that is consistent with the receipt of funds by such

pool from the hospital reimbursement system. Rates for excess coverage

and additional excess coverage shall not be subject to the

stabilization reserve fund charge established by section five thousand

five hundred nine of this article.

(2) To issue, or cause to be issued, policies of insurance, including

incidental liability coverages, to hospital applicants subject to limits

specified in the plan of operation with limits not in excess of one

million dollars for each claimant and ten million dollars for all

claimants in any one year; provided that policies for coverage in excess

of one million dollars for each claimant and three million dollars for

all claimants in any one year shall be issued only upon the obtaining of

reinsurance for such excess coverage for the term of the policy and the

excess coverage shall remain in effect only so long as reinsurance is in

effect. The association shall obtain such reinsurance, if available, for

coverage in excess of one million dollars for each claimant and three

million dollars for all claimants in any one year. If the association

fails to obtain such reinsurance, the superintendent may order it to do

so for the term of the policy from sources found by him to be available.

The rates charged by the association for coverage in excess of three

million dollars shall not be subject to prior approval by the

superintendent, and shall equal the charges to the association for such

reinsurance.

(3) To underwrite such insurance and to adjust and pay losses or to

appoint service companies to perform those functions.

(4) To assume reinsurance from its members.

(5) To cede reinsurance.

(6) To make the lump sum payments provided for in subdivision (b) of

section five thousand thirty-six of the civil practice law and rules

and receive the periodic payments due under the annuity contract

provided for therein.