OGC Opinion No. 06-11-09

The Office of General Counsel issued the following opinion on November 14, 2006, representing the position of the New York State Insurance Department.

Re: Insurer's Participation in the Medical Malpractice Insurance Pool ("Pool")

Question Presented:

Under the circumstances delineated below, where an insurer issues one medical malpractice insurance policy in New York that covers only facilities located outside of New York, but includes a vicarious liability exposure in New York, is the insurer required to participate in the Medical Malpractice Insurance Pool ("Pool")?

Conclusion:

Based on the Pool's Plan of Operation, under such circumstances, the insurer would not be required to participate in the Pool.

Facts:

A property/casualty insurance company that is domiciled in Nebraska issued, pursuant to Article 63 of the Insurance Law and N.Y. Comp. Codes R. & Regs. tit. 11, Part 16 (Regulation 86), under its special risk insurance (Free Trade Zone) license, a medical malpractice insurance policy to a not-for-profit entity located in Germantown, New York. The policy covers a number of long term care facilities, which are all located outside of New York. The policy also covers the not-for-profit entity for vicarious liability exposure in New York. According to the insurer, there are no doctors or other medical personnel at the not-for-profit entity's New York location, nor does the not-for-profit entity engage in any activities in New York that requires licensing or certification by the New York State Department of Health. The insurer issued no other medical malpractice policy in New York.

Under the assumption that premium taxes must be paid to the state in which the policy was issued, the insurer has filed its premium taxes with New York, not with any of the other states in which the facilities are located. According to the insurer, the market share chart that was supplied to it by the Department summarily states that its market share for 2004, based on medical malpractice insurance gross premiums written in New York as reported to the Department by the insurer, was 0.15%. The insurer's market share was based solely on the policy issued to the not-for-profit entity. The question arises as to whether the insurer's policy constitutes medical malpractice insurance as defined in the Pool's Plan of Operation so that the insurer is required to participate in the Pool.

Analysis:

The New York Medical Malpractice Insurance Plan ("Plan") was created pursuant to N.Y. Ins. Law § 5502(c)(2)(D) and N.Y. Comp. Codes R. & Regs. tit. 11, Part 430 (Regulation 170), as an assigned risk mechanism for providing medical malpractice insurance to all eligible health care providers who are unable to secure coverage in the voluntary market. See Article II(5) & (9) and Article III(1) of the Plan's Rules of Operation.

As an alternative to the Plan's assigned risk mechanism, the Medical Malpractice Insurance Pool ("Pool") was created. Like the Plan, the Pool's members consist of all insurers authorized to write and engaged in writing primary or excess medical malpractice insurance in New York. However, all members of the Pool voluntarily agree to join the Pool in lieu of receiving direct assignments through the Plan. See Articles II(4) & III(1) of the Pool's Plan of Operation. The Pool's Plan of Operation provides that each member's "participation in the Pool shall be determined annually on the basis of such net direct premiums written during the preceding calendar year, as reported in the annual statement and other reports filed by the Member with the Superintendent."

Article V of the Plan's Rules of Operation delineates the percentage of an insurer's medical malpractice insurance market share that would exempt that insurer from participation in the Plan. This rule also applies to the members of the Pool. Specifically, Article V states, in pertinent part, as follows:

An insurer that writes 0.01% or more of its medical malpractice net premiums in New York is required to participate in the Pool, but if the insurer did not write 0.01%, it would not have to participate.

In regard to the issue of whether the insurer's policy constitutes medical malpractice insurance, Article II(5) of the Pool's Plan of Operation defines medical malpractice insurance as follows:

Article II(3) defines a "hospital" as:

Although the insurer issued the policy in New York to the not-for-profit entity, none of the facilities that are covered under the policy are located in New York. Therefore, under the Pool's definition of medical malpractice insurance, the policy does not provide medical malpractice insurance because the facilities are not registered or certified by the State of New York, pursuant to Article II(3) of its Plan of Operation. Therefore, the insurer does not meet the 0.01% written net direct medical malpractice premiums threshold in New York. As a result, the insurer is not required to participate in the Pool or the Plan.

For further information contact Associate Attorney D. Monica Marsh at the New York City Office.