Case Title: William J. Faber v. Josephine W. Musser

Citation: 

Docket Number: 1995AP000968

State: wisconsin

Court: Wisconsin Supreme Court

Date: 1997-01-24T00:00:00Z

Document:
SUPREME COURT OF WISCONSIN 
 
                                                              
 
Case No.: 
 
95-0968 
                                                              
 
Complete Title 
of Case: 
 
 
William J. Faber, D.O.,   
 
 
 
 
Petitioner-Respondent-Petitioner,  
 
 
 
 
v.  
 
 
 
Josephine W. Musser, Commissioner of  
 
 
 
Insurance and Board of Governors, Wisconsin  
 
 
 
Health Care Liability Insurance Plan,   
 
 
 
 
Respondents-Appellants.  
 
 
 
_______________________________________ 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
 
 
 
Reported at:  197 Wis. 2d 119, 541 N.W.2d 839 
 
 
 
 
 
 
 
(Ct. App. 1995) 
 
 
 
 
 
 
 
PUBLISHED 
 
                                                              
 
Opinion Filed:  
January 24, 1997 
Submitted on Briefs: 
November 14, 1996 
Oral Argument:  
 
                                                              
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Dane 
 
JUDGE: 
PAUL B. HIGGINBOTHAM 
 
                                                              
 
JUSTICES: 
 
 
Concurred: 
 
 
Dissented: 
 
 
Not Participating: 
 
                                                              
 
ATTORNEYS:  
For the petitioner-respondent-petitioner there were 
briefs by Robert J. Kay and Kay & Andersen, S.C., Madison and oral 
argument by Robert J. Kay. 
 
 
For the respondents-appellants the cause was argued by Susan 
K. Ullman, assistant attorney general, with whom on the brief was 
James E. Doyle, attorney general. 
95-0968 
 
1
 
NOTICE 
This opinion is subject to further editing 
and modification.  The final version will 
appear in the bound volume of the official 
reports. 
 
 
No. 95-0968 
 
STATE OF WISCONSIN               :        
        
 
 
 
 
IN SUPREME COURT 
 
 
William J. Faber, D.O., 
 
  
Petitioner-Respondent-Petitioner 
 
 
v. 
 
Josephine W. Musser, Commissioner of 
Insurance and Board of Governors, 
Wisconsin Health Care Liability Insurance 
Plan, 
 
 
Respondents-Appellants. 
 
FILED 
 
JAN 24, 1997 
 
Marilyn L. Graves 
Clerk of Supreme Court 
Madison, WI 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed. 
¶1 
ANN WALSH BRADLEY, J.   The petitioner, William J. 
Faber, D.O., seeks review of an unpublished decision of the court 
of appeals, which upheld a determination of the respondent, Board 
of Governors of the Wisconsin Health Care Liability Insurance 
Plan (WHCLIP), that it was not obligated to furnish insurance 
coverage to Faber.
1  The petitioner asserts that WHCLIP is 
statutorily required to provide liability insurance to health 
care professionals who lose coverage as a result of insurer 
liquidation.  Because we conclude that the petitioner's sole 
recourse for loss of liability insurance caused by insurer 
liquidation is through the Wisconsin Insurance Security Fund 
(WISF), we affirm the decision of the court of appeals.    
                     
1 Faber v. Musser, No. 95-0968, unpublished slip op. (Wis. Ct. 
App. Sept. 28, 1995) (reversing a decision of the Circuit Court 
for Dane County, Paul J. Higginbotham, Judge). 
95-0968 
 
2
¶2 
An examination of the scope of coverage provided under 
our State's system of statutory back-up medical malpractice 
liability insurance is helpful to an understanding of the facts 
of this case.  We begin with a review of that system. 
¶3 
Generally, all Wisconsin health care providers are 
required to maintain minimum levels of health care liability 
insurance through policies issued by insurers licensed to do 
business in this State.  Wis. Stat. § 655.23(3) (1993-94).
2  For 
the time period relevant in this case, a health care provider 
must maintain liability coverage in an amount not less than 
"$400,000 for each occurrence and $1,000,000 for all occurrences 
in any one policy year . . . ."  § 655.23(4).  A provider's 
potential liability exposure is limited to the amounts expressed 
in § 655.23(4), or the amount of coverage actually maintained by 
the provider, whichever is greater.  § 655.23(5).  
¶4 
WHCLIP provides health care liability insurance "for 
risks in this state which are equitably entitled to but otherwise 
unable to obtain such coverage . . . ."  Wis. Adm. Code 
                     
2 Unless otherwise indicated, all future statutory references are 
to the 1993-94 volume.  Wisconsin Stat. § 655.23(3) provides in 
relevant part as follows: 
(3) (a) Except as provided in par. (d), every 
health care provider either shall insure and keep 
insured the health care provider's liability by a 
policy of health care liability insurance issued by an 
insurer authorized to do business in this state or 
shall qualify as a self-insurer. Qualification as a 
self-insurer is subject to conditions established by 
the commissioner and is valid only when approved by the 
commissioner. 
 
. . . . 
(d) If a cash or surety bond furnished by a health 
care provider for the purpose of insuring and keeping 
insured the health care provider's liability was 
approved by the commissioner before April 25, 1990, 
par. (a) does not apply to the health care provider 
while the cash or surety bond remains in effect. 
95-0968 
 
3
§ 17.25(1)(a); Wis. Stat. § 619.04.  It was created as part of a 
legislative response to the medical malpractice crisis of the 
1970's, which had resulted in a decrease in the number of 
commercial insurers, and an increase in restrictions on coverage. 
 In essence, WHCLIP is an "'involuntary' association[] of 
commercial insurers who are required by the state to share the 
risks of health care providers which are unable to obtain 
commercial insurance from the usual [commercial] sources."  
Rowland H. Long, The Law of Liability Insurance § 12.01(2) (MB 
1996).  Generally, the maximum coverage available under a WHCLIP 
policy is $400,000 for each occurrence and $1,000,000 for all 
occurrences 
in 
a 
given 
year.
3 
 
Wis. 
Adm. 
Code 
§ Ins 
17.25(3)(d)(3). 
¶5 
WISF was created to "maintain public confidence in the 
promises of insurers by providing a mechanism for protecting 
insureds from excessive delay and loss in the event of 
liquidation of insurers and by assessing the cost of such 
protection among insurers . . . ."  Wis. Stat. § 646.01(2).  It 
is funded by mandatory contributions from a broad spectrum of 
insurers,
4 and provides "back-up" coverage to a maximum of 
$300,000 per claim.  § 646.31(4). 
¶6 
The Patients Compensation Fund (PCF) provides liability 
coverage on medical malpractice awards exceeding the $400,000 
coverage required under § 655.23(4), or the amount of coverage 
actually maintained by the provider, whichever is greater.  Wis. 
                     
3 These amounts match precisely the minimum liability coverage 
that health care providers are required to maintain under 
§ 655.23(4).   
4 See §§ 646.01(1), 646.11(1). 
95-0968 
 
4
Stat. §§ 655.27(1).  It is funded by annual assessments paid by 
health care providers. § 655.27(3). 
¶7 
Summarizing the statutory scheme, the court of appeals 
stated:   
 
WHCLIP provides an insurance plan of last resort for 
those health care providers entitled to but unable to 
obtain liability coverage; WISF exists to fill the 
breach left when a liability insurer goes into 
liquidation by providing coverage up to $300,000 [per 
claim]; and PCF provides coverage when a medical 
malpractice award exceeds $400,000.  As is apparent, 
when WISF and PCF are harnessed in tandem, they do not 
provide full coverage but leave a $100,000 "gap."   
Unpublished slip op. at 3. 
¶8 
The relevant facts of this case are undisputed.  
William J. Faber, D.O., is an osteopathic physician and surgeon 
practicing in Milwaukee.  Between January of 1988 and December of 
1992, Faber was insured against health care provider's liability 
by the Professional Medical Insurance Company (Pro-Med), a 
Missouri-based insurer licensed to do business in Wisconsin.  In 
October of 1992, Pro-Med advised Faber that it would not renew 
his policy, but offered noncancelable extended reporting coverage 
("tail" coverage). Faber purchased the tail coverage for the 
period January 1, 1988 through December 31, 1992.
5       
¶9 
In April 1994, the Deputy Receiver of Pro-Med, which 
was now in liquidation, notified Faber by letter that the company 
was canceling his tail coverage policy.  The Wisconsin Insurance 
Security Fund (WISF) stepped in to provide coverage of up to 
$300,000 on each of three pending claims against Faber.  On June 
14, 1994, Faber requested that WHCLIP provide retroactive 
insurance coverage to: 1) replace his canceled tail coverage; and 
                     
5 The tail coverage insured Faber indefinitely for liability 
arising from his acts or omissions occurring between the 
specified dates.  
95-0968 
 
5
2) close the $100,000 gap existing between the $300,000 maximum 
coverage furnished by WISF and the $400,000 minimum coverage that 
he was statutorily required to carry. 
¶10 On September 26, 1994, WHCLIP denied Faber's request 
for coverage.  WHCLIP determined that it was not created to 
provide coverage in situations in which a health care provider's 
lack of coverage is occasioned by the insolvency of an insurer.  
WHCLIP concluded that Faber's loss of coverage was appropriately 
addressed by WISF, which was created to provide coverage in the 
event of insurer insolvency.  
¶11 Faber sought review in the circuit court.  The circuit 
court reversed WHCLIP's determination that the latter lacked 
authority to issue the insurance coverage sought by Faber, and 
ordered WHCLIP to process Faber's application for coverage.  
WHCLIP appealed. 
¶12 Essentially adopting the position of WHCLIP, the court 
of appeals reversed the circuit court's decision. It concluded 
that the statutory framework under which WISF was created would 
be undermined by requiring WHCLIP to provide the coverage 
requested by Faber.  Faber petitioned this court for review. 
¶13 The sole question before us is whether WHCLIP is 
obligated to provide retroactive liability coverage to a health 
care provider lacking coverage by virtue of insurer liquidation.
6 
 This court reviews under a de novo standard a legislatively 
created entity's determination of its own statutory authority to 
act.  Wisconsin Patients Compensation Fund v. WHCLIP, 200 Wis. 2d 
                     
6 We deny the motion of WHCLIP to supplement the record, because 
its proposed additions to the record are not germane to our 
analysis of the dispositive issue in this case.  
95-0968 
 
6
599, 606, 547 N.W.2d 578 (1996); Wisconsin Power & Light v. 
Public Serv. Comm., 181 Wis. 2d 385, 392, 511 N.W.2d 291 (1994). 
¶14 In urging us to conclude that WHCLIP is required to 
process his application for liability insurance coverage, Faber 
makes 
the 
following 
arguments: 
1) 
the 
legislature 
fully 
integrated the statutory health care liability insurance scheme 
without WISF; and 2) the statutory scheme is not undermined by 
requiring WHCLIP to close the $100,000 gap between WISF and PCF 
coverage. 
¶15 It is true that WISF was created after WHCLIP and PCF. 
 However, this does not compel the conclusion that WISF operates 
outside of the statutory scheme of back-up medical malpractice 
insurance.  We presume that the legislature enacts laws with full 
knowledge of existing statutes.  Milwaukee v. Kilgore, 193 Wis. 
2d 168, 183, 532 N.W.2d 690 (1995).   
¶16 As WHCLIP notes, the statutes and administrative rules 
demonstrate an integration between WISF and the other statutory 
coverage plans.  For example, the legislature has made the 
Commissioner of Insurance chairperson of the Board of Governors 
of WHCLIP and PCF, and has placed the Commissioner on the board 
of directors of WISF.  §§ 619.04(3), 655.27(2), 646.12(1).  Also, 
the Administrative Code provisions governing WHCLIP make specific 
reference to WISF.
7 
¶17 This court finds unpersuasive Faber's argument that 
requiring WHCLIP to close the $100,000 gap between WISF and PCF 
coverage will not undermine the statutory back-up coverage 
                     
7 Wis. Admin. Code § Ins 17.35(2m) provides: 
[T]he Wisconsin insurance security fund is not 
available for payment of claims if this risk retention 
group becomes insolvent. 
95-0968 
 
7
scheme.  Instead, we determine that the legislature intended to 
limit Faber's recourse to the coverage provided by WISF in order 
to preserve the financial integrity of each coverage plan.  If 
WHCLIP 
is 
required 
to 
extend 
coverage 
to 
health 
care 
professionals who lose coverage through insurer liquidation, 
little incentive will remain for those professionals to pursue 
claims under either WISF or against insolvent insurers who 
wrongfully repudiate policies.
8  Essentially, WHCLIP would be 
forced into the business of reinsuring failed insurers.  We 
conclude that the resulting financial burden on WHCLIP, and 
corresponding windfall to WISF and liquidating private insurers, 
is not consistent with the intent of the legislature. 
¶18 Requiring WHCLIP to provide insurance to health care 
professionals 
who 
lose 
coverage 
as 
a 
result 
of 
insurer 
liquidation would have the perverse effect of requiring WHCLIP to 
"buy claims," i.e., to insure against claims that have already 
occurred.  For example, Faber presently has three pending claims 
that would otherwise have been covered under the Pro-Med policy. 
Those three claims are each covered by WISF, but only up to 
$300,000.  Thus, when Faber asks this court to require WHCLIP to 
extend tail coverage and to close the $100,000 gap between WISF 
and PCF coverages, he is requesting that WHCLIP be forced to 
"insure" against claims that have already occurred and are in 
litigation.  We cannot conclude that the legislature intended 
such a result.    
¶19 There is nothing in Chapters 646, 655, or the 
Administrative Code expressly forbidding WHCLIP from offering 
                     
8 While the record before us is not clear on the issue, we note 
that WHCLIP asserts that Faber may have some recourse in the 
Missouri courts against Pro-Med.   
95-0968 
 
8
coverage in this situation or limiting Faber to WISF coverage.  
However, we discern in the statutory scheme a distinction between 
health care provider liability coverage deficits caused by market 
failure, and lack of coverage caused by the insolvency and 
subsequent liquidation of an insurer.  WHCLIP is addressed to the 
former circumstance, and WISF to the latter.    
¶20 WISF was expressly created to address precisely the 
situation present in this case—the loss of insurance coverage 
occasioned by insurer liquidation.  § 646.01(2)(a).  On the other 
hand, 
WHCLIP 
was 
established 
to 
deal 
with 
the 
general 
unavailability of certain kinds of health care provider liability 
insurance.   
 
Since malpractice insurance for health care providers 
became 
increasingly 
difficult 
to 
obtain 
in 
the 
voluntary 
market, 
certain 
categories 
of 
health 
professionals such as physicians and osteopaths were 
unable to obtain liability insurance.  Granting the 
Commissioner the authority to create risk-sharing plans 
for health professional liability insurance, which 
requires all liability insurers to participate, avoids 
this situation.  Since the purpose of creating such 
plans is to alleviate the problems of lack of 
availability of malpractice insurance, not to require 
insurers to assume the costs of malpractice suits and 
administrative expenses, the premiums charged to the 
policyholder are to be adequate, to the extent possible 
to ensure that the plan is self-supporting.        
Medical Malpractice Legislation Passed by the 1975 Wisconsin 
Legislature, Staff Paper #1 of the Malpractice Committee, 
Wisconsin Legislative Council Reports 1, 4 (1976).   
¶21 Faber did not suffer a loss of insurance due to a 
failure of the voluntary insurance market to offer the coverage 
that he is required by statute to carry.  Instead, his lack of 
coverage was caused by the liquidation of his insurer.  We 
determine that the legislature has established WISF coverage as 
the only recourse in such a situation, which provides Faber with 
95-0968 
 
9
$300,000 of coverage for each claim falling under the provisions 
of the Pro-Med policy.   
¶22 The WISF coverage is less comprehensive than that 
offered by WHCLIP, and as a result, Faber faces potential 
exposure to $100,000 on each claim that would otherwise have been 
covered under the Pro-Med policy.  It appears from the record 
that Faber finds himself with insufficient coverage through no 
fault of his own.  However, the legislature's failure to 
establish a seamless system of back-up health care provider 
liability coverage cannot serve as the basis for applying WHCLIP 
to a situation reserved for the WISF.   
¶23 We conclude that the legislature intended that WHCLIP 
and WISF apply in different contexts, and that in the present 
case, the latter applies.  While Faber faces potential economic 
hardship in the absence of WHCLIP coverage, the gap in coverage 
between the WISF and PCF is one that has been created by, and 
must therefore be addressed by, the legislature.       
 
By the Court.—The decision of the court of appeals is 
affirmed.