Court Opinion

ID: 9533463
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:31:59.654004+00
Date Added: 2024-06-11T13:29:03.666062
License: Public Domain

Davis, J.,
dissenting: I respectfully disagree with the majority’s answer to the certified question of whether Kansas law recognizes *528a claim of bad faith against the Health Care Stabilization Fund (Fund) when a judgment is returned that is in excess of the Fund’s statutory limit of liability. I would answer the question in the affirmative.
In cases not governed by the Fund, an insured person whose insurance company had wrongfully failed to settle within the policy limits has a common-law cause of action against the company. See Spencer v. Aetna Life & Casualty Ins. Co., 227 Kan. 914, 920, 611 P.2d 149 (1980). The rationale behind such a claim is that the insurer’s assumption of the defense of the insured gives rise to a fiduciary relationship and a contractual duty to defend the insured in good faith. 227 Kan. at 920.
In cases where the Fund is implicated, the Fund assumes the defense of the insured in the same manner as a private insurance company. Thus, the Fund should be subject to the same duty to defend the insured in good faith.
The majority’s finding that a common-law action for bad faith does not exist in these circumstances runs contrary to the intent of the Health Care Provider Insurance Availability Act. One of the purposes of the Act was to address the problems of obtaining and maintaining affordable malpractice insurance and maintaining the availability of medical services in Kansas. See Blair v. Peck, 248 Kan. 824, 827, 811 P.2d 1176 (1991). However, when the Fund wrongfully and in bad faith refuses to settle a claim within the policy limits, it exposes doctors, as it did to Dr. Shah in this case, to large excess judgments for which the doctors are personally liable.
The statutes cited by the majority, K.S.A. 40-3403(e) and K.S.A. 40-3412(c), do not compel the conclusion that the legislature intended to abrogate the liability of the Fund for a bad faith refusal to setde a claim. K.S.A. 40-3403(e) provides only that the Fund will not be liable to pay in excess, of $3,000,000 pursuant to any judgment arising out of the rendering of or failure to render professional services. A bad faith claim for failure to settle within policy limits does not arise out of the rendering or failure to render professional services but is instead a claim arising from the fiduciary *529duty owed by the Fund to its insured physician. Thus, K.S.A. 40-3403(e) cannot be construed as a limit on bad faith claims.
Similarly, the plain language of K.S.A. 40-3412(c) does not provide for the prohibition of a common-law bad faith claim. K.S.A. 40-3412(c) states that “[n]othing herein shall be construed to impose any liability in the fund in excess of that specifically provided for herein for negligent failure to settle a claim or for failure to settle a claim in good faith.” (Emphasis added.) Rather than prohibiting a common-law claim for bad faith as the majority suggests, this statute merely provides that nothing in the Act would specifically create a statutory cause of action for bad faith.
I would find that in enacting K.S.A. 40-3403(e) and K.S.A. 40-3412(c), the legislature did not intend to eliminate the common-law claim for failure to settle in good faith. Accordingly, I dissent from the majority’s opinion.