1 Colorado, Colo. Rev. Stat. §§ 10-4-801 to -808 (Cum. Supp. 1978); Florida, Fla. Stat. Ann. § 768.54 (West Supp. 1978) (repealed by 1976 Fla. Laws, ch. 76168, § 3, effective July 1, 1982); Hawaii, Hawaii Rev. Stat. §§ 671-31 to -37, 431-456 to -457 (Replacement 1976); Illinois, Ill. Ann. Stat. ch. 73, §§ 1065.300 to .315 (Smith-Hurd Supp. 1979); Indiana, Ind. Code Ann. §§ 16-9.5-1-1 to .5-9-10 (Burns Supp. 1978); Kansas, Kan. Stat. Ann. §§ 40-3401 to-3419 (Supp. 1976) (upheld in Schneider v. Liggett, 223 Kan. 610, 576 P.2d 221 (1978)); Kentucky, Ky. Rev. Stat. § 304.40-330 (Supp. 1978) (Fund deficit provision and mandatory insurance provision held unconstitutional in McGuffey v. Hall, 557 S.W.2d 401 (Ky. 1977)); Louisiana, La. Rev. Stat. Ann. §§ 40:1299.41 to : 1299.46 (West 1977); Nebraska, Neb. Rev. Stat. §§ 44-2801 to-2855 (Supp. 1978); New Mexico, N.M. Stat. Ann. §§ 58-33-1 to -28 (Supp. 1976); North Dakota, N.D. Cent. Code §§ 26-40-01 to -40.1-18 (Replacement 1978) (held unconstitutional in Arneson v. Olson, 270 N.W.2d 125 (N.D. 1978)); Oregon, 1975 Or. Laws ch. 796; Pennsylvania, Pa. Stat. Ann. tit. 40, §§ 1301.101 to .1006 (Purdon Supp. 1978) (upheld in McCoy v. Commonwealth, 37 Pa. Commw. Ct. 530, 391 A.2d 723 (1978)); South Carolina, S.C. Code §§ 38-59-110 to -190 (Supp. 1978); Wisconsin, Wis. Stat. Ann. §§ 655.23 to .27 (West Special Pamphlet 1979). Puerto Rico also has adopted PCF and mandatory insurance legislation. P.R. Laws Ann. tit. 26, §§ 41.010 to .090 (1976).

2 See White, & McKenna, Constitutionality of Recent Malpractice Legislation, 12 Forum 312, 312 (1977)Google Scholar. Although some commentators have questioned the existence of the “malpractice crisis,” legislation designed to address it has been passed by every state. Id. Legislative efforts have been directed primarily toward guaranteeing the availability of malpractice insurance to health care providers, toward modifying the tort law applicable to malpractice suits, and toward reducing the incidence of malpractice. Comment, Recent Medical Malpractice Legislation—A First Checkup, 50 Tulane L. Rev. 655 (1976)Google Scholar.

The term “medical malpractice crisis” is not easily defined. Some writers have used it to refer to increases both in the number of malpractice claims and in insurance premiums. Dunn, Medical Malpractice 1976: An Update on Change, 45 J. Kan. B.A. 173, 173 (1976)Google Scholar. Others use the term to refer to the underlying problems that may have led to the “symptoms” of increased litigation and rising insurance premiums. E.g., Comment, supra, at 655-60. This Note is concerned primarily with the aspects of the crisis related to the high cost and unavailability of medical malpractice insurance.

3 See Dunn, supra note 2, at 174. Other factors that have been linked to the crisis include erosion of the doctor-patient relationship, see, e.g., Comment, supra note 2, at 657, and the practice of defensive medicine, which has been defined as follows:

S. Law & S. Polan, Pain and Profit 114 (1978) [hereinafter cited as Law & Polan]. See also Ashler, Medical Malpractice—The Regulator's View, 49 Fla. B.J. 506, 508 (1975).

4 This description of PCF statutes refers to the concept in general, without accounting for variations among the statutes.

5 For a definition of the term “excess insurance,” see note 27 infra.

6 Although most PCF statutes include nurses or health care institutions or both within the term “health care providers,” some statutes do not. All PCF statutes define licensed practicing physicians as “health care providers.” Hence, for simplicity, the term “health care providers” shall be used throughout this Note to mean licensed practicing physicians.

7 Although available data are not current, the following statistics are noteworthy. Between 1960 and 1970, premiums for California doctors (other than surgeons) rose 540.8 percent, and premiums for surgeons rose 949.2 percent. By 1975, these rates increased another 400 percent, and a 170 percent increase was projected for 1976. American Medical Association, Malpractice in Focus 20-21 (1975) [hereinafter cited as Malpractice in Focus]. One California obstetrician-gynecologist reported that his malpractice premiums went from $6,000 in 1975 to $36,000 in 1976. This doctor abandoned traditional insurance and, along with 40 percent of other “high-risk” doctors in this country, joined a doctor-owned malpractice insurance company. The doctor's premiums then decreased to $12,000. The viability of the doctor-owned insurance companies—which typically write only medical malpractice policies and cater particularly to high-risk doctors—will not be known until claims begin to surface. Hollie, Doctors Form Own Malpractice-Insurance Units, N.Y. Times, Nov. 24, 1978, at 2, col. 3.

In 1976, only one in seventy doctors paid over $25,000 for malpractice coverage and half paid $3,000 or less. The median cost of insurance, however, increased 58 percent over 1974-75. Law & Polan, supra note 3, at 162. (citing Owens, How Much Have Malpractice Premiums Gone Up? Medical Economics, Dec. 27, 1976, at 102). In 1970, insurance premiums cost physicians and surgeons 1.8 percent and 4.2 percent, respectively, of their gross incomes. Hew, Report of the Secretary's Commission on Medical Malpractice 13 (1973) [hereinafter cited as Hew Report]. Commentators estimate that in 1975 premiums represented between 5 percent and 10 percent of physicians’ gross salaries. Brook, Brutoco, & Williams, The Relationship Between Medical Malpractice and Quality of Care, 1975 Duke L.J. 1197, 1210 (1975)CrossRefGoogle Scholar. However, these malpractice insurance premiums are tax deductible for health care providers. Rev. Rul. 60-365, 1960-1 C.B. 49.

Thus, while physicians’ economic positions are not threatened by the increases in premium rates, this trend probably is indicative of a more serious underlying trend—the insurers’ economic problems and their desire to withdraw from the medical malpractice market. Legislative findings, Wis. Stat. Ann. § 655.27 (West Special Pamphlet 1979).

8 Law & Polan, supra note 3, at 166-71; Comment, supra note 2, at 659-60.

9 Comment, supra note 2, at 655-59.

10 Insurers have difficulty setting rates to cover future losses, because an injured patient may not become aware of an incident of malpractice or may not litigate or settle his or her claim for several months, if not years. Id. at 659; Law & Polan, supra note 3, at 182-83; Malpractice in Focus, supra note 7, at 20.

11 Hew Report, supra note 7, at 41.

12 The number of suits filed doubled between 1970 and 1975. During this same period, the average amount of jury awards increased sixfold. Shapiro, Medical Malpractice: History, Diagnosis and Prognosis, 22 St. Louis U.L. Rev. 469, 471 (1978)Google Scholar. In 1970, only 6.1 percent of awards were for more than $40,000, and most were for less than $3,000. Hew Report, supra note 7, at 11. The St. Paul Fire and Marine Insurance Co. estimated that its average claim payment was $12,535 in 1974. Malpractice in Focus, supra note 7, at 14. In California, with a well recognized malpractice crisis, there were six jury awards for over a million dollars each in 1975. Comment, Insurance—Medical Malpractice—Uncoupling the Freight Train: The Kentucky Medical Malpractice Act—McGuffey v. Hall, 557 S.W.2d401 (Ky. 1977), 5 N. Ky. L. Rev. 123, 140 (1978)Google Scholar. In 1975-76, the national average loss per doctor per claim filed was $668. Law & Polan, supra note 3, at 162.

13 Comment, supra note 2, at 660.

14 Small insurers are more dependent upon reinsurance than are large insurers; their small size creates a greater need to share the risk of liability with another insurer. See Hew Report,supra note 7, at 39. There are now only about two dozen reinsurers in the nation; as a result, it is very difficult for small insurers to obtain reinsurance, and consequently, to remain in the market. “Therefore, if a competitive private insurance market is to reappear in the country, efforts should be made, either privately or federally, to provide easy access to the reinsurance mechanism. For, to the extent that reinsurance is not available, a malpractice oligopoly will be fostered.” Oster, Medical Malpractice Insurance, 45 Ins. Counsel J. 228, 236 (1978)Google Scholar. For a definition of the term “reinsurance,” see note 27 infra.

15 The number of commercial medical malpractice insurers fell from 50 in 1965 to 12 in 1975. Law & Polan, supra note 3, at 164-65.

16 Id. at 166. At present, 10 major insurers are responsible for over 90 percent of the medical malpractice insurance written in this country. Comment, supra note 2, at 660. The anticompetitiveness of the malpractice insurance market is perhaps the most significant cause of the problems of unavailability and high cost. See Law & Polan, supra note 3, at 166.

17 The terms “high-risk providers” and “low-risk providers” will be used throughout this Note to refer to the providers’ specialty classifications, which are used by insurers to compute premium rates. The following classifications are commonly used (class 1 being the lowest risk, and class 5 the highest):

Hew Report, supra note 7, at 43.

18 Id.

19 “The reduction of reasonably priced liability insurance has caused doctors and hospitals to restrict their practices of medicine, thus limiting the availability of acceptable health care in some areas.” Comment, supra note 2, at 660. See Legislative Findings, Wis. Stat. Ann. § 655.27 (West Special Pamphlet 1979). In Florida, the unavailability of reasonably priced malpractice insurance threatened the availability of health care services. French, Florida Departs from Tradition: The Legislative Response to the Medical Malpractice Crisis, 6 Fla. Stat. U.L. Rev. 423, 424 (1978)Google Scholar.

20 Typically, the statutory provisions deal with the following: (1) mandatory or voluntary Fund membership; (2) mandatory or voluntary purchase of primary insurance coverage, and amount of insurance required (one amount or graduated amounts for providers in different specialties); (3) mode of recourse in the event of deficit in the Fund; (4) allowance of alternative means of proving financial responsibility; (5) possibility of waiver or exemption of certain providers; (6) sanctions to guarantee or encourage compliance; (7) alternative insurance sources for providers unable to obtain insurance on the market; (8) limitations on total recovery or on Fund liability; (9) insurers’ burden of defending the Fund; (10) amount of surcharge assessed and factors used to determine amount; and (11) liability of the Fund for uncollectable judgments below the level of the Fund's responsibility.

21 See notes 74 and 82 infra. “Primary insurance” is meant to refer to $100,000 per occurrence/$300,000 aggregate coverage. This level of coverage usually is the lowest level of coverage written. See Ashler, supra note 3, at 507. For a definition of the term “excess insurance,” see note 27 infra.

22 Most PCF statutes fix $100,000 as the level at which the Fund's responsibility begins, and as the minimum primary coverage required.

23 Plaintiffs must win a legal judgment against a Fund member, or at least demonstrate proof of a cause of action in negligence that is sufficient to induce settlement, in order to be entitled to collect from the Fund.

24 Redish, Legislative Response to the Medical Malpractice Insurance Crisis: Constitutional Implications, 55 Tex. L. Rev. 759, 764 (1977)Google Scholar.

25 See Mechanic, Some Social Aspects of the Medical Malpractice Dilemma, 1975 Duke L.J. 1179, 1180 (1975)CrossRefGoogle Scholar.

26 See Comment, supra note 2, at 665.

27 Id. Existing risk-spreading devices include: (a) reinsurance—the insurer's liabilities are insured by a second insurer, Black's Law Dictionary 946 (4th rev. ed. 1968)—the first insurer's risks are shifted to the second insurer; (b) excess insurance—liability is covered for damages greater than those covered under a primary insurance policy—risks above the primary insurance level are shifted from the primary insurer and the insured to the excess insurer; (c) deductible policies—certain liabilities are expressly excluded from coverage—the risk of such liabilities is left with the insured. Note, A Study of Medical Malpractice Insurance: Maintaining Rates and Availability, 9 Ind. L. Rev. 594, 602 (1976)Google Scholar.

28 Comment, supra note 2, at 665.

29 An analysis of the constitutionality of PCF and mandatory malpractice insurance statutes is beyond the scope of this Note. Such statutes have been challenged in five state courts. Jones v. State Bd. of Medicine, 97 Idaho 859, 399 P.2d 555 (1976); Schneider v. Liggett, 223 Kan. 610, 576 P.2d 221 (1978); McGuffey v. Hall, 557 S.W.2d 401 (Ky. 1977); Arneson v. Olson, 270 N.W.2d 125 (N.D. 1978); McCoy v. Commonwealth, 37 Pa. Commw. Ct. 530, 391 A.2d 723 (1978). In McGuffey, the PCF concept itself was upheld but the provisions for borrowing funds from the state in the event of Fund deficit and for requiring mandatory insurance were held unconstitutional.

30 Keeton, Compensation for Medical Accidents, 121 U. Pa. L. Rev. 590 (1972)CrossRefGoogle Scholar.

31 Keeton's model objectives are the following:

Id. at 603.

32 Wisconsin requires its PCF to pay within 90 days of the filing of a claim. Wis. Stat. Ann. § 655.27(5)(e) (West Special Pamphlet 1979). Louisiana, on the other hand, provides for payments shortly after the end of the year in which the claim was filed. La. Rev. Stat. Ann. § 40:1299.44 A(7) (West 1977).

33 Under the Wisconsin statute, for example, if the Fund incurs liability over $1,000,000 to any one person for one claim, the fund will pay up to $500,000 per year until the claim is paid in full. Wis. Stat. Ann. § 655.27(5)(d) (West Special Pamphlet 1979). For other examples, see note 41 infra.

34 See notes 41 and 43 infra.

35 See note 45 infra.

36 McCoy v. Commonwealth, 37 Pa. Commw. Ct. 530, 555, 391 A.2d 723, 730 (1978) (Crumlish, J., dissenting); Dunn, supra note 2, at 184; Comment, supra note 2, at 665. For example, a plaintiff who wins a $500,000 judgment against a health care provider who is not a member of the Fund and has commercial insurance coverage of $100,000 per occurrence/ $300,000 aggregate, and personal assets valued at $150,000, would be unable to collect $250,000 of his or her judgment. Alternatively, a plaintiff who wins a $500,000 judgment against a Fund-member provider who has similar commercial primary insurance coverage and similar personal assets would collect $100,000 from the commercial insurer and $400,000 from the PCF. Hence, the total judgment would be collected.

37 In Indiana and Oregon, the PCF is responsible for uncollectable judgments owed by providers. Ind. Code Ann. § 16-9.5-4-2.5 (Burns Supp. 1978); 1975 Or. Laws ch. 796, § 14(4).

38 PCF statutes in the following jurisdictions place limits on fund liability or on individual awards: Colorado (Fund's liability limited to $900,000 per occurrence/$2,700,000 aggregate), Colo. Rev. Stat. § 10-4-803(3)(a) (Cum. Supp. 1978); Indiana, Louisiana, and Nebraska ($500,000 absolute recovery limit), Ind. Code Ann. § 16-9.5-2-2(a) (Burns Supp. 1978), LA. Rev. Stat. Ann. § 40:1299.42(B)(l) (West 1977), Neb. Rev. Stat. § 44-2832(2) (Supp. 1978); New Mexico ($500,000 absolute limit injury cases for damages, excluding punitive damages and medical care and related benefits), N.M. Stat. Ann. § 58-33-6(A) (Supp. 1976); North Dakota ($300,000 absolute recovery limit), N.D. Cent. Code § 26-40.1 (11) (Replacement 1978); Pennsylvania (Fund's liability limited to $1 million per occurrence/$3 million aggregate), PA. Stat. Ann. tit. 40, § 1301.701(d) (Purdon Supp. 1978); Puerto Rico ($500,000 limit on Fund's liability unless additional Fund surcharge is remitted, and if remitted, Fund's liability is limited to $1 million), P.R. Laws Ann. tit. 26, § 41.050(1) (1976); Wisconsin (if Fund's reserves fall below $2,500,000 in one year or below $6,000,000 over two years, a $500,000 limit on Fund liability will take effect), Wis. Stat. Ann. § 655.27(6) (West Special Pamphlet 1979).

39 In Hawaii, Kansas, and Kentucky, PCF statutes allow the Fund to borrow money from the state treasury in order to avoid a deficit. Hawaii Rev. Stat. § 671-37 (Replacement 1976); Kan. Stat. Ann. § 40-3405 (Cum. Supp. 1978); KY. Rev. Stat. § 304.40-330(8)(c) (Supp. 1978).

40 The following jurisdictions allow additional assessments against providers in order to avoid a deficit: Florida (equal to or less than amount already paid to Fund), Fla. Stat. Ann. § 768.54(3)(b)(3) (West Supp. 1978); Illinois (amount found necessary by director of state department of insurance), Ill. Ann. Stat. ch. 73, § 1065.307 (Smith-Hurd Supp. 1979); Nebraska (not greater than 50 percent of provider's premium), Neb. Rev. Stat. § 44- 2829(2)(a) (Supp. 1978); North Dakota (amount proportional to annual fee but no limit specified), N.D. Cent. Code § 26-40.1-15(4) (Replacement 1978); Puerto Rico (no limit), P.R. Laws Ann. tit. 26, § 41.060(4) (1976); Wisconsin (not greater than 25 percent of provider's premium), Wis. Stat. Ann. § 655.27(3)(c) (West Special Pamphlet 1979).

41 Wisconsin pays claims under $1,000,000 in full as filed; if the Fund is exhausted, unpaid claims are payable the following year. Wis. Stat. Ann. § 655.27 (West Special Pamphlet 1979). Colorado, Hawaii, Indiana, Louisiana, and Puerto Rico prorate all claims and carry over any unpaid balance to the following year. Colo. Rev. Stat. § 10-4 804 (Cum. Supp. 1978); Hawaii Rf.V. Stat. § 671-32(b) (Replacement 1976); Ind. Stat. Ann. § 16-9.5-4-l(j) (Burns Supp. 1978); La. Rf.V. Stat. Ann. § 40:1299.42A(7) (West 1977); P.R. Laws Ann. tit. 26, § 41.060 (1976). New Mexico prorates claims and carries over unmet obligations, except for medical care and related benefits. N.M Stat. Ann. § 58-33-25(6) (Supp. 1976). The following states have established an annual award limit per claimant and pay the excess in installment options in order to avoid deficits: Florida ($100,000 limit per claim per year), Fla. Stat. Ann. § 768.54(3)(e)(3) (West Supp. 1978); Illinois (installment payments required if Fund liability exceeds $300,000—except for claimant's living and medical expenses), Ill. Ann. Stat. ch. 73, § 1065.309(c) (Smith-Hurd Supp. 1979); Kansas ($150,000 limit per claim per year), Kans. Stat. Ann. § 40-3404(c) (Cum. Supp. 1978); Kentucky (installment payments required if liability exceeds $1 million), KY. Rev. Stat. § 304.40-330(8)(b) (Supp. 1978); North Dakota (if award is over $100,000 court can order installment payments), N.D. Cent. Code § 26-40.1-16 (Replacement 1978); South Carolina (optional $100,000 limit per year), S.C. Code § 38-59-120 (Supp. 1978); Wisconsin (if a claim exceeds $1,000,000, the Fund pays up to $500,000 per year until the claim is satisfied), Wis. Stat. Ann. § 655.27(5)(d) (West Special Pamphlet 1979).

42 Some courts have held that limiting plaintiffs’ medical malpractice recovery or borrowing from the state's treasury is unconstitutional. See White,supra note 2, at 317-22; Comment, supra note 2, at 655. In addition, fixed recovery limits usually apply even when the Fund has enough reserves to meet its obligations, needlessly preventing plaintiffs from recovering part of their awards. Increasing surcharges is undesirable, because it would place undue hardship on low-risk providers, and because it could render the Fund's “excess insurance” as costly or more costly than commercial policies. See Comment, An Analysis of State Legislative Responses to the Medical Malpractice Crisis, 1975 Duke L.J. 1417, 1423-24 (1975)Google Scholar.

43 Carrying over obligations also is ill-advised because there is no guarantee that the Fund will be more solvent in subsequent years. See Comment, supra note 2, at 666.

44 Comment, supra note 12, at 138. In Oregon the Fund pays a maximum of 10 percent of the award due when the claim is filed. At the end of the year, if the Fund's reserves are sufficient, the balance of awards due is paid with interest. If reserves are not sufficient, each claimant is paid his or her pro rata share of the remaining reserves as payment in full. 1975 Or. Laws ch. 796, § 17(2).

45 There are conflicting views about the probability of Fund deficits. The present author concludes, however, that deficits will be infrequent, because the average claim in a malpractice suit is relatively low and million dollar judgments are rare. See note 12 supra. In addition, Fund assessments should create sizeable reserves, especially in states where Fund membership is mandatory. See Lenihan, Kentucky's Medical Malpractice Laws Provide Compulsory Unlimited Coverage at Reduced Costs, 40 Ky. Bench & Bar, July 1976Google Scholar, at 15, 34. But see Comment, supra note 43, at 1423; Mathy, Testing the Constitutionality of the Wisconsin Medical Malpractice Act of 1975, \917 Wis. L. Rev. 838, 868 (1977)Google Scholar. See also Comment, supra note 2, at 665.

46 In Indiana and Oregon the PCF is responsible for uncollectable judgments owed by providers, making determination of the Fund's financial responsibility more difficult than in states without this provision. Ind. Code Ann. §§ 16-9.5-2-7, .5-4-2.5 (Burns Supp. 1978); 1975 OR. Laws ch. 796, § 14(5). In addition, there may be constitutional problems with Nebraska's, Indiana's, North Dakota's, and Louisiana's methods of determining their Funds’ liability. Comment, A Constitutional Perspective on the Indiana Medical Malpractice Act, 51 Ind. L.J. 143, 154-62 (1975)Google Scholar. In Arneson v. Olson, 270 N.W.2d 125 (N.D. 1978), the North Dakota Supreme Court held unconstitutional the state statute's provision that if the insurer settles with the claimant up to the defendant's policy limit, and the claimant demands more, the claimant must sue the Fund and let the court (without a jury) determine the amount to be paid the claimant by the Fund. An argument could be made that the described procedure is not part of a lawsuit, but is a settlement proceeding, and hence, does not result in an unconstitutional deprivation of the right to a jury trial. In light of the Arneson decision, however, this argument is not likely to succeed.

47 Comment, supra note 12, at 137. Fund assessments are collected through insurers in Hawaii, Indiana, Kansas, Kentucky, Louisiana, and New Mexico. Hawaii Rev. Stat. § 671-31(1) (Replacement 1976); Ind. Code Ann. § 16-9.5-4-1(d) (Burns Supp. 1978); Kan. Stat. Ann. § 40-3404 (Supp. 1976); KY. Rev. Stat. § 304.40-300(5)(b) (Supp. 1978); LA. Rev. Stat. Ann. § 40:1299.44A(2) (West 1977); N.M. Stat. Ann. § 58-33-25(B) (Supp. 1976).

48 In Colorado, Florida, Hawaii, Illinois, Indiana, Louisiana, Nebraska, New Mexico, Oregon, and South Carolina, the benefits of the statutes are withheld from nonparticipating providers. Colo. Rev. Stat. § 10-4-803 (Cum. Supp. 1978); Fla. Stat. Ann. §§ 768.54(2)(b), (3) (West Supp. 1978); Hawaii Rev. Stat. § 671-36 (Replacement 1976); Ill. Ann. Stat. ch. 73, § 1065.306 (Smith-Hurd Supp. 1979); Ind. Code Ann. §§ 16-9.5-2-1, -2-2(b) (Burns Supp. 1978); La. Rev. Stat. Ann. § 40:1299.41(D) (West 1977); Neb. Rev. Stat. § 44-2821 (Supp. 1978); N.M. Stat. Ann. § 58-33-5(B) (Supp. 1976); 1975 Or. Laws ch. 796, § 18(1); S.C. Code § 38-59-140 (Supp. 1978).

49 In six jurisdictions a provider's license can be suspended, or revoked, or both, for noncompliance: Florida (license of hospital can be revoked), Fla. Stat.” Ann. § 768.54(2)(d) (West Supp. 1979); Kansas (action may be taken to enjoin provider from practicing), Kan. Stat. Ann. § 40.3416 (Cum. Supp. 1978); Kentucky (a hearing may be held to determine whether provider's license should be suspended), Ky. Rev. Stat. § 340.40-330(9) (Cum. Supp. 1978); North Dakota (license can be revoked), N.D. Cent. Code § 26-40.1-10 (Replacement 1978); Pennsylvania (license can be suspended or revoked), Pa. Stat. Ann. tit. 40, § 1301.701(f) (Purdon Supp. 1978); Puerto Rico (action may b e taken against provider), P.R. Laws Ann. tit. 26, § 41.080(3) (1976).

50 In four jurisdictions the insurer's certificate of authority can be suspended or revoked for noncompliance: Indiana (suspension), Ind. Code Ann. § 16-9.5-1-5 (Burns Supp. 1978); Louisiana (suspension), La. Rev. Stat. Ann. § 40:1299.45 (West 1977); Nebraska (revocation), Neb. Rev. Stat. § 44-2836(6) (Supp. 1978); New Mexico (revocation), N.M. Stat. Ann. § 58-33-26(D) (Supp. 1976). A certificate of authority is the equivalent of a state-issued license to sell insurance.

51 In Wisconsin a fine of up to $1,000 can be imposed for each week of violation. Wis. Stat. Ann. § 655.23(6) (West Special Pamphlet 1979).

52 McCoy v. Commonwealth, 37 Pa. Commw. Ct. 506, 555, 391 A.2d 723, 730 (1978) (Crumlish, J., dissenting); Dunn, supra note 2, at 184; Comment, supra note 2, at 665.

53 Eight states require the provider's insurer to defend the Fund in malpractice actions: Colorado (but the Fund retains the option of providing its own defense), Colo. Rev. Stat. § 10-4-805(4) (Cum. Supp. 1978); Florida (but the Fund must defend itself if named as a defendant), Fla. Stat. Ann. § 768.54(e)(2) (West Supp. 1978); Illinois (the Fund must defend itself if named as a defendant, and it retains the option of providing its own defense), Ill. Ann. Stat. ch. 73, § 1065.309(b) (Smith-Hurd Supp. 1979); Kansas (the Fund retains the option of defending itself), Kan. Stat. Ann. § 40-3409(b) (Cum. Supp. 1978); Kentucky (if the Fund requests an appeal, the Fund must pay its expenses), Ky. Rev. Stat. § 304.40- 330(8)(a) (Supp. 1978); Pennsylvania (the Fund retains the option of defending itself), PA. Stat. Ann. tit. 40, § 1301.702(d) (Purdon Supp. 1978); South Carolina (the Fund retains the option of defending itself), S.C. Code § 38-59-180(2) (Supp. 1978); Wisconsin (the Fund retains the option of defending itself, but if the Fund takes such action because the insurer has acted in bad faith, the insurer must reimburse the Fund for its defense costs), Wis. Stat. Ann. § 655.27(5)(b) (West Special Pamphlet 1979). Since the insurers do not have the economic incentive to minimize the Fund's liability, all but one of the jurisdictions that require the insurers to defend the Fund have an option for the Fund to defend itself. Ky. Rev. Stat. § 304.40-330(8)(a) (Supp. 1978). For a discussion of requirements that the insurer bear the Fund's defense costs, see note 88 infra.

54 For example, the Kansas provision states that if a claimant rejects the Fund's offer, and the claimant's actual recovery is less, the claimant must pay the Fund's defense costs. Kan. Stat. Ann. § 40-3411(d) (Cum. Supp. 1978). In light of the expense of defending against malpractice suits, however, this scheme might impose an unreasonable penalty on plaintiffs by equating an unsuccessful claim with a frivolous one.

55 Plaintiffs must win a legal judgment against a Fund member provider, or at least demonstrate proof of a cause of action that is sufficient to induce settlement, before the PCF will pay a claim. For example, in malpractice suits based on negligence theory, the plaintiff must prove the four fundamental elements of negligence:

1. 1.

   1. A duty or obligation, recognized by the law, requiring the actor to conform to a certain standard of conduct, for the protection of others against unreasonable risks.

2. 2.

   2. A failure on his part to conform to the standard required ….

3. 3.

   3. A reasonably] close causal connection between the conduct and the resulting injury. This is what is commonly known as ‘legal cause,’ or ‘proximate cause.'

4. 4.

   4. Actual loss or damage resulting to the interests of another ….

W. Prosser, Law Op Torts § 30 (4th ed. 1971) (footnote omitted).

56 Statutes altering traditional tort law as applied to medical malpractice suits often include malpractice screening panels, e.g., Ind. Stat. Ann. §§ 16-9.5-9-1 to .5-9-10 (Burns Supp. 1978) and shortened statutes of limitation, e.g., id. at § 16-9.5-3-1.

57 Schwartz, & Komesar, Doctors, Damages and Deterrence: An Economic View of Medical Malpractice, 298 New England,]. Med. 1282, 1283 (1978)CrossRefGoogle Scholar. “By finding fault and assessing damages against the negligent provider, the system sends all providers a signal that discourages future carelessness and reduces future damages.” Schwartz and Komesar posit the following modification of Learned Hand's Rule for the occurrence of negligent behavior: “[N]egligent behavior is the failure to invest resources up to a level that equals the anticipated savings in damages …. Damages awarded to a victim induce potentially negligent people to compare the cost of avoiding an injury with the cost of paying for it.” Id. at 1282. But see Bernzweig, Getting to the Root of the Problem, 11 Trial 58, 70 (1975)Google Scholar (arguing that although the threat of malpractice suits may cause some doctors to practice better medicine, there are more who practice worse medicine because of the fear of suits); see also Keeton, supra note 30, at 606-08. (“The effectiveness of [negligence law as] a deterrent depends more on the economic consequences of liability than on the question whether the theory is nonfault … or … fault … .” Id. at 607.

58 Reder, Medical Malpractice: An Economist's View, 1976 A.B.F. Research J. 511, 544-45 (1976)Google Scholar.

59 Keeton, supra note 30, at 606; Schwartz & Komesar, supra note 57, at 1287.

60 Providers, however, do have other incentives to avoid tort liability, such as potential harm to their practice, shame associated with adverse publicity, and the possibility of state and professional sanctions. See Mechanic, supra note 25, at 1180.

61 Schwartz & Komesar, supra note 57, at 1287. The term “experience rating” refers to a rating based upon the provider's record of claims, settlements, and judgments.

62 The severity of harm caused by medical malpractice, however, is not necessarily related to the degree of the provider's negligence.

63 Fund surcharges are adjusted to account for providers’ experience ratings in Florida, Puerto Rico, and Wisconsin. Fla. Stat. Ann. § 768.54(3)(b) (West Supp. 1978); P.R. Laws Ann. tit. 26, § 41.060(2) (1976); Wis. Stat. Ann. § 655.27(3)(b) (WestSpecial Pamphlet 1979).

64 See Law & Polan, supra note 3, at 114.

65 See note 27 supra.

66 See Redish, supra note 24, at 764.

67 See note 38 supra.

68 McCoy v. Commonwealth, 37 Pa. Commw. Ct. 530, 539, 391 A.2d 723, 727 (1978).

69 See Hew Report, supra note 7, at 8-9.

70 See Scherer, & Scherer, Recent Legislation: The Kansas Approach to Medical Malpractice, 16 Washburn L.J. 395, 399 (1977)Google Scholar.

71 Id.

72 See note 45 supra; McCoy v. Commonwealth, 37 Pa. Commw. Ct. 530, 539, 391 A.2d 723, 727 (1978).

73 A mandatory Fund also will distribute the risk more widely among providers, thus reducing the burden on any one provider. Ashler, supra note 3, at 507.

74 Seven jurisdictions require PCF membership and primary insurance coverage for all health care providers: Hawaii, Indiana, Kansas, Kentucky, North Dakota, Puerto Rico, and Wisconsin. Hawaii Rev. Stat. § 671-31(a) (Replacement 1976); Ind. Code Ann. § 16-9.5-4-la(e) (Burns Supp. 1978); Kan. Stat. Ann. §§ 40-3404(2)-3402(a) (Cum. Supp. 1978); Ky. Rev. Stat. § 304.40-330(2) (Supp. 1978); N.D. Cent. Code § 26-40-05 (Replacement 1978); P.R. Laws Ann. tit. 26, § 41.060(1) (1976); Wis. Stat. Ann. § 655.23 (West Special Pamphlet 1979). In Pennsylvania, Fund membership is mandatory only lor doctors with 50 percent or more of their practice in the state; however, primary insurance is mandatory for all providers. Pa. Stat. Ann. tit. 40, § 1301.701 (Purdon Supp. 1978). Seven jurisdictions’ statutes provide for voluntary Fund membership, but require insurance for all Fund members: Colorado, Louisiana, Nebraska, New Mexico, Oregon (doctors only), and South Carolina. Colo. Rev. Stat. § 10-4-803(1) (Cum. Supp. 1978); La. Rev. Stat. Ann. §§ 40:1299-42(A)(2), (E) (West 1977); Neb. Rev. Stat. § 44-2824 (Supp. 1978); N.M. Stat. Ann. § 58-33-5(A) (Supp. 1976); 1975 Or. Laws ch. 796, § 14; S.C. Code §§ 38-59-140, -150 (Supp. 1978). In Florida, insurance coverage is mandatory for all health care providers, but Fund membership is mandatory only for doctors, and is voluntary for hospitals carrying insurance. Fla. Stat. Ann. § 768.54(2)(a)-(c) (West Supp. 1978).

75 “Going bare,” according to most commentators, is not likely to become a major trend: First, a few cases of proven medical negligence against physicians unable to pay a judgment will encourage more states to pass laws requiring malpractice insurance coverage…. Second, hospitals, out of their own fear or at the insistence of their insurance companies, increasingly require staff physicians to carry their own malpractice insurance…. Finally, physicians may be reluctant to practice with or refer patients to a doctor who is not insured.

Presumably, the great majority of doctors and hospitals will continue to purchase malpractice insurance, because of concern for their patients, economic insecurity, or external compulsion.

Law & Polan, supra note 3, at 205.

76 The portion of a judgment below the Fund's level of responsibility would be uncollect able. But see note 38 supra (Fund pays uncollectable judgments owed by providers in Indiana and Oregon).

77 See note 75 supra.

78 See Bernzweig, supra note 57, at 49-50. But see Comment, supra note 42, 1975 Duke L.J. at 1424 (arguing that the risk-spreading mechanism of the Fund is inequitable because it places undue burdens on low-risk providers).

79 Fund surcharges are adjusted to account for providers’ experience ratings in Florida, Puerto Rico, and Wisconsin. Fla. Stat. Ann. § 768.54(3)(c)(2) (West Supp. 1978); P.R. Laws Ann. tit. 26, § 41.0 (1976); Wis. Stat. Ann. § 655.27(3)(b)(2) (West Special Pamphlet 1979).

80 Florida, Oregon, and Puerto Rico graduate fees according to risk classifications. Florida initially assessed $1,000 per physician and $300 per bed for hospitals. The physicians’ assessment has been reduced to $500 with adjustments for risk, location, and experience rating. The surcharge is automatically reduced whenever fund reserves exceed $25 million. Fla. Stat. Ann. § 768.54(c) (West Supp. 1978). In Oregon, class 1 and 2 physicians pay $150, class 3 and 4 physicians pay $450, and class 5 and 6 physicians pay $750. 1975 Or. Laws ch. 796, § 14(2). Puerto Rico initially assessed general practitioners and other nonsurgeons $100, other practitioners $500, and hospitals $50 per bed. The assessments are now adjusted for reserve level, loss experience, risk-classification, and other factors. P.R. Laws Ann. tit. 26, § 41.060 (1976).

Twelve jurisdictions use premium surcharges: Colorado (rate of providers’ insurance premium surcharge to be set; if reserves are $7 million or more, surcharge can be reduced, to maintain the Fund at this level), Colo. Rev. Stat. § 10-4-804 (Cum. Supp. 1978); Hawaii (rate to be set; if reserves are $5 million or more, surcharge can be reduced or waived, to maintain the Fund at this level), Hawaii Rev. Stat. § 67l-31(b) (Replacement 1976); Indiana (rate to be set, but not to exceed 10 percent of the provider's insurance premium; $5 minimum surcharge; after the Fund has reached $ 15 million, surcharge can be reduced), Ind. Code Ann. § 16-9.5-4-l(b) (Burns Supp. 1978); Kansas (rate to be set between 40 percent and 65 percent of premiums until $5 million is accumulated; if the Fund reaches $10 million level after claims have been paid, surcharge can be reduced), Kan. Stat. Ann. § 40-3415 (Supp. 1976); Kentucky (rate to be set, not to exceed 10 percent of premium for doctors, or $50 per bed for hospitals), KY. Rev. Stat. § 304.40-330(5)(a) (Supp. 1978); Louisiana (rate to be set, but not to exceed 20 percent of premium), La. Rf.V. Stat. Ann. § 40:1299.44(2) (West 1977); Nebraska (rate to be set, but not to exceed 50 percent of premium; if Fund exceeds $4,500,000 surcharge can be reduced, to maintain the Fund at the $5 million level—or less, if Fund is reimbursed), Neb. Rev. Stat. §§ 44-2829, 44-2830 (Supp. 1978); New Mexico (rate to be set, but not to exceed 33 percent of premium; surcharge can be reduced if the Fund's reserves are at least $5 million after payment of claims for that year, N.M. Stat. Ann. §§ 58-33-25(B), (D) (Supp. 1976); North Dakota (rate to be set, but not to exceed 150 percent of premium), N.D. Cent. Code § 26-40.1-15-(1) (Replacement 1978); Pennsylvania (rate to be determined, but not to exceed $100 or 10 percent of premium, whichever is greater; if Fund reaches $15 million after paying claims for that year, surcharge can be reduced), Pa. Stat. Ann. tit. 40, § 1301.701(e) (Purdon Supp. 1978); South Carolina (first year: 100 percent of premium; second year: 75 percent of premium; third year: 50 percent of premium; fourth year: 25 percent of premium. But when the Fund reaches $4 million level, no surcharges will be assessed until reserves fall to $3,500,000; then 10 percent of premium for old Fund members, with the normal first-through fourth-year sequence of assessments for new members. Note, however, that surcharges will be reduced for providers obtaining primary insurance coverage in excess of the required minimum), S.C. Code § 38-59-150 (Supp. 1978); Wisconsin (first year: 10 percent premium for $200,000/$600,000 coverage for doctors, $50 for nurse anesthetists, $75 per bed for hospitals; second year: same as above for doctors and hospitals, $40 for nurse anesthetists; after second year: rate to be set based on operating expenses loss experience of Fund, providers’ experience rating with an adjustment for part-time providers. Fees are not to exceed 10 percent of premium, and can be reduced after $10 million level has been reached by Fund), Wis. Stat. Ann. § 655.27(3) (West Special Pamphlet 1979). The method of assessment has yet to be determined in Illinois.

81 Illinois, Kentucky, Pennsylvania, and Puerto Rico provide for possible exemption or waiver for providers. Ill. Ann. Stat. ch. 73, §§ 1065.306(b)(2), .315 (Smith-Hurd 1979); Ky. Rev. Stat. § 304.40-330(2) (Supp. 1978); Pa. Stat. Ann. tit. 40, §§ 1301.701(g), (h) (Purdon Supp. 1978); P.R. Laws Ann. tit. 26, § 41.080(1) (1976).

82 The following minimum amounts of primary insurance are required in PCF jurisdictions: Colorado, Florida, Hawaii, Kansas, Louisiana, Nebraska, and North Dakota require $100,000 per occurrence/$300,000 aggregate (for doctors) with the Fund's liability beginning at the same level. Colo. Rev. Stat. § 10-4-803(1) (Cum. Supp. 1978); Fla. Stat. Ann. § 76.854(2)(b)(3) (West Supp. 1978); Hawaii Rev. Stat. § 671-36 (Replacement 1976); Kan. Stat. Ann. § 40-3402(2) (Cum. Supp. 1978); La. Rev. Stat. § 40:1299.42(E) (West 1977); Neb. Rev. Stat. § 44-2827 (Supp. 1978); N.M. Stat. Ann. § 58-33-5(1) (Supp. 1976); N.D. Cent. Code § 26-40.1-09 (Replacement 1978). Illinois requires $100,000/$300,000 minimum insurance, although the statute authorizes higher minimums if needed. Ill. Ann. Stat. ch. 73, §§ 1065.306(a), (b) (Smith-Hurd Supp. 1979). Oregon requires doctors in classes 1 and 2 to purchase $100,000/$300,000; doctors in classes 3 and 4, $300,000/$300,000; and doctors in classes 5 and 6, $500,000/$500,000. 1975 Or. Laws ch. 796, § 14(2). In Pennsylvania, $100,000/$300,000 is the minimum coverage required of doctors with at least half of their practice in Pennsylvania, while all others must buy at least $200,000/$600,000. Pa. Stat. Ann. tit. 40, §§ 1301.701(a)(I), (2) (Purdon Supp. 1978). South Carolina also requires $100,000/ $300,000, but the liability of the Fund begins where the provider's coverage ends if more primary coverage is purchased. S.C. Code §§ 38-59-120, -150, -180(5) (Supp. 1978). Wisconsin requires $100,000/$300,000, but liability of the Fund begins at $200,000/$600,000, or the maximum liability limit for which the provider is insured, whichever is higher. Wis. Stat. Ann. § 655.23(5) (West Special Pamphlet 1979).

83 Indiana, Kentucky, Louisiana, Pennsylvania, and Wisconsin allow providers to selfinsure. Ind. Code Ann. § 16-9.5-2-b(3) (Burns Supp. 1978); Ky. Rev. Stat. §§ 304.40-330(3), (4) (Supp. 1978); LA. Rev. Stat. Ann. § 40:1299.44.A(2) (West 1977); Pa. Stat. Ann. tit. 40, § 1301.701(4) (Purdon Supp. 1978); Wis. Stat. Ann. § 655.23(3) (West Special Pamphlet 1979). Florida, Hawaii, Indiana, New Mexico, and Wisconsin allow providers to prove financial responsibility by posting bond. Fla. Stat. Ann. §§ 268.54(2)(b)(l), (2) (West Supp. 1978); Hawaii Rev. Stat. § 671-36(2) (Replacement 1976); Ind. Code Ann. § 16-9.5-2-6(2) (Burns Supp. 1978); N.M. Stat. Ann. § 58-33-5(1) (Supp. 1976); Wis. Stat. Ann. § 655.23(3) (West Special Pamphlet 1979). Hawaii and Illinois also allow other, unspecified means of proving financial responsibility. Hawaii Rev. Stat. § 671-36(2) (Replacement 1976); Ill. Ann. Stat. ch. 73, § 1065 (Smith-Hurd Supp. 1979).

84 The following PCF jurisdictions have established programs to provide an alternate source for insurance: Colorado (JUA and Stabilization Reserve Fund), Colo. Rev. Stat. §§ 10-4-101 to -908 (Cum. Supp. 1976); Florida (Medical Malpractice Risk Management Trust Fund), Fla. Stat. Ann. § 627.357 (West Supp. 1978); Hawaii (JUA), Hawaii Rev. Stat. §§ 435C-1 to -11 (Replacement 1976); Illinois (Stabilization Reserve Fund, JUA), Ill. Ann. Stat. ch. 73, §§ 1065.201 to .221, (Smith-Hurd Supp. 1978); Indiana (Risk Management Authority), Ind. Code Ann. § 16-9.5-8-1 to .5-8.8 (Burns Supp. 1978); Kansas (Risk Pooling Plan), Kan. Stat. Ann. § 40-3413 (Supp. 1976); Kentucky (Kentucky Insurance Pool Plan, JUA), Ky. Rev. Stat. §§ 304.40-010 to -140 (Supp. 1978); Louisiana (Residual Malpractice Insurance Authority), La. Rev. Stat. § 40:1299.46 (West 1977); Nebraska (Professional Liability Insurance Availability Act; Residual Malpractice Insurance Authority), Neb. Rev. Stat. §§ 44-2837 to -2839, -3001 to -3019 (Supp. 1978); New Mexico (Professional Liability Fund Act), N.M. Stat. Ann. §§ 58-34-1 to -14 (Supp. 1976); North Dakota (North Dakota Medical Malpractice Mutual Insurance Company), N.D. Cent. Code §§ 26-40-01 to -15 (Replacement 1978); Pennsylvania (JUA), Pa. Stat. Ann. tit. 40, §§ 1301.801 to .810 (Purdon Supp. 1978); Puerto Rico (JUA), P.R. Laws Ann. tit. 26, §§ 41.020 to .0240 (1976); Wisconsin (Risk Sharing Plans), Wis. Stat. Ann. §§ 619-01 to -04 (West Special Pamphlet 1979).'.

85 See note 36 supra.

86 See Comment, supra note 2, at 665.

87 See Dunn, supra note 2, at 184.

88 In Kansas the Fund's defense costs are borne by the insurer (insurer only bears costs up to $100,000 including amount of award paid by insurer; costs are assessed against claimant if amount of recovery is less than settlement offer made by Commissioner), Kentucky (unless the Fund requests an appeal), Illinois (unless the Fund chooses to defend itself or is named as defendant; the Fund shares the cost of a Fund-requested appeal), and Puerto Rico. Ill. Ann. Stat. ch. 73, § 1065.309(b) (Smith-Hurd Supp. 1979); Kan. Stat. Ann. §§ 40-341 l(b) (Cum. Supp. 1978); KY. Rev. Stat. § 304.40-330(8)(a) (Supp. 1978); P.R. Laws Ann. tit. 26, § 41.070(3) (1976). See Dunn, supra note 2, at 178. This burden may not be very significant because the insurers must defend on the issue of liability in any event. Furthermore, the Fund may choose to participate in the defense when the damages sought are very large. For a list of states where the insurer has a duty to actively provide the Fund's defense, see note 53 supra.

89 The PCF statutes of Colorado, Florida, Hawaii, Indiana, Kansas, Louisiana, North Dakota, Oregon, Puerto Rico, South Carolina, and Wisconsin explicitly state that the Fund, and not the state, is responsible for awards and administrative expenses. Colo. Rev. Stat. § 10-4-804 (Cum. Supp. 1978); Fla. Stat. Ann. § 768.54(3)(a) (West Supp. 1978); Hawaii Rev. Stat. § 671-34 (Replacement 1976); Ind. Code Ann. § 16-9.5-4-l(h) (Burns Supp. 1978); Kan. Stat. Ann. § 40-3405 (Cum. Supp. 1978); La. Rev. Stat. Ann. § 40:1299.44(a)(5) (West 1977); N.D. Cent. Code § 26-40.1-15(3) (Replacement 1978); 1975 Or. Laws ch. 796, § 21; P.R. Laws Ann. tit. 26, §§ 41.050(l)(a), (b) (1976); S.C. Code § 38-59-160 (Supp. 1978); Wis. Stat. Ann. § 655.27(1) (West Special Pamphlet 1979). The Illinois statute leaves the matter to be determined. Ill. Ann. Stat. ch. 73, § 1065.305(2) (Smith-Hurd Supp. 1978). The statutes of Kentucky, Nebraska, New Mexico, and Pennsylvania do not directly address the question, but seem to imply that the Fund is to bear these costs. Ky. Rev. Stat. § 304.40-300 (Supp. 1978); Neb. Rev. Stat. §§ 44-2801 to -2855 (Supp. 1978); N.M. Stat. Ann. §§ 58-33-1 to -28 (Supp. 1978); PA. Stat. Ann. tit. 40, § 1301.101 to .1006 (Purdon Supp. 1978).

90 See Comment, supra note 42, at 1423-24.