Background
The Medical Care Availability and Reduction of Error Fund (MCARE Fund) is Pennsylvania’s mandatory excess-coverage backstop for physicians: every physician who practices in the Commonwealth must maintain primary malpractice insurance and pay annual assessments to the Fund, which then covers claims above the primary policy limits. Primary insurers collect those assessments on behalf of their physician-insureds and remit them to MCARE, along with notice confirming that the physician has the required basic coverage. When that notification and remittance system breaks down, the question becomes who bears the consequences—and that is exactly what this case asks.
The dispute arises from the settlement of Cadden v. Nam, a medical malpractice action in Luzerne County Court of Common Pleas. Petitioner Applied Medico-Legal Solutions Risk Retention Group, Inc. (AMS) provided primary malpractice coverage to Adfinitas Health at Wilkes-Barre and its employed physician, Dr. Daniel Nam. Respondent ProAssurance Specialty Insurance Company, Inc. had also insured Adfinitas for earlier policy periods and, under Pennsylvania regulation (31 Pa. Code § 242.6), was responsible for collecting Dr. Nam’s MCARE assessments and notifying the Fund that he had the required primary coverage. Due to an administrative error—a former Adfinitas employee wrongly told ProAssurance there was a “gap” in Dr. Nam’s employment—ProAssurance failed to re-add Dr. Nam to the Adfinitas policy and never notified MCARE of his coverage. Adfinitas later corrected the error and directed ProAssurance to reinstate Dr. Nam on the policy, but ProAssurance did not act promptly. When the Cadden case settled, MCARE refused to contribute its $500,000 statutory share of the settlement because it had no record of Dr. Nam’s insurance or assessment. AMS stepped in and covered that $500,000 itself.
AMS then brought this original-jurisdiction action in the Commonwealth Court against both ProAssurance and the MCARE Fund. Its second amended petition asserts six counts: declaratory judgment against MCARE (Count I); declaratory judgment against ProAssurance for breach of its duties (Count II); indemnification against both (Count III); unjust enrichment against MCARE (Count IV); breach of contract against ProAssurance (Count V); and bad faith against ProAssurance under 42 Pa.C.S. § 8371 (Count VI). Both respondents filed preliminary objections in the nature of demurrers and motions to strike.
The Court’s Holding
Judge Fizzano Cannon, writing for a panel of Jubelirer, P.J., Fizzano Cannon, J., and Wallace, J., sustained one of ProAssurance’s preliminary objections and overruled the rest. ProAssurance argued that all four of the counts directed against it (Counts II, III, V, and VI) must fail because the petition alleges no breach of a specific contract provision. The court rejected this: the petition plainly alleges that ProAssurance had a contractual and regulatory duty to collect and remit MCARE assessments and to notify MCARE of Dr. Nam’s coverage, and that ProAssurance breached both. ProAssurance’s additional demurrers to Counts III (indemnity) and V and VI were waived or rejected for the same reasons. The court likewise overruled ProAssurance’s insufficient-specificity objection, finding that the petition—read as a whole—clearly identified the complained-of conduct as the failure to notify MCARE and remit the assessment, leaving no risk of later amplification.
The court did sustain ProAssurance’s objection to three paragraphs and one demand for relief asserting that the parties had “common liability” as tortfeasors in the underlying malpractice case. Because AMS had previously withdrawn its contribution claims against ProAssurance, those averments no longer served any pleading purpose and were stricken as scandalous and impertinent under Pa.R.Civ.P. 1028(a)(2). The MCARE Fund’s demurrers to Counts III (indemnification) and IV (unjust enrichment) fared no better. The Fund contended that indemnification can only run from an “actually responsible” tortfeasor. The court disagreed, citing Willet v. Pa. Med. Catastrophe Loss Fund, 702 A.2d 850 (Pa. 1997), for the principle that indemnification may lie whenever “community opinion” would conclude that the obligation should rest on one party rather than another; at the pleading stage, the court could not rule out that MCARE was the party that should bear the $500,000. On unjust enrichment, the court held that AMS sufficiently pleaded a benefit conferred on MCARE (payment of MCARE’s statutory share), retained by MCARE, under circumstances where MCARE was not entitled to keep it.
Key Takeaways
- A primary malpractice insurer owes duties under 31 Pa. Code § 242.6 to collect and remit MCARE assessments and to notify the Fund of a physician’s coverage; breach of those duties can support breach-of-contract, indemnity, and bad-faith claims under 42 Pa.C.S. § 8371, at least at the preliminary-objection stage.
- The MCARE Fund’s indemnification obligation is not limited to cases in which it is a tortfeasor; if AMS’s allegations that MCARE had a statutory obligation to pay $500,000 are true, an indemnification claim lies even though MCARE was not a named defendant in the malpractice action.
- Pleading “common liability” as joint tortfeasors in an insurance-coverage action is scandalous and impertinent once contribution claims have been withdrawn; such paragraphs are properly stricken under Pa.R.Civ.P. 1028(a)(2).
- Demurrers for insufficient specificity fail where the petition, read as a whole, clearly confines the alleged wrongdoing to specific conduct; vague catch-all language is acceptable when the nature of the dispute leaves no meaningful room for later amplification.
Why It Matters
Medical malpractice practitioners in Pennsylvania regularly navigate the MCARE system, but disputes about who must ensure a physician’s assessments are remitted and MCARE is notified are relatively uncommon in litigated form. This decision gives risk-retention groups and primary insurers a roadmap for pursuing both ProAssurance-type insurers (for failure to perform their regulatory notification duties) and the MCARE Fund itself (for unjust retention of a statutory payment obligation) when administrative errors cause MCARE to deny coverage. The court’s willingness to allow indemnification claims against MCARE at the pleading stage—even absent tortfeasor status—suggests that the Fund cannot easily escape liability simply because it played no role in the underlying negligence.
For insurers that administer MCARE assessments on behalf of physician-insureds, the case is a reminder that the notification and remittance duties under 31 Pa. Code § 242.6 carry real legal consequences. An error in tracking a physician’s employment status—even one caused initially by a client—that is not promptly corrected can expose the insurer to breach-of-contract, indemnity, and bad-faith claims if MCARE later denies coverage. Because this is an opinion not reported, it cannot be cited as binding precedent, but it provides persuasive authority on the interplay between MCARE’s statutory structure and common-law indemnification doctrine.