# Louisiana Patients' Compensation Fund Oversight Board v. St. Paul Fire & Marine Insurance

> Court of Appeals for the Fifth Circuit · June 7, 2005 · 411 F.3d 585

URL: https://www.frixlaw.com/law-library/cases/38348

## Case

- **Full name:** LOUISIANA PATIENTS’ COMPENSATION FUND OVERSIGHT BOARD, Plaintiff-Appellee, v. ST. PAUL FIRE & MARINE INSURANCE CO., Defendant-Appellant
- **Court:** Court of Appeals for the Fifth Circuit
- **Decided:** June 7, 2005
- **Citations:** 411 F.3d 585; 2005 U.S. App. LEXIS 10431; 2005 WL 1331264
- **Precedential status:** Published
- **Opinion:** Opinion by DeMOSS
- **Judges:** Davis, Smith, Demoss
- **Cited by:** 15 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/38348

## How later opinions describe it (automated extraction)

- finding that “[oJur appellate jurisdiction under § 1292(b) extends only to interlocutory orders involving a controlling question of law” and refusing to consider questions of sufficiency of evidence as a result
- finding that “[o]ur appellate jurisdiction under § 1292(b) extends only to interlocutory orders involving a controlling question of law” and refusing to consider questions of sufficiency of evidence as a result
- stating that our jurisdiction is limited to what has been identified in the § 1292(b) order as a “controlling question of law”
- observing that under § 1292(b) we do not review whether a party has presented sufficient evidence to avoid summary judgment

## Opinion text

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
For the Fifth Circuit June 7, 2005

Charles R. Fulbruge III
Clerk
No. 04-30591

LOUISIANA PATIENTS’ COMPENSATION FUND OVERSIGHT BOARD,

Plaintiff-Appellee,

VERSUS

ST PAUL FIRE & MARINE INSURANCE CO.,

Defendant-Appellant.

Appeal from the United States District Court
For the Western District of Louisiana

Before DAVIS, SMITH, and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

A panel of this Court granted leave to appeal from an

interlocutory order of the district court denying summary judgment

to Defendant-Appellant St. Paul Fire & Marine Insurance Company

(“St. Paul”) on the claims filed by the Louisiana Patients’

Compensation Fund Oversight Board (the “Board”). The complaint

alleged St. Paul violated the insurer’s duty of good faith and

reasonable care under the Louisiana Medical Malpractice Act, LA.

REV. STAT. ANN. § 40:1299.44C(7) (West 2005). Concluding that the

statute provides no such cause of action, we reverse the decision

of the district court, render judgment for St. Paul, and remand for
proceedings consistent with this opinion.

I.

The Louisiana Medical Malpractice Act, LA. REV. STAT. ANN. §

40:1299.41, et seq. (the “LMMA”), created the Patients’

Compensation Fund (the “Fund”) as a budgetary instrument of the

state to hold monies in trust for the “use, benefit, and

protection” of medical malpractice claimants and private health

care provider members. LA. REV. STAT. ANN. § 40:1299.44A(1). The

Fund’s purpose is specific and limited: the satisfaction of “excess

judgments against health care providers qualified under the

[LMMA].” United Med. Corp. of Louisiana v. Johns, 798 So. 2d 1161,

1165 (La. Ct. App. 2001). The LMMA also created the Board,

Plaintiff-Appellee in this cause, established in the office of the

Governor. LA. REV. STAT. ANN. § 40:1299.44D(1)(a). The Board is

responsible for the Fund and has “full authority under law, for the

management, administration, operation and defense” of the Fund.

Id. § 40:1299.44D(2)(a).

The Board filed suit against St. Paul in district court on the

basis of diversity jurisdiction on August 1, 2000, alleging a

continuing scheme of fraud in the adjustment and settlement of

medical malpractice cases as well as a breach of duties under the

LMMA. See id. § 40:1299.44C(7). The Board complained St. Paul

convinced medical malpractice plaintiffs, who were contemplating

settlement in the underlying malpractice actions, to accept a

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reduced settlement from St. Paul, in exchange for establishing

liability against the Fund, thereby depriving the Fund of credits

and defenses grounded on the issue of liability. The Board claimed

this fraud involved secret agreements and the concealment of

information owed to the Fund under the LMMA. The Board sought

damages based upon known underlying malpractice cases, as well as

underlying cases unidentified prior to discovery. The Board prayed

for declaratory relief, that is, in all cases where the Fund

suffered a loss because of St. Paul’s fraud or ill practices, St.

Paul must indemnify the malpractice claimant for all sums recovered

and that St. Paul is not entitled to the benefit of the medical

malpractice cap on general damages established by the LMMA. Also,

the Board requested monetary damages, including loss of credits for

providers involved in the malpractice and loss of funds resulting

from adverse judgments and settlements due to the fraud and ill

practices of St. Paul.

Discovery proceeded, initially limited to seven

representative, underlying medical malpractice claims. St. Paul

moved for summary judgment on the basis of that discovery, arguing:

(1) it owed no duty to the Fund, but rather only to its insureds;

and (2) the Board’s claims sought only and impermissibly to

collaterally challenge valid settlements reached between

plaintiffs, insured health care providers, the insurers, and the

Fund. St. Paul also raised the procedural bar of prescription.

In December 2002, the district court denied St. Paul’s motion

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for summary judgment, concluding that St. Paul breached its duties

under the LMMA and relevant Louisiana regulations by failing to

give the Fund ten days’ written notice of proposed compromises or

settlements. See LA. ADMIN. CODE tit. 37, Part III, § 1101(C). The

district court ruled, in relevant part, that St. Paul owed a duty

to the Fund of “good faith and reasonable care both in evaluating

the underlying plaintiffs’ claim and in considering and acting upon

settlement thereof.” See LA. REV. STAT. ANN. § 40:1299.44C(7).

The district court granted supplemental discovery on an

additional 39 underlying malpractice claims related to the Board’s

allegations, and after completion of this discovery, St. Paul filed

motions for partial summary judgment: to dismiss two of the 46

underlying malpractice claims, McNairn v. Roux and Lagars v.

Andicare, because they were prescribed and because St. Paul did not

breach any duty to the Fund. The district court denied the

motions.

St. Paul moved for reconsideration or in the alternative for

leave to file an interlocutory appeal, and the district court

denied reconsideration but granted St. Paul’s request for

interlocutory appeal. By written order, the district court

supplemented the prior denial of summary judgment with citation to

some evidence presented and a clarification that the denial was a

determination that the Board’s evidence was sufficient to survive

summary judgment under Rule 56, not a ruling that St. Paul breached

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its duty under the LMMA as a matter of law. In granting the motion

for interlocutory appeal, the district identified as material under

28 U.S.C. § 1292(b) the legal question of the interpretation of St.

Paul’s duties to the Fund under the LMMA.

II.

We review the denial of a motion for summary judgment de novo,

applying the same standard used by the trial court. Terrebonne

Parish Sch. Bd. v. Mobil Oil Corp., 310 F.3d 870, 877 (5th Cir.

2002). However, in this interlocutory appeal permitted under 28

U.S.C. § 1292(b), our review is limited. See Malbrough v. Crown

Equip. Corp., 392 F.3d 135, 136 (5th Cir. 2004). Our appellate

jurisdiction under § 1292(b) extends only to interlocutory orders

involving a “controlling question of law.” 28 U.S.C. § 1292(b);

Malbrough, 392 F.3d at 136. Therefore, we do not review whether

the Board presented sufficient evidence to raise a genuine issue of

material fact to preclude summary judgment for St. Paul. See

Malbrough, 392 F.3d at 136 (citing Fed. R. Civ. P. 56(c); Ahrenholz

v. Bd. of Trs. of Univ. of Ill., 219 F.3d 674, 676-77 (7th Cir.

2000)). Instead, we review only whether the district court erred

in concluding that the LMMA provides a cause of action to the

Board, on behalf of the Fund, against an insurer for a breach of §

40:1299.44(C)(7)’s duty of “good faith and reasonable care.” See

id. We review the district court’s interpretation of the LMMA de

novo, interpreting the statute as would the highest court of

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Louisiana. See Transcon. Gas Pipe Line Corp. v. Transp. Ins. Co.,

953 F.2d 985, 987-88 (5th Cir. 1992).

St. Paul raises primarily three challenges to the denial of

summary judgment in its favor: (1) the LMMA does not provide the

Board with a cause of action against St. Paul; (2) even if the LMMA

does create a cause of action for damages, St. Paul did not breach

a duty owed to the Fund because St. Paul’s fiduciary duty to its

insureds must prevail over any general good faith and reasonable

care duty to the Fund; and (3) claims arising out of two underlying

cases, McNairn and Lagars, are prescribed by Louisiana law. Given

our limited appellate jurisdiction under § 1292(b), we reach only

the first challenge, as the latter two involve review beyond the

“controlling question of law.”

III.

Under the LMMA, a qualified health care provider “is not

liable for an amount in excess of one hundred thousand dollars plus

interest . . . for all malpractice claims because of injuries to or

death of any one patient.” LA. REV. STAT. ANN. § 40:1299.42B(2). All

“damages in excess of the total liability of all liable health care

providers, up to $500,000, are to be paid by the Fund.” Stuka v.

Fleming, 561 So. 2d 1371, 1373 (La. 1990); see also LA. REV. STAT.

ANN. § 40:1299.42B(3).

Thus, in the case of a malpractice action against multiple

health care provider defendants, the Fund’s potential liability is

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triggered as soon as any one health care provider settles with the

plaintiff for $100,000, even if that settlement’s terms include the

release of all other potentially liable defendants. See Stuka, 561

So. 2d at 1374-75.

The Medical Malpractice Act therefore contemplates that
the issue of liability is generally to be determined
between the malpractice victim and the health care
provider, either by settlement or by trial, and that the
Fund is primarily concerned with the issue of the amount
of damages. Payment by one health care provider of the
maximum amount of his liability statutorily establishes
that the plaintiff is a victim of that health care
provider's malpractice. Once payment by one health care
provider has triggered the statutory admission of
liability, the Fund cannot contest that admission. The
only issue between the victim and the Fund thereafter is
the amount of damages sustained by the victim as a result
of the admitted malpractice.

Id. at 1374 (internal footnote omitted).

Thus, the Louisiana Supreme Court held that, where a single

health care provider’s insurance settled with the malpractice

victim and the victim released all other defendants, the Fund is

precluded from contesting the liability of the settling health care

provider and the Fund is liable for excess damages. Id. at 1374-

75. In so holding, the Louisiana Supreme Court relied upon the

language of § 1299.44C, indicating that the Fund’s duties of excess

damage payment are triggered by the settlement of only one

underlying defendant. Id. at 1373 (noting the statutory language

providing “the insurer of a health care provider . . . has agreed

to settle its liability”).

The necessary result of the LMMA’s provisions is that the Fund

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enjoys fewer “rights . . . when claims against multiple health care

providers are settled than when such claims are tried.” Id. at

1374. Trial against multiple defendants permits the Fund to

attempt to apportion fault, causation, and damages among more

defendant providers, thereby reducing the ultimate burden it must

bear in payment to the malpractice victim.

In Mumphrey v. Gessner, 581 So. 2d 357 (La. Ct. App. 4th Cir.

1991), writ denied, 587 So. 2d 694 (La. 1991), the underlying

plaintiff sued multiple provider defendants and then settled on the

terms that one provider paid the statutory limit of $100,000 and

the others were released. The settlement was approved, but the

Fund challenged it via a third-party action against the dismissed

provider defendants. Id. at 358-59. Relying in part on Stuka, the

court held that the Fund, tethered to the language of the LMMA,

could not seek contribution from the settling defendants through

the collateral challenge. Id. at 359-60.

This Circuit has previously relied upon Stuka and Mumphrey in

holding that the Fund lacks “authority under the statute to

apportion fault amongst providers and reduce its liability by the

non-qualified provider’s share.” Castillo v. Montelepre, Inc., 999

F.2d 931, 937-39 (5th Cir. 1993). Castillo addressed the Fund’s

attempt to challenge the underlying settlement and rejected the

Fund’s policy arguments in support of that attempted challenge.

Id. at 934-35. In so doing, Castillo relied upon the duty owed by

8
insurers to the Fund under the language of the LMMA. Id. at 936-

37. “For the benefit of both the insured and the [Fund], the

insurer of the health provider shall exercise good faith and

reasonable care both in evaluating the plaintiff’s claim and in

considering and acting upon settlement thereof.” LA. REV. STAT. ANN.

§ 40:1299.44C(7). Based upon this statutory duty, Castillo

offered: “Why would the legislature have imposed upon the insurer,

for the benefit of the Fund, a duty of good faith and reasonable

care in its decision to settle a claim if the Fund has the greater

right to challenge any settlement that would lock it into

liability?” Castillo, 999 F.2d at 935-36. This query formed the

basis of the district court’s decision in this case to permit the

Board’s claims to survive summary judgment.

St. Paul argues that these cases limiting the Board’s ability

to challenge underlying settlements require the dismissal of the

Board’s claims here because they are simply a recharacterization of

the Board’s prior unsuccessful attempts to litigate liability in

order to reduce the financial exposure of the Fund after a

malpractice plaintiff has settled with a qualified defendant for

$100,000. The Board responds that its claims do not challenge the

underlying settlements and do not seek to relitigate the underlying

liability and damages. Instead, the Board argues it seeks damages

for St. Paul’s fraudulent conduct, based upon the injury caused to

the Fund in the underlying settlements.

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We agree with St. Paul. Here, the Fund attempts to

collaterally challenge the complete and effected settlements in

underlying malpractice actions by claiming against one of the

health care provider insurers, as opposed to the health care

provider. See Stuka, 561 So. 2d at 1374; see also Turner v.

Southwest La. Hosp. Ass’n., 856 So. 2d 1237, 1240-41 (La. Ct. App.

3d Cir. 2003), writ denied, 876 So. 2d 89 (La. 2004) (approving

Stuka). The Board’s complaint so illustrates: “Further, The [Fund]

through the [Board] prays for declaratory judgment, [requiring] in

all cases where the Fund has suffered a loss or has or may be

adversely affected because of the fraud and ill practices of St.

Paul, that St. Paul, rather than the Fund, must indemnify the

malpractice claimant for all sums recovered thereby and that St.

Paul is not entitled to the benefit of the medical malpractice cap

on general damages established by the Act.”

The LMMA and the Louisiana Supreme Court’s interpretation of

that Act make clear that the Louisiana legislature did not provide

the Fund with the cause of action it seeks to create here. Nowhere

in the LMMA is the Fund, or the Board on the Fund’s behalf, given

the authority to challenge prior malpractice settlements by

instituting fraud claims against the insurer of a health care

provider. Rather, the LMMA provides a regulatory structure through

which the Board manages the Fund and administers the system created

in Louisiana within which both insurers and health care providers

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work. See LA. REV. STAT. ANN. § 40:1299.44D(2)-(3). Under the

Administrative Code, an insurer that fails to comply with

requirements may be terminated from enrollment with the Fund. See

LA. ADMIN. CODE tit. 37, Part III, § 519. And, in the event that an

insurer fails to meet its duty to timely remit the surcharge to the

Fund, then the Fund may assess a penalty or a revocation or

suspension of the insurer’s certificate of authority. LA. REV. STAT.

ANN. § 40:1299.44A(3)-(4).

Similarly, St. Paul suggests that with respect to the

insurer’s duty of good faith and reasonable care, the Louisiana

legislature’s failure to provide an express enforcement action

leaves available to the Fund only administrative remedies. In the

absence of a legislative directive to the contrary and in the face

of Stuka and Mumphrey, interpreting the LMMA to preclude the Board

from litigating liability of the underlying malpractice claims, we

agree. The Board argues that its ability to bring a fraud or tort

claim, on behalf of the Fund, against St. Paul stems from the

LMMA’s provision for defense of the Fund. See LA. REV. STAT. ANN. §

40:1299.44D(2). Subsection (D)(2) of § 40:1299 enumerates the

Board’s powers related to management, administration, operation,

and defense, of the Fund “[i]n addition to such other powers and

authority elsewhere expressly or impliedly conferred on the board

by this Part” and “to the extent not inconsistent with the

provisions of this Part.” Id. § 40:1299D(2)(b). The LMMA empowers

11
the Board to defend the Fund from claims and to obtain indemnity

and reimbursement to the Fund. Id. § 40:1299D(2)(b)(x)-(xi). The

Board asks this Court to read these provisions, in combination with

the duty of good faith and reasonable care owed by insurers to the

Fund under § 40:1299.44C(7), to create the cause of action here

presented. In the absence of the Louisiana legislature’s express

language so providing and in light of the Louisiana Supreme Court’s

interpretation of the LMMA in Stuka and Mumphrey, we decline to do

so. The cause of action alleged by the Board is not expressly

granted by the governing statute, and, to the extent the Board

seeks additional enforcement powers on behalf of the Fund under the

LMMA, its pleas must be addressed to the Louisiana legislature.

IV.

Having concluded that the LMMA and Louisiana law do not

provide the Board with the cause of action stated here against St.

Paul, we need not, and under § 1292(b)’s limited appellate

jurisdiction cannot, reach St. Paul’s additional challenges to the

district court’s denial of summary judgment. After review of the

record on appeal, the briefs and oral arguments of the parties, and

for the foregoing reasons, we REVERSE the district court’s denial

of summary judgment, RENDER judgment to St. Paul on the claims

alleged by the Board, and REMAND for such further proceedings as

may be necessary in light of this opinion.

REVERSED; RENDERED; and REMANDED.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/38348. Public record. Not legal advice.