Opinion #5191

The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)

STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5191

May 18, 1977

BROWN-McNEELY INSURANCE FUND:

Scope of medical malpractice insurance policy.

Although the Board of Directors of the Brown-McNeely Insurance Fund is not authorized to offer malpractice insurance coverage beyond that authorized by 1956 PA 218, Sec. 2501(d), the insuring clause of this section is broad enough to include coverage for an injury arising out of acts or omissions in the performance of medical service.

The Board of Directors of the Brown-McNeely Insurance Fund has authority to provide professional premises liability insurance.

A medical malpractice insurance policy which purports to provide indemnification for a criminal act is void as contrary to public policy.

Thomas C. Jones

Commissioner of Insurance

Michigan Department of Commerce

1048 Pierpont

Lansing, Michigan 48910

You have requested my opinion on three questions arising from the administration of the Brown-McNeely Insurance Fund. The fund was created by 1975 PA 43, amending the Insurance Code of 1956, 1956 PA 128; MCLA 500.100 et seq; MSA 24.1100 et seq, by adding Chapter 25 to the Insurance Code. The questions which have arisen are as follows:

'Whether the insuring clause of the policy to be issued by the Brown-McNeely Insurance Fund must contain the exact language contained in the definition of malpractice insurance in section 2501(d) of act 43 or whether the policy may contain the broader language used in the vast majority of malpractice insurance policies.

'Whether the Brown-McNeely Insurance Fund has the authority under act 43 to provide what is commonly known as professional premises liability insurance along with the standard professional liability insurance commonly known as malpractice insurance.

'Whether the Brown-McNelly Insurance Fund is

'(1) required to include, in its policy, those exclusions specifically stated in the definition of malpractice insurance in section 624 of the Michigan Insurance Code, act 218 of the Michigan Public Acts of 1956, as amended,

'(2) whether those exclusions are required to be eliminated from the coverage provided under act 43 due to that act's definition of malpractice insurance or

'(3) whether those exclusions may at the fund's discretion, be included or excluded from the policy.'

The Brown-McNeely Insurance Fund is a state agency and is therefore limited to that authority expressly granted and necessarily or fairly implied. Coffman v State Board of Examiners, 331 Mich 582; 50 NW2d 322 (1951). Consequently, the authority of the Brwon-McNeely Insurance Fund to issue policies of insurance is restricted to that expressly granted or necessarily or fairly implied.

In enacting Chapter 24 of the Insurance Code, the legislature set forth its overall intent:

'The legislature finds that the health care delivery system being an essential part of the general health, safety, and welfare of the people of this state is in peril as a result of the diminishing availability of malpractice insurance; that it is within the public policy of this state to ensure that the health care delivery system be preserved and that the providers thereof be afforded adequate liability protection; and that it is within the public policy of this state that all providers, being beneficiaries of this protection, bear its cost as provided in this chapter.' MCLA 500.2500; MSA 25.12500 (emphasis added)

Thus, the legislature intended to make available 'adequate liability insurance'. The Act does on to provide that the fund is 'created to provide malpractice insurance to eligible providers', MCLA 500.2502(1); MSA 24.12502(1). Malpractice insurance is defined by the Act as:

"Malpractice insurance' means insurance of a health provider insuring against loss resulting from all claims and actions alleging malpractice, error, or mistake and based upon professional services rendered or which should have been rendered by the insured or his assistants or employees, and to defend and indemnify the insured against any loss resulting from any other action for civil damages arising out of the practice by the insured of his profession.' MCLA 500.2501(d); MSA 24.12501(d) (emphasis added)

Your first question arises from the distinction in the terms '. . . loss resulting from . . . error, or mistake . . .', which the statute uses, and '. . . injury arising out of . . . acts or omissions . . .'. The latter phrase, you inform me, is used in the vast majority of medical malpractice insurance policies. You are concerned because, while the legislature has evidenced the intent to make available 'adequate liability protection', it has also defined malpractice insurance differently than the majority of insurance carriers.

Ordinarily, when a statute defines a term, that definition is binding. Jone's Estate v State, 52 Mich App 628; 218 NW2d 89 (1974). Under section 2508 of the Insurance Code, the board in its plan of operations shall include:

'(b) A provision that insurance will be provided to all risks determined to be eligible by this chapter.

(d) A description of the coverages and the limits of the coverages to be afforded the various categories of risk as provided in this chapter.' MCLA 500.2508(1); MSA 24.12508(1) (emphasis added)

It is my opinion that while the act impliedly authorizes the board to limit both the scope of coverage and the amount of coverage, the board is not authorized to offer coverage beyond that authorized by section 2501(d). However, I am of the opinion that the insuring clause of section 2501(d) is broad enough to include 'injury arising out of . . . acts or omissions'. First, the legislature has expressed its intent to make available adequate liability protection, that is, insurance substantially similar to that which would otherwise be available. In that regard, I note the virtual identity between the language of section 2501(d) and an earlier section of the Insurance Code:

'(h) Malpractice. Insurance of persons lawfully engaged in the practice of medicine, surgery, dentistry, or dispensing drugs or medicines, and partnerships or corporations lawfully engaged in the operation of hospitals or sanitariums, against loss resulting from all claims and suits alleging malpractice, error or mistake and based upon professional services rendered or which should have been rendered by insured and/or his or her assistants or employees, and to defend and indemnify insured against any loss resulting from all other suits for civil damages arising out of the practice by insured of his profession; except that indemnity under such insurance shall not extend to claims or suits based on criminal acts or on services rendered while under the influence of liquor or drugs;' MCLA 500.624(1)(h); MSA 24.1624(1)(h)

Secondly, the insuring clause is not limited simply to 'error or mistake' but includes:

(1) 'services . . . which should have been rendered by the insured . . .' and

(2) defense and indemnification for '. . . any loss resulting from any other action for civil damages arising out of the practice by the insured of his profession.'

It is well settled that a court must read the statute as a whole, not isolate any profession and construe it without reference to the entire Act. Smith v Behrendt, 278 Mich 91; 270 NW 227 (1937) and United Insurance Co v Attorney General, 300 Mich 200; 1 NW2d 510 (1942). Further, in interpreting statutes it is the intent of the legislature which must be sought and effectuated, the other rules of statutory construction serving only as guides to ascertaining that intent. City of Grand Rapids v Crocker, 219 Mich 178; 189 NW 211 (1922).

The legislature obviously intended to make available medical malpractice insurance substantially similar to that otherwise generally avilable through private insurers. The similarity between the definition of malpractice insurance in section 2501(d) and section 624(1)(h) evidences this intent and fairly implies a broad permissible scope of coverage. Consequently, it is my opinion that policies issued by the fund may contain the broader language referred to above.

Based upon the foregoing, it naturally follows that the fund has the authority to provide what is commonly known as 'professional premises liability insurance' as defined in your letter should 'professional premises liability insurance' be otherwise unavailable as a separate coverage.

III

Your third question has been prompted by the fact that malpractice insurance as defined by section 624 of the Insurance Code contains the following exclusion not found in the definition of malpractice insurance for the Brown-McNeely Insurance Fund:

'. . . except that indemnity under such insurance shall not extend to claims or suits based on criminal acts or on servings rendered while under the influence of liquor or drugs.' MCLA 500.624(1)(h); MSA 24.1624(1)(h)

The history of this provision is illuminative of its purpose. In 1928 the Attorney General reviewed a policy providing indemnity for 'assault, slander, libel, undue familiarity, anaesthesia hallucination, personal restraint, malicious prosecution, replevin of property, or claims for return of professional fees' against the then existing provisions of the former Insurance Code, 1917 PA 256, and said:

'. . . We are, however, not limited here to a consideration of the proposed insurance in the relation it bears to the insurance law alone. There is an even greater objection to the approval of such acts . . . public policy. The law has never sanctioned insurance against criminal acts. . .

We have given serious thought to respondent's arguments that a physician is, by reason of the intimate relation which he bears toward his patient a likely and indeed a frequent target for unjust and unfounded claims by the patient, entitled to a mantle of protection not accorded to others. We are impressed, however, that this is a grievance which should be more properly addressed to the legislature. The enacting of laws and the framing of public policy is their exclusive prerogative, upon which we may not trespass.' OAG 1928-1930, p 122, 125-126 (October 23, 1928) (emphasis added)

The legislature responded less than one year later by enacting 1929 PA 154, amending the Insurance Code of 1917 to provide for malpractice insurance with the exclusion under review.

In Bowman v Preferred Risk Mutual Insurance Co, 348 Mich 545; 83 NW2d 434 (1957) the Supreme Court said:

'It is perfectly true that well-established law in this and other jurisdictions refuses, on grounds of public policy, to allow insurance of illegal activities lest such be encouraged thereby. . . .'

Further, '[i]n general insurance to indemnify insured against his own violation of law is void as against public policy'. 44 CJS, Insurance, Sec. 242(b), p 1005, c.f. 35 ALR 2d 452, 455.

Medical malpractice insurance policy provisions which would purport to provide indemnification for criminal acts would undoubtedly be void as contrary to public policy. Act 43 evidences no intent on the part of the legislature to change that basic proposition. Further, it would be inconsistent with the legislative intent of providing substantially similar insurance to construe Act 43 to authorize the fund to provide for malpractice insurance substantially broader than that available through private insurers. 44 CJS, Insurance, Sec. 242, pp 1005 & 1006. Bowman v Preferred Risk Mutual Insurance Co, 348 Mich 531; 83 NW2d 434 (1957).

Thus, it is my opinion that the Brown-McNeely Insurance Fund may not provide in its policies for indemnification extending '. . . to claims or suits based on criminal acts or on services rendered while under the influence of liquor or drugs.'

As to whether the fund must specifically incorporate the exclusions in the policy that the fund issues, I note that section 624 does not expressly mandate that such be expressly stated within the policy. Moreover, even if section 624 were construed to require the provisions to be expressly stated:

'. . . Insurance contracts are subject to statutory regulation. They should be construed in the light of statutory requirements, and mandatory statutory provisions should be read into such contracts. . . .' Galkin v Lincoln Mutual Casualty Insurance Co, 279 Mich 327, 331; 272 NW 694 (1937)

Thus, I am of the opinion that, although there is no necessity to specifically set forth the exclusions in the policy, it is highly desirable to do so so that the rights and obligations of the parties will be clear.

Frank J. Kelley

Attorney General