Under the Louisiana Medical Malpractice Act (“the Act”), damages are limited or “capped” at $500,000 plus medical expenses in cases filed against healthcare providers who either self-insure or insure the primary layer and pay the Patient’s Compensation Fund (PCF) surcharge. However, scenarios could present where a claim falls outside of the Act, and in such instances there is no cap, no $100,000 limitation of liability for the healthcare provider, and no PCF coverage. Examples of uncapped exposures include claims brought by a third-party alleging negligent discharge and claims involving allegations of negligent credentialing/privileging.
Billeaudeau v. Opelousas General Hospital Authority and a series of more recent appellate holdings arising therefrom1, merit discussion, because in 2016, the Louisiana Supreme Court created a significant exception to the Act. In Billeaudeau, plaintiffs’ action against a parish-owned hospital alleged the hospital negligently credentialed an ER physician who failed to treat a patient for a stroke. The failures of the hospital during the credentialing process occurred prior to initially granting medical staff privileges to the physician. The Supreme Court determined that negligently credentialing a physician is not “treatment related” and thus falls outside of the Act, resulting in no PCF coverage of the claims and uncapped damages.2
The hospital’s general liability insurer then filed a motion for summary judgment, stating that the claims for negligent credentialing were not covered under the hospital’s general liability policy as they were excluded as professional services. The Louisiana Third Circuit Court of Appeal agreed.3 That policy excluded coverage for “bodily injury” that resulted from the failure to perform “healthcare professional services,” which were defined to include the work of any accreditation or standards committee in evaluating a provider’s professional services. Both the plaintiffs and the hospital argued for coverage to apply in light of their allegations that hospital employees not on the committee were negligent in gathering information. The court rejected that argument, finding that the work of the committee included the work of all those tasked with gathering or providing information to the committee members for review. In upholding the coverage exclusion, the appellate court specifically noted that it was mindful of the dilemma created by the change in case law that occurred with the holding that negligent credentialing was not covered under the Act.
However, one week later, in another appeal, the Third Circuit found coverage under the general liability policy. Specifically, the Court held that the bodily injury exclusion in the Directors and Officers coverage section of the hospital’s general liability insurance policy did not exclude coverage for claims of mental anguish and distress resulting from the negligent credentialing of the hospital and its employees.4 Therefore, the insurer was not relieved of its coverage and defense responsibility to the hospital on such general negligence claims.5
While LAMMICO’s medical professional liability policy does cover claims of negligent credentialing (subject to policy limits and the terms and conditions of the policy), it is important for providers and hospitals to assess potential risks associated with the care they provide and consider the need for higher limits of coverage. Healthcare providers, hospitals and facilities can protect themselves from liability for uncapped claims (other than those that are uncapped due to failing to qualify) by purchasing limits of liability above $100,000/$300,000. The additional cost for higher liability limits is minimal as the frequency of uncapped claims is low. However, when these claims occur, the potential for damages to exceed a $100,000 limit is higher since there is no cap on the damages. Contact a LAMMICO Marketing representative today at 800.452.2120 to find a solution to meet the needs of your hospital or practice.