Judge Says Physician Assets Off-Limits in Liability Claims

From the ACEP website:

A bankruptcy judge in April signed an order preventing malpractice plaintiffs from collecting judgments from the personal assets of physicians contracted with the now-defunct PhyAmerica Physician Group.

Several plaintiffs’ attorneys had tried to satisfy their claims with physician’s personal items after PhyAmerica’s bankruptcy left an insurance shortfall.

ACEP opposed the effort, along with Sterling Healthcare, the physician’s group that now holds the contracts of those physicians. On April 28, US Bankruptcy Judge E. Stephen Derby signed an order issuing a permanent injunction protecting physicians’ assets.

“We won and we’re thrilled,” said Stephen J. Dresnick, M.D., President and CEO of Sterling Healthcare, which is based in North Carolina. “I think the judge issued the ruling because it obviously wasn’t fair that these physicians were covered by their policy and for whatever reason there was not enough insurance to go around.”

At least 2,000 physicians, including many ACEP members, worked as independent contractors for PhyAmerica before the group went bankrupt in 2003. A dispute resolution agreement with PhyAmerica’s malpractice claimants limited the claims to the available insurance, which was believed to be enough to cover the outstanding claims.

About a year later, however, the Official Committee of Tort Plaintiff Creditors discovered there was a shortfall of nearly $7 million in the insurance pool, which exposed physician’s personal assets to make up the difference.

The bankruptcy court issued a preliminary injunction in December 2004 to prevent physicians’ personal assets from being taken by the claimants.

ACEP, in an effort to prevent setting a precedent with this unique case, filed an amicus memo in March supporting the injunction to exclude physicians’ personal assets. The College argued in favor of a permanent injunction during a Baltimore bankruptcy hearing in April, as did Sterling’s attorneys.

In his opinion, Judge Derby wrote that the problems arose because the dispute resolution agreement was “based on faulty assumptions as to funding,” and “attempted to respond to too many malpractice constituencies by being all things to all holders of malpractice claims.”