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What happens to a Texas medical malpractice claim when a defendant's insurance company is declared insolvent?

Appellate court addresses interplay of Insurance Code and tort reform expert requirement

There aren’t many things in Texas law that will prevail over the medical malpractice tort reform provisions of the Texas Medical Liability Act of 2003, codified at Texas Civil Practice & Remedies Code Chapter 74. The goal of the statute is to discourage negligence lawsuits against hospitals, doctors, and health care providers by stacking the deck against patients.

One of the key provisions is a preliminary expert report requirement, where medical malpractice plaintiffs (patients) have to serve one or more medical expert reports within 120 days of each defendant filing an original answer in the lawsuit. The reports have to spell out the applicable standard of care, how it was violated, and how it injured the patient. If a plaintiff missed the deadline, the case must be dismissed, with an order for the plaintiff to pay the defense attorney’s fees.

Chapter 74 beats just about every other law out there, but I do know of one trump card.

A few years ago, Painter Law Firm represented a family who sustained a brain injury because a hospital emergency room (ER) physician misdiagnosed his stroke. It was a shocking and memorable case because the patient was a registered nurse who thought he was having a stroke and said as much. Without doing a complete work up, the doctor settled on a diagnosis of vertigo and sent the patient home.

After we filed a medical malpractice lawsuit, it wasn’t long until we received notice that the ER doctor’s medical malpractice insurance company, Capson Physicians Insurance Company (Capson), was going into receivership. Regulators felt that the insurer didn’t have sufficient cash reserves and was going belly up.

When this happens, there’s a stay on proceedings where a physician or health care provider who’s covered by that insurance company has been sued. In other words, medical malpractice lawsuits grind to a halt. Ultimately, the claim gets turned over to the Texas Life & Health Insurance Guaranty Association, but that’s a process that typically takes a year or more. Until that happens, though, the lawsuit goes nowhere.

Although this is fortunately something rare for medical malpractice insurance carriers, it sometimes happens. Thus, it’s inevitable that the interplay between the insurance insolvency stay and Chapter 74 expert report requirements would be challenged to see which prevailed.

That’s what happened in a Fort Worth case involving the same insurance company, Capson, styled May Ha Goetsch, ACNP v. Rolls, No. 02-20-00263-CV. You can read the opinion here.

In that case, the patient was admitted to Baylor All Saints Hospital for an emergency gallbladder surgery. Over the next week, he had internal bleeding and another procedure to try to stop the hemorrhage. Less than two weeks after his original cholecystectomy surgery, he had a heart attack and died. We’ve handled numerous cases involving issues of post-surgical negligence, as was alleged here.

The patient’s wrongful death beneficiaries, his wife and mother, filed a medical malpractice lawsuit against several defendants.

One of the defendants had medical malpractice insurance coverage by Capson. Once Capson was placed in receivership, a court ordered a comprehensive stay on all lawsuits involving Capson or any individual or entity that it insured.

The stay applied to the Goetsch v. Rolls case in Fort Worth, and the trial court entered an order recognizing it and removing the case from its active docket. As required by Texas Insurance Code Section 462.309, the trial court order noted that, “The stay applies to each party to the proceeding and the proceeding is stayed for all purposes.”

Because of the stay, the plaintiffs didn’t serve expert reports within the normal 120-day expert period required by Chapter 74. After the 120-day deadline passed, several defendants filed a motion to dismiss the claim because of the failure to meet the 120-day deadline.

The Fort Worth Court of Appeals held that the statutory stay trumped the Chapter 74 120-day deadline, so the case shouldn’t be dismissed. One heading in the opinion made the point clear: “The Healthcare Parties’ Arguments Cannot Circumvent This Plain Language,” referring to the Insurance Code’s mandatory stay.

I’ve often described medical malpractice law as a minefield in Texas, and this case is a good example of that. If you’ve been seriously injured because of poor hospital or medical care in Texas, you’d be well served by hiring a top-rated experienced Texas medical malpractice lawyer.

Robert Painter is an award-winning medical malpractice attorney at Painter Law Firm PLLC, in Houston, Texas. He is a former hospital administrator who represents patients and family members in medical negligence and wrongful death lawsuits all over Texas. Contact him by calling 281-580-8800 or emailing him right now.


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