Justices must resolve doctor hearing case

By Steve Korris | Sep 11, 2009

CHARLESTON – Five years after directors of West Virginia Mutual Insurance decided not to renew coverage for an orthopedic surgeon with 19 malpractice claims on his record, the insurer still covers the doctor under a court order.

West Virginia Mutual must hold a hearing before dropping Robert Zaleski of Wheeling, but the insurer and the doctor disagree on the membership of the hearing panel.

Now, the Justices of the West Virginia Supreme Court of Appeals, who thought they resolved the dispute two years ago, must try again.

West Virginia Mutual has asked the Justices to overturn Ohio Circuit Judge Arthur Recht, who last year rejected the insurer's plan for the hearing.

Recht had reinstated Zaleski's coverage in 2006, pending a hearing.

"Doctor Zaleski has never asked for a hearing," West Virginia Mutual lawyer D.C. Offutt of Huntington told the Justices at oral argument on Sept. 9.

Offutt said Recht took away the insurer's right to decide whether to renew a policy.

The case tests the strength of a medical malpractice insurance law that West Virginia legislators enacted in 2004.

The law created West Virginia Mutual to provide coverage to doctors who had insured themselves through the state Board of Risk and Insurance Management.

The state board transferred 1,470 doctors to West Virginia Mutual, which renewed policies for all but 20.

Five doctors appealed the decisions not to renew their policies. The insurer's underwriting committee reinstated all but Zaleski and another doctor.

The committee counted 19 malpractice claims against Zaleski in 25 years, resulting in payments of $2,042,447.

Zaleski complained to state insurance commissioner Jane Cline, who found no violation of any statute or rule.

Zaleski sued West Virginia Mutual in 2005, claiming breach of good faith and fair dealing, arbitrary and capricious conduct, breach of fiduciary duty, and infliction of emotional distress.

West Virginia Mutual moved to dismiss.

Zaleski moved for summary judgment, claiming that as a state agency West Virginia Mutual owed him the same due process the insurance commissioner would provide.

Recht denied the insurer's motion to dismiss. He granted partial summary judgment to Zaleski, defining West Virginia Mutual as a state actor.

He ordered West Virginia Mutual to submit a procedure affording a policyholder the right to contest a decision not to renew, and he reinstated Zaleski's coverage.

West Virginia Mutual appealed. In 2007 the Justices defined it as a state actor but ruled that it didn't have to match the insurance commissioner's procedures.

The Justices prescribed a hearing before an unbiased examiner. They reversed Recht's denial of the motion to dismiss and sent the case back to him.

West Virginia Mutual renewed its motion to dismiss and submitted to Recht a plan for an independent examiner to hold a hearing before five doctors on its board of directors.

In 2008 Recht denied the motion to dismiss and rewrote the hearing plan.

"The Mutual shall bear the entire burden of proof during a hearing procedure for non-renewal as to the reason," he wrote.

"The Mutual shall be required to inform an affected physician as to the scope of the appellate review," he wrote.

"The composition of the tribunal described in the proposed protocols by the Mutual shall provide for a completely unbiased constituency which shall not include members of Mutual's board of directors," he wrote.

West Virginia Mutual again appealed, adding a request to find bias on Recht's part and disqualify him from the case.

"Judge Recht should have had no other option but to enter an order dismissing the case and reversing his order to reinstate Dr. Zaleski's insurance coverage," Offutt wrote.

At oral argument Offutt didn't press the point of bias against Recht, who held a seat on the Supreme Court in the 1990s.

Offutt said the right to decide non-renewal was invested in the board.

Justice Robin Davis said she thought the 2007 decision was clear. She said Recht might have misread it.

For Zaleski, James Companion of Charleston said the hearing should be similar to arbitration.

He said, "Their decision makers were going to be their own board of directors."

He said they came up with an unbiased examiner before a biased tribunal.

Chief Justice Brent Benjamin said, "It's proceeding on conjecture, your argument."

Benjamin said they should have held a hearing and would have had time to appeal.

"We are spinning our wheels here," he said. "All rights would have been reserved and all rights would have been preserved."

Companion said he suggested a panel of five insured doctors.

Offutt said insured doctors own West Virginia Mutual, and the same argument of bias would apply.

He said, "Judge Recht took away what you told us we had a right to do."

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