647 S.E.2d 747
5. “To have a property interest, an individual must demonstrate more than an
abstract need or a desire for it. He must instead have a legitimate claim of entitlement to it
under state or federal law. Additionally, the protected property interest is present only when
the individual has a reasonable expectation of entitlement deriving from the independent
source.” Syl. Pt. 6, State ex rel. Anstey v. Davis, 203 W.Va. 538, 509 S.E.2d 579 (1998).
6. Physicians who have been afforded the benefit of medical liability
insurance coverage through West Virginia Physicians' Mutual Insurance Company are
entitled due process protection in seeking review of any non-renewal decision made by the
company.
7. “When a statute is clear and unambiguous and the legislative intent is plain,
the statute should not be interpreted by the courts, and in such case it is the duty of the courts
not to construe but to apply the statute.” Syl. Pt. 5, State v. General Daniel Morgan Post
No. 548, V.F.W., 144 W.Va. 137, 107 S.E.2d 353 (1959).
8. Being a state actor for due process purposes, West Virginia Physicians'
Mutual Insurance Company is required to make available to parties affected by its non-
renewal decisions a review process that minimally includes: notice of the non-renewal which
conforms with the requirements of West Virginia Code § 33-20C-4(a) and which includes
the reasons for non-renewal; hearing before an unbiased hearing examiner; reasonable time
in which to prepare to rebut the charges; opportunity to have retained counsel at any
hearings on the charges; opportunity to present relevant evidence which includes calling and
cross-examining witnesses; and preservation of an adequate record of the review
proceedings.
Albright, Justice:
This case is an appeal by the defendant below, West Virginia Physicians'
Mutual Insurance Company (hereinafter referred to as “Mutual”), of the April 27, 2006, final
order (See footnote 1) of the Circuit Court of Ohio County in a suit involving the reinstatement of medical
malpractice insurance coverage for plaintiff below, Robert J. Zaleski, M.D. (hereinafter
referred to as “Dr. Zaleski”). Among the matters being appealed are the lower court's grant
of partial summary judgment for Dr. Zaleski and denial of Mutual's motions seeking
dismissal of the case or for summary judgment. After due consideration of the briefs and
arguments of counsel, (See footnote 2) the record certified for our review and relevant law, the challenged
order is affirmed, in part, and reversed, in part, and the case is remanded with direction as
further explained below.
Dr. Zaleski was insured for professional liability through BRIM, and his policy
was among the one thousand four hundred seventy other physician malpractice policies in
the state that were transferred to Mutual on July 1, 2004. By certified letter dated September
8, 2004, Dr. Zaleski was notified by Mutual that his existing policy coverage would not be
renewed at its natural termination date of December 22, 2004. (See footnote 4) The notification did not state
a reason for the non-renewal, and no attempt was made by Mutual to cancel the policy
earlier than the termination date.
Dr. Zaleski notified Mutual by letter dated September 23, 2004, of his desire
to appeal the non-renewal decision. Mutual responded by certified letter designating a date
for the hearing and indicating that it would be limited in duration to fifteen minutes. As
related in the April 27, 2006, order, this mailing also included a written description of the
appeal process containing the following elements:
(a) Coverage is declined by underwriting.
(b) An appeal is requested by the Physician.
(c) The physician is requested to make a brief statement
to the Underwriting Committee, can ask questions of the
Committee, and can entertain questions from the
Committee members.
(d) The Committee reviews the application for coverage
and the information gathered during the appeal and
makes a decision regarding the underwriting decision
immediately following the Physician's appearance
before the Committee.
(e) The physician will receive a telephone call from a
representative of the Committee the day following the
appeal and will receive a follow-up letter by mail.
Dr. Zaleski appeared in person before Mutual's Underwriting Committee on
November 11, 2004, presented evidence on his own behalf and responded to questions from
the Committee. No stenographic record was made of the hearing. The day following the
hearing, Mutual informed Dr. Zaleski by phone that the Committee unanimously upheld the
decision not to renew the doctor's liability coverage. The information was also transmitted
to Dr. Zaleski in writing by certified mail on November 12, 2004. In neither instance was
Dr. Zaleski advised of any right to appeal Mutual's non-renewal decision.
Dr. Zaleski responded to Mutual by letter dated November 30, 2004,
requesting that Mutual provide him with a detailed explanation of why the insurance policy
would not be renewed. Dr. Zaleski also lodged what he called a “formal complaint”with the
West Virginia Insurance Commissioner on December 8, 2004, seeking information about
the non-renewal of his malpractice coverage. The Insurance Commissioner's Office
forwarded the letter to Mutual and requested a written response. In its December 15, 2004,
written response to the Insurance Commissioner, Mutual said its reason for not renewing Dr.
Zaleski's policy was because of the “frequency of lawsuits in his history.” (See footnote 5) A copy of
Mutual's December 15, 2004, letter was mailed to Dr. Zaleski by the Insurance
Commissioner with written notification that no administrative action would be taken against
Mutual because it did not appear that Mutual had violated any applicable statute or rule
regarding non-renewal of the doctor's policy. The notification did not include reference to
any right to seek judicial review of the Insurance Commissioner's determination through the
Circuit Court of Kanawha County. See W.Va. Code § 33-2-14 (1957) (Repl. Vol. 2006).
On April 4, 2005, Dr. Zaleski filed suit against Mutual asserting that the
company's decision not to renew his malpractice insurance policy amounted to breach of the
covenant of good faith and fair dealing, arbitrary and capricious conduct, breach of fiduciary
duty, intentional infliction of emotional distress, and negligent infliction of emotional
distress. The relief sought in the complaint was “judgment against Physicians Mutual for
compensatory damages in an amount to be determined by a jury and, [punitive damages] to
the extent that the jury may determine that the aforesaid acts constitute actual malice.”
Additionally, Dr. Zaleski sought award of attorneys fees and expenses, pre- and post-
judgment interest and “any and other relief as determined by the Court.”
In response to all claims raised in Dr. Zaleski's complaint, on June 2, 2005,
Mutual filed a motion to dismiss or, in the alternative, for summary judgment. On August 5,
2005, the lower court held a hearing on the motion and concluded that Mutual's status as a
private, public, or quasi-public body was a predicate question of law that had to be
determined before any other matter. The circuit court judge asked the parties to brief the
issue. Dr. Zaleski responded by filing a cross-motion for summary judgment claiming that
Mutual should be required by the court to renew the doctor's liability policy and/or find that
Mutual was a “quasi-public agency” whose decisions refusing to renew professional liability
policies were subject to review under due process standards.
The trial court denied Mutual's motion to dismiss or for summary judgment
by order dated September 22, 2005. Also in that order, the lower court granted Dr. Zaleski
partial summary judgment (See footnote 6) upon the issue that Mutual was a state actor. The order
recounted the lower court's conclusions that
[The] various provisions of the Physician's Mutual
Insurance Act clearly establish a close nexus between the State
of West Virginia and the Physician's Mutual Insurance
Company, by which the goals of the State of West Virginia to
protect the health, safety and welfare of its citizens are
“pervasively entwined” with the means of implementing those
goals through a private insurance entity, without subjecting the
State of West Virginia to substantial actual and potential
liability.
(Internal citations omitted). By way of the September 22, 2005, order, the lower court
directed Mutual to submit a procedure which would afford due process to a policyholder
who desired to contest any decision by Mutual not to renew the policy.
Mutual filed with the court a mechanism for review of non-renewal decisions.
That filing was made under protest and included various objections Mutual had regarding
the rulings in the September 22, 2005, order. These objections included allegations that the lower
court: lacked subject matter jurisdiction; improperly considered claims not asserted in the
complaint; granted relief that was not requested and was not the product of an evidentiary
hearing; improperly concluded that Mutual was a state actor; and the review undertaken in
Dr. Zaleski's case would satisfy due process concerns even if Mutual were a state actor.
The court below issued a final and appealable order on April 27, 2006, in
which it reaffirmed the conclusion that Mutual is a quasi-public body and a state actor. The
order contained the further conclusion that Dr. Zaleski has a significant property interest in
maintaining the malpractice insurance policy and is entitled to due process safeguards with
regard to a non-renewal decision of Mutual as a state actor. According to the terms of the
order, the process due Dr. Zaleski by Mutual was the same procedure prescribed in West
Virginia Code § 33-2-13 (1957) (Repl. Vol. 2006) for use by the Insurance Commissioner
to review any allegations involving any an act, omission, rule, regulation or order of the
Commissioner. Under the terms of the order, any appeal of Mutual's non-renewal decision
could be made directly to the circuit court in the county where Dr. Zaleski resides or the
Circuit Court of Kanawha County rather than to the Insurance Commissioner. The order
also reflects the lower court's finding that the procedural safeguards Mutual afforded Dr.
Zaleski failed to comply with the statutory standard and did not satisfy due process. The
order ultimately directs the immediate reinstatement of insurance coverage to Dr. Zaleski by
Mutual and sets a date for a jury trial, following discovery, on the issue of damages related
to the non-renewal of the insurance policy. As a natural consequence of these rulings, the
order reflects the lower court's denial of Mutual's various motions, including objection
raised to the court making findings of facts without conducting an evidentiary hearing to
make a factual record.
Mutual subsequently petitioned this Court to appeal the rulings contained in
the April 27, 2006, final order, for which we granted review on November 28, 2006.
1. There is a recognized substantial public interest in
providing access to quality health care to the citizens of West
Virginia. See W.Va. Code § 33-20F-2(a)(8);
2. There is a recognition that persons who suffer injuries
as a result of medical professional liability must be adequately
compensated. See W.Va. Code § 33-20F-2(b)(2);
3. Access to quality health care is inextricably
intertwined with affording the physicians the opportunity to
obtain medical liability insurance. See W.Va. Code § 33-20F-
2(a)(7);
4. The State of West Virginia attempted to alleviate the
current medical liability crisis by providing medical liability
coverage through an exclusively State-run program (Board of
Risk and Insurance Management.) See W.Va. Code § 33-20F-2
(a)(1)(2)(12).
5. The state-run program represented a substantial actual
and potential liability to the state which could be addressed by
transferring this actual and potential liability to the private
sector and creating a stable self-sufficient entity which will be
a source of liability insurance coverage for physicians in this
state and consequently achieving substantial public benefit. See
W.Va. Code § 33-20F-2(a)(14); and
6. The citizens of the State of West Virginia will greatly
benefit from the formation of a Physician's Mutual Insurance
Company, justifying the efforts of the State of West Virginia to
encourage and support the formation of a private sector entity,
including providing a low-interest loan for a portion of the
private entity's initial capital. See West Virginia Code § 33-
20F-2(a)(16).
We agree with the lower court's analysis that the relevant statutory factors
surrounding the creation of Mutual weigh in favor of Mutual being a quasi-state entity rather
than a private company for due process purposes. The analysis establishes that Mutual came
into being due to an act of the Legislature and is a body which functions statewide in carrying
out a significant public purpose. Additionally, state money (See footnote 8) in the form of a loan from the
Tobacco Settlement Medical Trust Fund was provided to promote the formation of Mutual
because of the “clear public interest” involved. W.Va. Code § 33-20F-2(a)(16). There is no
question that the Legislature is enjoined from providing public funds to a purely private
company according to the provisions of West Virginia Constitution Article X, §6. (See footnote 9) See State
ex rel. West Virginia Citizens Action Group v. West Virginia Economic Development Grant
Committee, 213 W.Va. 255, 276, 580 S.E.2d 869, 890 (2003). Accordingly, we hold that the
West Virginia Physicians' Mutual Insurance Company formed in consonance with the
provisions of Article 20F, Chapter 33 of the West Virginia Code is a state actor for due
process purposes. We proceed to determine whether Mutual's decisions not to renew
insurance policies are subject to due process review.
As recognized by the court below, the constitutional protection of due process
is triggered when there is state action that affects an individual's liberty (See footnote 10) or property interest.
Syl. Pt. 1, Waite v. Civil Service Commission, 161 W.Va. 154, 241 S.E.2d 164 (1977). For
due process purposes, “[a] 'property interest' includes not only the traditional notions of real
and personal property, but also extends to those benefits to which an individual may be
deemed to have a legitimate claim of entitlement under existing rules or understandings.” Id. at Syl. Pt. 3. We further explained in syllabus point six of State ex rel. Anstey v. Davis, 203
W.Va. 538, 509 S.E.2d 579 (1998), that
[t]o have a property interest, an individual must
demonstrate more than an abstract need or a desire for it. He
must instead have a legitimate claim of entitlement to it under
state or federal law. Additionally, the protected property interest
is present only when the individual has a reasonable expectation
of entitlement deriving from the independent source.
(Emphasis in original).
The lower court determined that Dr. Zaleski had a reasonable expectation of
entitlement to continued liability insurance coverage, based on the following language of
West Virginia Code § 33-20F-9(f)(4), (See footnote 11) which was in effect at the time the decision not to
renew was made:
(f) Notwithstanding the provisions of subsection (b), (c)
or (e) of this section, the company may:
a formal written notice of charges; sufficient opportunity to
prepare to rebut the charges; opportunity to have retained
counsel at any hearings on the charges, to confront his accusers,
and to present evidence on his own behalf; an unbiased hearing
tribunal; and an adequate record of the proceedings.
North, 160 W.Va. at 257, 233 S.E.2d at 417. See also Jordan v. Roberts, 161 W.Va. 750,
755-56, 246 S.E.2d 259, 262-63 (1978) (application of same standards in cases involving
suspension of drivers' licenses.). It is clear from the statutory purposes for promoting the
creation of Mutual that physicians also have a substantial property interest in the availability
of medical liability insurance since it directly effects a doctor's ability to pursue his
profession in this state. Therefore, being a state actor for due process purposes, West
Virginia Physicians' Mutual Insurance Company is required to make available to parties
affected by its non-renewal decisions a review process that minimally includes: notice of the
non-renewal which conforms with the requirements of West Virginia Code § 33-20C-4(a)
and which includes the reasons for non-renewal; hearing before an unbiased hearing
examiner; reasonable time in which to prepare to rebut the charges; opportunity to have
retained counsel at any hearings on the charges; opportunity to present relevant evidence
which includes calling and cross-examining witnesses; and preservation of an adequate
record of the review proceedings. (See footnote 14) Discovery, if any, should be governed by the standards
set forth in State ex rel. Hoover v. Smith, 198 W.Va. 507, 482 S.E.2d 124 (1997), wherein
we said that “[g]enerally, there is no constitutional [due process] right to pre-hearing
discovery in administrative proceedings. . . [, but it must be permitted when] 'refusal to grant
discovery would so prejudice the party as to amount to a denial of due process.'” Id. at 512,
482 S.E.2d 129 (citations omitted.).
While we largely agree with the conclusions reached by the court below, we
disagree with and reverse the lower court's decisions to reinstate insurance coverage and
allow this case to proceed in that tribunal. Typical treatment of such cases was summarized
in White v. Barill, 210 W.Va. 320, 557 S.E.2d 374 (2001), as follows:
In Syllabus Point 4 of Barazi v. West Virginia State College, 201
W.Va. 527, 498 S.E.2d 720 (1997), this Court held that “'[t]he
proper remedy for reversible due process procedural defects in
administrative proceedings is to remand the case to the
appropriate tribunal with directions to order the administrative
institution to remedy the defect.' Syl. Pt. 4, Clarke v. West
Virginia Bd. of Regents, 166 W.Va. 702, 279 S.E.2d 169
(1981).” Thus, we find that the circuit court should have
remanded this case to the Commission to address White's
procedural due process rights.
Id. at 323, 557 S.E.2d at 377. Thus we remand this case with directions to remand the matter
to Mutual for conduct of a review process on the non-renewal decision which conforms with
the standards set forth in this opinion.