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Insurance firms say OSI decision left DaVita exposed to liability

ALBUQUERQUE, N.M. — Two insurance companies are suing the Office of Superintendent of Insurance saying it misinterpreted state law and left DaVita Medical Group New Mexico LLC exposed to “unlimited liability” on malpractice claims for a seven-month period in 2017.

Under New Mexico law, organizations deemed to be “qualified health care providers” by the state are subject to certain protections, including a cap on damages incurred in a medical malpractice lawsuit. That cap includes a $600,000 limit on most damages and a $200,000 cap on monetary damages, medical care and related benefits.

To qualify for that cap, an organization must, among other things, pay the Office of the Superintendent of Insurance an annual fee known as a surcharge. The surcharge finances a patient compensation fund used to repay organizations and individuals personally liable for judgments and settlements beyond the $200,000 cap.

The plaintiffs, Georgia-based Beecher Carlson Insurance Services LLC and Arizona-based California Medical Group Insurance Company Risk Retention Group, are described in court filings as the provider and administrator respectively of medical malpractice insurance for DaVita.

They claim a computer error led to the inadvertent omission of DaVita’s name and more than a dozen of its providers, and subsequently an underpayment of $10,895 to OSI in Sept. 2017.

OSI alerted Beecher Carlson of the issue on Jan. 31, 2018, and the company remitted the payment about a week later, according to the lawsuit.

OSI allegedly told Beecher Carlson the timing violated an agency rule that requires malpractice insurance surcharges to be received within a 45-day window and that it could not consider DaVita a qualified health care provider for the period between June 1, 2017, and Dec. 23, 2017. The agency would, however, recognize the coverage from December 2017 onward.

The insurance companies disagreed with OSI’s interpretation of when the 45-day period began, arguing the decision “contradicts the plain language” of state law and exposed DaVita to “unlimited liability” for the nearly seven-month period.

“Because DaVita employs approximately 150 health care providers, it risks being sued and held liable for the alleged negligence of any of those providers,” wrote the plaintiffs in court filings. “Even though the mistakenly omitted surcharge amounted to only 1.4 (percent) of the total surcharge, DaVita is exposed to unlimited liability for the alleged negligence of any of 150 providers.”

The lawsuit, filed in the 1st Judicial District in Santa Fe in December, names Superintendent of Insurance John Franchini as the defendant and seeks a declaratory judgment, a reversal of the Office of Superintendent of Insurance’s decision and a writ of mandamus compelling the agency to accept the payment and apply it toward the period in question.

A spokeswoman for the Office of Superintendent of Insurance said the agency had not yet been served with the lawsuit and could not comment.

An attorney for the plaintiffs declined to comment and a spokeswoman for DaVita said the company could not comment on the lawsuit.