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Resolution Oversight Corp. v. Kansas Health Care Stabilization Fund

January 11, 2008

RESOLUTION OVERSIGHT CORPORATION, APPELLANT,
v.
KANSAS HEALTH CARE STABILIZATION FUND, APPELLEE.



Appeal from Shawnee District Court; CHARLES E. ANDREWS, JR., judge.

SYLLABUS BY THE COURT

1. Generally, a contract entered into by an agent of a governmental entity is binding on the entity. However, to the extent the contract exceeds the scope of the governmental entity's power, the contract is unlawful, unenforceable, and void.

2. A party contracting with a governmental entity is presumed to know the scope of the entity's authority, and, when a governmental agent or entity acts outside the scope of its authority, or ultra vires, no ratification or estoppel can legitimize the exercise of such authority.

3. The interpretation of statutes is a question of law subject to unlimited appellate review.

4. While K.S.A. 2006 Supp. 40-3403(a) addresses the Kansas Health Care Stabilization Fund's authority to contract with an insurance company to administer the Fund, it does not provide express statutory authority for the Fund to negotiate an agreement with a claimant's primary malpractice insurance carrier to resolve a dispute over the insurer's applicable policy limits.

5. K.S.A. 2006 Supp. 40-3403(b)(1)(A), which provides the Kansas Health Care Stabilization Fund's board of governors with the authority to "[a]dminister the fund and exercise and perform other powers, duties and functions required of the board under the [Act]," authorizes the Fund to negotiate or litigate a resolution of a dispute between the Fund and an insurance carrier concerning applicable policy limits. This authority is implied from the language of K.S.A. 40-3408 and K.S.A. 40-3410, which authorize the Fund to negotiate a settlement with a malpractice claimant only after the insurance carrier has agreed to settle for the policy limits and the claimant's demand for damages exceeds the policy limits, implicating the excess coverage of the Fund.

6. While the Kansas Health Care Stabilization Fund is generally authorized to enter into an agreement contractually postponing a determination of the Fund's liability, an agreement which commits the Fund to pay a specific portion of a settlement agreement in the event of a declaratory judgment implicating the Fund's interest violates K.S.A. 40-3410.

7. K.S.A. 40-3410 requires that the court in which a malpractice action is pending, or a court of appropriate jurisdiction, to approve any settlement between a claimant and the Kansas Health Care Stabilization Fund. This approval may only occur after the court issues proper notice, conducts a hearing, and finds the proposed settlement to be "valid, just and equitable."

8. Any agreement by the Kansas Health Care Stabilization Fund which circumvents the approval requirements of K.S.A. 40-3410 exceeds the scope of the Fund's authority and is ultra vires.

9. K.S.A. 40-3410 requires that the liability of the Kansas Health Care Stabilization Fund must ultimately be approved by a "court of appropriate jurisdiction" over the Fund. Any agreement made by the Fund which circumvents this requirement is ultra vires.

10. An appellate court lacks statutory or constitutional authority to render advisory opinions in cases found to be moot. A case is moot when no further controversy exists between the parties and where any judgment of the court would be without effect.

The opinion of the court was delivered by: Caplinger, J.

Affirmed in part and dismissed in part.

Before CAPLINGER, P.J., ELLIOTT and LEBEN, JJ.

Resolution Oversight Corporation (ROC), an appointed receiver for Western Indemnity Insurance Company (Western Indemnity), appeals the district court's order granting summary judgment to the Kansas Health Care Stabilization Fund (the Fund) on ROC's breach of contract claim. ROC argues the district court erred in concluding the Fund acted ultra vires in entering into a letter agreement with Western Indemnity whereby the Fund agreed to reimburse Western Indemnity in the amount of $800,000 if Western Indemnity obtained a declaratory judgment that its insurance policy did not cover negligent acts committed in Kansas. ROC further contends the district court erred in concluding that a claim against the Fund for statutory liability would be barred by the applicable statute of limitations.

We conclude the Fund had implied authority pursuant to K.S.A. 2006 Supp. 40-3403(b)(1)(A) to enter into an agreement with Western Indemnity to seek a declaration as to the limits of Western Indemnity's coverage. However, because K.S.A. 40-3410 required court approval of any settlement implicating the Fund, the Fund acted without authority in agreeing to pay a portion of the settlement absent such court approval, and the district court appropriately granted summary judgment to the Fund.

Finally, we lack jurisdiction to consider ROC's argument that the district court erred in finding that a claim for statutory liability, had it been raised, would have been barred by the applicable statute of limitations. Further, we decline ROC's invitation to render an advisory opinion as to the statute of limitations issue.

Factual and Procedural Background

Western Indemnity issued two medical malpractice insurance policies to Emergency Medical Services, Inc. (EMS), which covered EMS employee Dr. Catherine White from March 1, 1999, to March 1, 2000. Policy No. WPLP23373E99 (Policy No. 73) provided for $1,000,000 per claim coverage; Policy No. WPLP23372E99 (Policy No. 72) provided for $200,000 per claim coverage. At the time Policy No. 73 was issued, it did not restrict its coverage to medical practice in Missouri, and the policy was included on the certification form required by K.S.A. 40-3402(a)(1) for Dr. White's participation in the Fund. Dr. White opted for excess coverage under the Fund in the amount of $800,000 per claim.

The Wyandotte County Malpractice Action

In September 1999, James Winfrey sued Dr. White in Wyandotte County District Court for medical malpractice allegedly occurring in Kansas. Western Indemnity issued a revised endorsement to Policy No. 73 on February 22, 2000, limiting coverage of the $1,000,000 malpractice policy to practice in Missouri.

Western Indemnity then tendered $200,000, the policy limits of Policy No. 72, to the Fund in satisfaction of its obligation to defend Dr. White. The Fund rejected Western Indemnity's tender, maintaining that Dr. White was ...


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