Whether the Massachusetts Insurers Insolvency Fund cap of $300,000 per claim applies to each claimant, or may apply in the aggregate to all claims arising from a single incident if specified by the policy.

After a doctor allegedly provided negligent care to Richard Smith, Smith and his wife and two children filed tort claims for bodily injury and loss of consortium. The doctor’s insurance policy provided that payment would be limited to $2,000,000 for “each medical incident,” regardless of the number of persons claiming injury and the number of “claims or suits brought.” The doctor’s insurance company is now insolvent, so any payment will be made by the Massachusetts Insurers Insolvency Fund, a state program funded by fees from insurance companies.

The Fund brought a declaratory judgment action seeking a declaration that it was limited by statute to a total payout of $300,000 to the Smith family, rather than $300,000 to each family member. The Superior Court declared that the limit applied to each family member. The Fund appealed, and the SJC granted direct appellate review.

The Fund is limited to paying $300,000 per “covered claim.” G.L. c. 175D, § 5(1)(a). A covered claim is “an unpaid claim … which arises out of and is within the coverage of an insurance policy.” G.L. c. 175D, § 1(2). 

The Fund argues that—while some states cap payments per claimant, and others cap payments per medical incident—this language puts the definition of “claim” within the control of the insurance policy itself. Where the policy at issue aggregated claims for purposes of its own cap, the Fund should also aggregate claims for purposes of the statutory cap.

The Smith family respond that “claim” in the statute should be given its ordinary meaning, and that a claim is a claim of injury by a person—not a “medical incident.” In this case, each family member’s claim would be within the coverage of the original policy, so they are each entitled to recover up to the $300,000 cap or a total of $2,000,000 for the medical incident.

The question seems to be whether a “claim” under the statute is a claim by an injured party (the Smiths), in which case they must prevail, or a claim by the doctor against his insurance company, in which case the Fund could plausibly (if not overwhelmingly) argue that his policy allowed him only a single claim arising from the medical incident. The Smiths seem to have the better of the argument, but Superior Court judges have split on the issue; it will be interesting to see which way the SJC goes.