Aves v. Shah

Supreme Court of Kansas · 1995 · Torts

258 Kan. 506 (1995)

Updated July 23, 2026

TortsMedical malpractice insuranceBad faith failure to settleGarnishmentStatutory interpretationConstitutional lawHealth Care Stabilization Fundbad faith

Facts

In an underlying medical malpractice action, a jury found Dr. Shah 90% at fault for injuries arising from Darcy Aves' birth and returned a verdict exceeding $23 million, with Dr. Shah's share exceeding $21 million. For purposes of certification, the federal court assumed the Fund took over Dr. Shah's defense, controlled defense counsel, and acted negligently and in bad faith by refusing settlement offers of $3.1 or $3.2 million despite advice from two attorneys that a verdict exceeding the combined policy limits was likely. The plaintiffs then filed a garnishment action against the Commissioner of Insurance as administrator of the Fund to collect the excess judgment based on the Fund's alleged bad faith failure to settle. The dispute turned on whether the Health Care Provider Insurance Availability Act permits such a claim against the Fund.

Issue

Whether, in light of the Health Care Provider Insurance Availability Act, Kansas law recognizes a claim of bad faith or negligent failure to settle against the Health Care Stabilization Fund when a judgment exceeds the Fund's statutory limit of liability. If not, whether plaintiffs may pursue such a claim by garnishment is moot.

Rule

Under the Health Care Provider Insurance Availability Act, the Fund's liability is capped by K.S.A. 40-3403(e), and K.S.A. 40-3412(c) reflects legislative intent that no liability exists against the Fund beyond that specifically provided in the Act for negligent failure to settle or failure to settle in good faith. Therefore, Kansas does not recognize a bad faith claim against the Health Care Stabilization Fund for an excess judgment beyond the Fund's statutory limit.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Wichita, a qualified Kansas surgeon carried mandatory primary malpractice coverage and excess coverage through a state-created medical malpractice fund. After the fund took over the defense, it rejected a settlement offer within the combined coverage limits, and a jury later returned a malpractice judgment far above the fund's statutory maximum.

The patient obtains an assignment of the surgeon's rights and sues the fund for the excess amount based on bad-faith failure to settle. Under the majority rule, what is the most likely result?

Explanation. The majority held that, even assuming a contractual relationship, the Health Care Provider Insurance Availability Act bars liability against the fund beyond the liability specifically provided in the Act. The fund's exposure is capped by statute, and Kansas does not recognize a bad-faith or negligent-failure-to-settle claim against the fund for an excess judgment above that statutory limit.