A BILL TO BE ENTITLED
AN ACT to reform the laws related to medical providers' insurance and civil justice issues, as recommended by the Senate select committee on insurance and civil justice reform.
The General Assembly of North Carolina enacts:

PART I. MEASURES TO IMPROVE THE QUALITY OF PATIENT CARE, PROTECT PATIENT‑PHYSICIAN RELATIONSHIPS, AND STRENGTHEN DISCIPLINARY PROCEDURES.
SECTION 1.1.  G.S. 131E‑101 is amended by adding a new subdivision to read:
"(8)	"Quality assurance committee" means a committee, agency, or department of a State or local professional organization, of a medical staff of a licensed hospital, nursing home, of nurses or aides on the staff of a nursing home, or adult care home, of physicians having privileges within the nursing home, or adult care home, or of a peer review corporation or organization that is formed for the purpose of evaluating the quality, cost of, or necessity for health care services under applicable federal and State statutes, regulations, and rules."
SECTION 1.2.  G.S. 131E‑107 reads as rewritten:
"§ 131E‑107.  Quality assurance, medical, or peer review committees.
(a)	A member of a duly appointed  quality assurance, medical or peer review committee shall not be subject to liability for damages in any civil action on account of any act, statement or proceeding undertaken, made, or performed within the scope of the functions of the committee, if the committee member acts without malice or fraud, and if such peer review committee is approved and operates in accordance with G.S. 131E‑108.
(b)	The proceedings of a quality assurance, medical, or peer review committee, the records and materials it produces, and the materials prepared for the committee or considered by the committee shall be confidential wherever located, shall not be considered public records within the meaning of G.S. 132-1, and shall not be subject to discovery or introduction into evidence in any civil action against a nursing home or a provider or professional health services that results from matters that are the subject of evaluation and review by the committee. No person who was in attendance at a meeting of the committee shall be required to testify in any civil action as to any evidence or other matters produced or presented during the proceedings of the committee or as to any findings, recommendations, evaluations, opinions, or other actions of the committee or its members. However, information, documents, or records otherwise available are not immune from discovery or use in a civil action merely because they were presented during proceedings of the committee. A member of the committee or a person who testifies before the committee may testify in a civil action but cannot be asked about the person's testimony before the committee or any opinions formed as a result of the committee hearings."
SECTION 1.3.  G.S. 131E‑76(5) reads as rewritten:
"(5)	"Medical review committee" means  any of the following committees formed for the purpose of evaluating the quality, cost of, or necessity for hospitalization or health care, including medical staff credentialing:
a.	A committee of a State or local professional society.
b.	A committee of a medical staff of a hospital.
c.	A committee of a hospital or hospital system, if created by the governing board or medical staff of the hospital or system or operating under written procedures adopted by the governing board or medical staff of the hospital or system.
d.	A committee of a peer review corporation or organization."
SECTION 1.4.  G.S. 131E‑95 reads as rewritten:
"§ 131E‑95.  Medical review committee.
(a)	A member of a duly appointed medical review committee who acts without malice or fraud shall not be subject to liability for damages in any civil action on account of any act, statement or proceeding undertaken, made, or performed within the scope of the functions of the committee.
(b)	The proceedings of a medical review committee, the records and materials it produces and the materials it considers shall be confidential and not considered public records within the meaning of G.S. 132‑1, " 'Public records' defined", and shall not be subject to discovery or introduction into evidence in any civil action against a hospital, an ambulatory surgical facility licensed under Chapter 131E of the General Statutes, or a provider of professional health services which results from matters which are the subject of evaluation and review by the committee. No person who was in attendance at a meeting of the committee shall be required to testify in any civil action as to any evidence or other matters produced or presented during the proceedings of the committee or as to any findings, recommendations, evaluations, opinions, or other actions of the committee or its members. Proceedings, records and materials produced or considered by a medical review committee relating to (i) a root cause analysis or other analyses of systemic performance issues in the delivery of health care, (ii) self‑assessment of health care quality, (iii) preventative, corrective, or remedial actions considered or taken to address quality issues, and (iv) incident reports used for quality assurance or risk management purposes, are confidential and not subject to discovery or use in a civil action. However, information, documents, or records otherwise available are not immune from discovery or use in a civil action merely because they were presented during proceedings of the committee. A member of the committee or a person who testifies before the committee may testify in a civil action but cannot be asked about the person's testimony before the committee or any opinions formed as a result of the committee hearings.
(c)	Information that is confidential and is not subject to discovery or use in civil actions under this section may be released to a professional standards review organization that performs any accreditation or certification including the Joint Commission on Accreditation of Healthcare Organizations. Information released under this subsection shall be limited to that which is reasonably necessary and relevant to the standards review organization's determination to grant or continue accreditation or certification. Information released under this subsection retains its confidentiality and is not subject to discovery or use in any civil actions as provided under this section, and the standards review organization shall keep the information confidential subject to this section."
SECTION 1.5.  G.S. 90‑21.22A reads as rewritten:
"§ 90‑21.22A.  Medical review and quality assurance committees.
(a)	As used in this section, the following terms mean:
(1)	"Medical review committee." – A committee composed of health care providers licensed under this Chapter that is formed for the purpose of evaluating the quality of, cost of, or necessity for health care services, including provider credentialing. "Medical review committee" does not mean a medical review committee established under G.S. 131E‑95.
(2)	"Quality assurance committee." – Risk management employees of an insurer licensed to write medical professional liability insurance in this State, who work in collaboration with health care providers licensed under this Chapter, and insured by that insurer, to evaluate and improve the quality of health care services.
(b)	A member of a duly appointed medical review or quality assurance committee who acts without malice or fraud shall not be subject to liability for damages in any civil action on account of any act, statement, or proceeding undertaken, made, or performed within the scope of the functions of the committee.
(c)	The proceedings of a medical review or quality assurance committee, the records and materials it produces, and the materials it considers shall be confidential and not considered public records within the meaning of G.S. 132‑1, 131E‑309, or 58‑2‑100; and shall not be subject to discovery or introduction into evidence in any civil action against a provider of health care services who directly provides services and is licensed under this Chapter, a PSO licensed under Article 17 of Chapter 131E of the General Statutes, an ambulatory surgical facility licensed under Chapter 131E of the General Statutes, or a hospital licensed under Chapter 122C or Chapter 131E of the General Statutes or that is owned or operated by the State, which civil action results from matters that are the subject of evaluation and review by the committee. Proceedings, records, and materials produced or considered by a medical review or quality assurance committee relating to (i) a root cause analysis or other analyses of systemic performance issues in the delivery of health care, (ii) self-assessment of health care quality, (iii) preventative, corrective, or remedial actions considered or taken to address quality issues, and (iv) incident reports used for quality assurance or risk management purposes, are confidential and not subject to discovery or use in a civil action. No person who was in attendance at a meeting of the committee shall be required to testify in any civil action as to any evidence or other matters produced or presented during the proceedings of the committee or as to any findings, recommendations, evaluations, opinions, or other actions of the committee or its members. However, information, documents, or records otherwise available are not immune from discovery or use in a civil action merely because they were presented during proceedings of the committee. A member of the committee may testify in a civil action but cannot be asked about his or her testimony before the committee or any opinions formed as a result of the committee hearings.
(d)	This section applies to a medical review committee, including a medical review committee appointed by one of the entities licensed under Articles 1 through 67 of Chapter 58 of the General Statutes.
(e)	Subsection (c) of this section does not apply to proceedings initiated under G.S. 58‑50‑61 or G.S. 58‑50‑62."
SECTION 1.6.  G.S. 122C‑191(e) reads as rewritten:
"(e)	For purposes of peer review functions only:
(1)	A member of a duly appointed quality assurance committee who acts without malice or fraud shall not be subject to liability for damages in any civil action on account of any act, statement, or proceeding undertaken, made, or performed within the scope of the functions of the committee.
(2)	The proceedings of a quality assurance committee, the records and materials it produces, and the material it considers shall be confidential and not considered public records within the meaning of G.S. 132‑1, " 'Public records' defined," and shall not be subject to discovery or introduction into evidence in any civil action against a facility or a provider of professional health services that results from matters which are the subject of evaluation and review by the committee. Proceedings, records, and materials produced or considered by a quality assurance committee relating to (i) a root cause analysis or other analyses of systemic performance issues in the delivery of health care, (ii) self-assessment of health care quality, (iii) preventative, corrective, or remedial actions considered or taken to address quality issues, and (iv) incident reports used for quality assurance or risk management purposes, are confidential and not subject to discovery or use in a civil action. No person who was in attendance at a meeting of the committee shall be required to testify in any civil action as to any evidence or other matters produced or presented during the proceedings of the committee or as to any findings, recommendations, evaluations, opinions, or other actions of the committee or its members. However, information, documents or records otherwise available are not immune from discovery or use in a civil action merely because they were presented during proceedings of the committee, and nothing herein shall prevent a provider of professional health services from using such otherwise available information, documents or records in connection with an administrative hearing or civil suit relating to the medical staff membership, clinical privileges or employment of the provider. A member of the committee or a person who testifies before the committee may be subpoenaed and be required to testify in a civil action as to events of which the person has knowledge independent of the peer review process, but cannot be asked about his testimony before the committee for impeachment or other purposes or about any opinions formed as a result of the committee hearings.
(3)	Peer review information that is confidential and is not subject to discovery or use in civil actions under this section may be released to a professional standards review organization that contracts with an agency of this State or the federal government to perform any accreditation or certification function, including the Joint Commission on Accreditation of Healthcare Organizations. Information released under this subdivision shall be limited to that which is reasonably necessary and relevant to the standards review organization's determination to grant or continue accreditation or certification. Information released under this subdivision retains its confidentiality and is not subject to discovery or use in any civil actions as provided under this subsection, and the standards review organization shall keep the information confidential subject to this section."
SECTION 1.7.  G.S. 122C‑30 reads as rewritten:
"§ 122C‑30.  Peer review committee; immunity from liability; confidentiality.
For purposes of peer review functions of a facility licensed under the provisions of this Chapter:
(1)	A member of a duly appointed peer review committee or quality review committee who acts without malice or fraud shall not be subject to liability for damages in any civil action on account of any act, statement, or proceeding undertaken, made, or performed within the scope of the functions of the committee; and
(2)	Proceedings of a peer review or quality review committee, the records and materials it produces, and the material it considers shall be confidential and not considered public records within the meaning of G.S. 132‑1, "Public records' defined," and shall not be subject to discovery or introduction into evidence in any civil action against a facility or a provider of professional health services that results from matters which are the subject of evaluation and review by the committee. Proceedings, records, and materials produced or considered by a peer review or quality review committee relating to (i) a root cause analysis or other analyses of systemic performance issues in the delivery of health care, (ii) self-assessment of health care quality, (iii) preventative, corrective, or remedial actions considered or taken to address quality issues, and (iv) incident reports used for quality assurance or risk management purposes, are confidential and not subject to discovery or use in a civil action. No person who was in attendance at a meeting of the committee shall be required to testify in any civil action as to any evidence or other matters produced or presented during the proceedings of the committee or as to any findings, recommendations, evaluations, opinions, or other actions of the committee or its members. However, information, documents or records otherwise available are not immune from discovery or use in a civil action merely because they were presented during proceedings of the committee, and nothing herein shall prevent a provider of professional health services from using such otherwise available information, documents or records in connection with an administrative hearing or civil suit relating to the medical staff membership, clinical privileges or employment of the provider. A member of the committee or a person who testifies before the committee may be subpoenaed and be required to testify in a civil action as to events of which the person has knowledge independent of the peer review or quality review process, but cannot be asked about the person's testimony before the committee for impeachment or other purposes or about any opinions formed as a result of the committee hearings."
SECTION 1.8.  Article 4 of Chapter 8C of the General Statutes is amended by adding a new section to read:
"Rule 413.  Medical actions; statements to ameliorate or mitigate adverse outcome.
Statements by a health care provider apologizing for an adverse outcome in medical treatment, offers to undertake corrective or remedial treatment or actions, and gratuitous acts to assist affected persons shall not be admissible to prove negligence or culpable conduct by the health care provider in an action brought under Article 1B of Chapter 90 of the General Statutes."
SECTION 1.9.  Article 1B of Chapter 90 of the General Statutes is amended by adding a new section to read:
"§ 90-21.12D.  Reports of attorney misconduct in medical malpractice actions.
(a)	If a trial court dismisses an action for noncompliance with G.S. 1A-1, Rule 9(j) or imposes sanctions pursuant to G.S. 1A-1, Rule 11, against an attorney in a medical malpractice action, the court shall report the dismissal or imposition of the sanctions and the name of the attorney whose action is dismissed or who is sanctioned, together with a copy of the order dismissing the action or imposing sanctions, to the State Bar within 30 days of the dismissal or imposition of the sanctions.
(b)	Within 90 days of receiving a third or subsequent report pursuant to subsection (a) of this section, the State Bar shall conduct an investigation to determine whether disciplinary action or other remedial measures against the attorney are warranted. The State Bar shall publish the results of its investigation conducted pursuant to this subsection.
(c)	On or before January 31 of each year, the State Bar shall submit a report to the General Assembly describing the State Bar's response in the preceding calendar year to reports of attorneys with a history of multiple violations reported pursuant to this section."
SECTION 1.10.  G.S. 90‑14.13 reads as rewritten:
"§ 90‑14.13.  Reports of disciplinary action by health care institutions; immunity from liability.
(a)	The chief administrative officer of every licensed hospital or other health care institution, including Health Maintenance Organizations, as defined in G.S. 58‑67‑5, preferred providers, as defined in G.S. 58‑50‑56, and all other provider organizations that issue credentials to physicians who practice medicine in the State, shall, after consultation with the chief of staff of that institution, report to the Board any revocation, suspension, or limitation of a physician's privileges to practice in that institution. A hospital is not required to report the suspension of a physician's privileges for failure to timely complete medical records unless the suspension is the third within the calendar year for failure to timely complete medical records. Upon reporting the third suspension, the hospital shall also report the previous two suspensions. The institution shall also report to the Board resignations from practice in that institution by persons licensed under this Article. The Board shall report all violations of this subsection known to it to the licensing agency for the institution involved.
(b)	Any licensed physician who does not possess professional liability insurance shall report to the Board any award of damages or any settlement of any malpractice complaint affecting his or her practice within 30 days of the award or settlement.
(c)	The chief administrative officer of each insurance company providing professional liability insurance for physicians who practice medicine in North Carolina, the administrative officer of the Liability Insurance Trust Fund Council created by G.S. 116‑220, the administrative officer of any trust fund operated by a hospital authority, group, or provider, and the Board of Directors of the North Carolina Health Care Excess Liability Fund created by G.S. 90-684, shall report to the Board within 30 days:
(1)	Any award of damages or settlement affecting or involving a physician it insures, or
(2)	Any cancellation or nonrenewal of its professional liability coverage of a physician, if the cancellation or nonrenewal was for cause.
(d)	The Board may request details about any action and the officers shall promptly furnish the requested information. The reports required by this section are privileged and shall not be open to the public, except as provided in this section. The Board shall report all violations of this paragraph to the Commissioner of Insurance.
(e)	The Board shall review all reports filed under this section and shall keep a cumulative total of all reports by individual physicians. Within 90 days of determining that a physician has three or more reports under this section affecting or involving the physician, the Board shall conduct an investigation to determine whether disciplinary sanctions or other remedial measures against the physician are warranted. The Board shall publish the results of its investigation. On or before January 31 of each year, the Board shall submit a report to the General Assembly describing the Board's response in the preceding calendar year to reports of physicians with a history of multiple awards of damages and settlements under this subsection.
(f)	Any person making a report required by this section shall be immune from any criminal prosecution or civil liability resulting therefrom unless such person knew the report was false or acted in reckless disregard of whether the report was false."
SECTION 1.11.  G.S. 90‑21.14 is amended by adding a new subsection to read:
"(b1)	If, because of the limit of liability in this section, an action is dismissed or the person against whom an action is brought is found not to be liable, the court shall, upon motion of the defendant, impose appropriate monetary sanctions against the plaintiff's attorney under Rule 11 of the Rules of Civil Procedure, including court costs and attorneys' fees related to defending the action."

PART II. LITIGATION REFORMS.
Subpart A. Changes to Definition of Medical Malpractice Action and Standard of Care.

SECTION 2.1.  Article 1B of Chapter 90 of the General Statutes is amended by adding the following new section to read:
"§ 90-21.18A.  Medical directors; liability limitation.
A medical director of a licensed nursing home shall not be named a defendant in an action pursuant to this Article except under any of the following circumstances:
(1)	Where allegations involve a patient under the direct care of the medical director.
(2)	Where allegations involve willful or intentional misconduct, recklessness, or gross negligence in connection with the failure to supervise, or other acts performed or failed to be performed, by the medical director in a supervisory or consulting role."
SECTION 2.2.  Article 1B of Chapter 90 of the General Statutes is amended by adding the following new section to read:
"§ 90-21.12B.  Nonprofessional negligence actions.
Civil actions for damages for personal injury or death arising out of the furnishing or failure to furnish patient care services other than professional services by a health care provider in conjunction with the performance of medical, dental, or other health care by a health care provider shall be brought in accordance with the provisions of G.S. 90‑21.11, 90-21.12A, 90-21.12C, 90-21.12D, 90-21.18A, and 90-21.18B, but shall not be subject to the requirements of G.S. 1A-1, Rule 9(j)."

Subpart B. Civil Procedural Changes.

SECTION 2.3.  G.S. 1‑289 reads as rewritten:
"§ 1‑289.  Undertaking to stay execution on money judgment.
(a)	If the appeal is from a judgment directing the payment of money, it does not stay the execution of the judgment unless a written undertaking is executed on the part of the appellant, by one or more sureties, as set forth in this section.
(a1)	In an action where the judgment directs the payment of money, the court shall specify the amount of the undertaking required to stay execution of the judgment pending appeal as provided in subsections (a2) and (b) of this section. The undertaking shall be to the effect that if the judgment appealed from, or any part thereof, is affirmed, or the appeal is dismissed, the appellant will pay the amount directed to be paid by the judgment, or the part of such amount as to which the judgment shall be affirmed, if affirmed only in part, and all damages which shall be awarded against the appellant upon the appeal, except as provided in subsection (b) of this section. Whenever it is satisfactorily made to appear to the court that since the execution of the undertaking the sureties have become insolvent, the court may, by rule or order, require the appellant to execute, file and serve a new undertaking, as above. In case of neglect to execute such undertaking within twenty days after the service of a copy of the rule or order requiring it, the appeal may, on motion to the court, be dismissed with costs. Whenever it is necessary for a party to an action or proceeding to give a bond or an undertaking with surety or sureties, he may, in lieu thereof, deposit with the officer into court money to the amount of the bond or undertaking to be given. The court in which the action or proceeding is pending may direct what disposition shall be made of such money pending the action or proceeding. In a case where, by this section, the money is to be deposited with an officer, a judge of the court, upon the application of either party, may, at any time before the deposit is made, order the money deposited in court instead of with the officer; and a deposit made pursuant to such order is of the same effect as if made with the officer. The perfecting of an appeal by giving the undertaking mentioned in this section stays proceedings in the court below upon the judgment appealed from; except when the sale of perishable property is directed, the court below may order the property to be sold and the proceeds thereof to be deposited or invested, to abide the judgment of the appellate court.
(a2)	Except as provided in subsection (b) of this section, the amount of the undertaking that shall be required by the court shall be an amount determined by the court after notice and hearing proper and reasonable for the security of the rights of the adverse party, considering relevant factors including the following:
(1)	The amount of the judgment.
(2)	The amount of the limits of all applicable liability policies of the appellant judgment debtor.
(3)	The aggregate net worth of the appellant judgment debtor.
(b)	If the appellee in a civil action brought under any legal theory obtains a judgment directing the payment or expenditure of money in the amount of twenty five million dollars ($25,000,000) or more, and the appellant seeks a stay of execution of the judgment within the period of time during which the appellant has the right to pursue appellate review, including discretionary review and certiorari, the amount of the undertaking that the appellant is required to execute to stay execution of the judgment during the entire period of the appeal shall be twenty five million dollars ($25,000,000). 
(c)	If the appellee proves by a preponderance of the evidence that the appellant for whom the undertaking has been limited under  subsections (a2) and (b) of this section is, for the purpose of evading the judgment, (i) dissipating its assets, (ii) secreting its assets, or (iii) diverting its assets outside the jurisdiction of the courts of North Carolina or the federal courts of the United States other than in the ordinary course of business, then the  limitations in subsections (a2) and (b) of this section shall not apply and the appellant shall be required to make an undertaking in the full amount otherwise required by this section."
SECTION 2.4.  G.S. 1A‑1, Rule 9(j) reads as rewritten:
"(j)	Medical malpractice. – Any complaint alleging medical malpractice by a health care provider as defined in G.S. 90‑21.11 in failing to comply with the applicable standard of care under G.S. 90‑21.12 shall be dismissed unless:
(1)	The pleading specifically asserts that the medical care and all medical records pertaining to the alleged injury then available to the plaintiff after reasonable inquiry, have been reviewed by a person who is reasonably expected to qualify as an expert witness under Rule 702 of the Rules of Evidence and who is willing to testify that the medical care did not comply with the applicable standard of care;
(2)	The pleading specifically asserts that the medical care and all medical records pertaining to the alleged injury then available to the plaintiff after reasonable inquiry, have been reviewed by a person that the complainant will seek to have qualified as an expert witness by motion under Rule 702(e) of the Rules of Evidence and who is willing to testify that the medical care did not comply with the applicable standard of care, and the motion is filed with the complaint; or
(3)	The pleading alleges facts establishing negligence under the existing common‑law doctrine of res ipsa loquitur.
Upon motion by the complainant prior to the expiration of the applicable statute of limitations, a resident judge of the superior court for a judicial district in which venue for the cause of action is appropriate under G.S. 1‑82 or, if no resident judge for that judicial district is physically present in that judicial district, otherwise available, or able or willing to consider the motion, then any presiding judge of the superior court for that judicial district may allow a motion to extend the statute of limitations for a period not to exceed 120 days to file a complaint in a medical malpractice action in order to comply with this Rule, upon a determination that good cause exists for the granting of the motion and that the ends of justice would be served by an extension.  At the request of the defendant, the plaintiff shall furnish to the defendant, within 30 days, an affidavit from the expert certifying compliance with this subsection."
SECTION 2.5.  G.S. 1A‑1, Rule 26(f1) reads as rewritten:
"(f1)	Medical malpractice discovery conference. – In a medical malpractice action as defined in G.S. 90‑21.11, upon the case coming at issue or the filing of a responsive pleading or motion requiring a determination by the court, the judge shall, within 30 days, direct the attorneys for the parties to appear for a discovery conference. At the conference the court may consider the matters set out in Rule 16, and shall:
…
(2)	Establish an appropriate schedule for designating expert witnesses, consistent with a discovery schedule pursuant to subdivision (3). As to each expert designated, the designation shall be accompanied by a written report prepared and signed by the witness. The report shall contain a complete statement of all opinions to be expressed and the basis and reasons therefor; the data or other information considered by the witness in forming the opinions; the qualifications of the witness, including a list of all publications authored by the witness within the preceding 10 years; the compensation the witness is to be paid for the study and testimony; and a listing of any other cases in which the witness has testified as an expert at trial or by deposition within the preceding four years. The party shall supplement the expert's report if the party learns that in some material respect the report is incomplete or incorrect. The expert's direct testimony shall not be inconsistent with or go beyond the fair scope of the expert report as supplemented. The parties shall not depose expert witnesses, unless the court otherwise orders for good cause shown.
…"
SECTION 2.6.  G.S. 1A‑1, Rule 53 reads as rewritten:
"Rule 53.  Referees.
(a)	Kinds of reference. –
(1)	By Consent. – Any or all of the issues in an action may be referred upon the written consent of the parties except in actions to annul a marriage, actions for divorce, actions for divorce from bed and board, actions for alimony without the divorce or actions in which a ground of annulment or divorce is in issue.
(2)	Compulsory. – Where the parties do not consent to a reference, the court may, upon the application of any party or on its own motion, order a reference in the following cases:
a.	Where the trial of an issue requires the examination of a long or complicated account; in which case the referee may be directed to hear and decide the whole issue, or to report upon any specific question of fact involved therein.
b.	Where the taking of an account is necessary for the information of the court before judgment, or for carrying a judgment or order into effect.
c.	Where the case involves a complicated question of boundary, or requires a personal view of the premises.
d.	Where a question of fact arises outside the pleadings, upon motion or otherwise, at any stage of the action.
(3)	Article 1B of Chapter 90 Actions. – In any action brought under Article 1B of Chapter 90 of the General Statutes, the issue of liability shall be referred.
(b)	Jury trial. –
(1)	Where the reference is by consent, the parties waive the right to have any of the issues within the scope of the reference passed on by a jury.
(2)	Except as provided in subdivision (3) of this subsection, a compulsory reference does not deprive any party of the party's right to a trial by jury, which right the party may preserve by
a.	Objecting to the order of compulsory reference at the time it is made, and
b.	By filing specific exceptions to particular findings of fact made by the referee within 30 days after the referee files his report with the clerk of the court in which the action is pending, and
c.	By formulating appropriate issues based upon the exceptions taken and demanding a jury trial upon such issues. Such issues shall be tendered at the same time the exceptions to the referee's report are filed. If there is a trial by jury upon any issue referred, the trial shall be only upon the evidence taken before the referee.
(3)	A compulsory reference pursuant to subdivision (3) of subsection (a) of this section does not deprive any party of the party's right to a trial by jury, which right is hereby preserved.
(c)	Appointment. –
(1)	General Appointment. – Except as provided for in subdivision (2) of this subsection, the parties may agree in writing upon one or more persons not exceeding three, and a reference shall be ordered  to such person or persons in appropriate cases. If the parties do not  agree, the court shall appoint one or more referees, not exceeding three, but no person shall be appointed referee to whom all parties in the action object.
(2)	Article 1B of Chapter 90 Appointments. – In all actions referred pursuant to subdivision (3) of subsection (a) of this section, the court shall appoint three referees. The plaintiff or plaintiffs and the defendant or defendants shall each furnish the court with a list of five names. The court shall randomly select one name from each of the separate lists for appointment. The parties shall then agree on a third person for appointment acceptable to all parties, or in the event the parties cannot agree, the court shall select for appointment as the third referee a retired superior court judge or other person with significant dispute resolution experience. The court shall insure that the referees are fair and objective, that none of the referees are parties to the action, related to any parties to the action, or are in any way financially associated with any of the parties to the action or in the outcome of the action. Any objection to the fairness or objectivity of any person recommended by any party must be raised and ruled on by the court prior to the appointment of the referees. The third referee designated in this process shall serve as chair of the referees.
(d)	Compensation. – The compensation to be allowed a referee shall be fixed by the court and charged in the bill of costs. After appointment of a referee, the court may from time to time order advancements by one or more of the parties of sums to be applied to the referee's compensation. Such advancements may be apportioned between the parties in such manner as the court sees fit. Advancements so made shall be taken into account in the final fixing of costs and such adjustments made as the court then deems proper. All referees serving jointly shall be paid equally.
(e)	Powers. – Except as otherwise provided by statute, the order of reference to the referee may specify or limit the referee's powers and may direct the referee to report only upon particular issues or to do or perform particular acts or to receive and report evidence only and may fix the time and place for beginning and closing the hearings and for the filing of the referee's report. Subject to the specifications and limitations stated in the order, every referee has power to administer oaths in any proceeding before the referee, and has generally the power vested in a referee by law. The referee shall have the same power to grant adjournments and to allow amendments to pleadings and to the summons as the judge and upon the same terms and with like effect. The referee shall have the same power as the judge to preserve order and punish all violations thereof, to compel the attendance of witnesses before the referee by attachment, and to punish them as for contempt for nonattendance or for refusal to be sworn or to testify. The parties may procure the attendance of witnesses before the referee by the issuance and service of subpoenas as provided in Rule 45.
(f)	Proceedings. –
(1)	Meetings. – When a reference is made, the clerk shall forthwith furnish the referee with a copy of the order of reference. Upon receipt thereof unless the order of reference otherwise provides, the referee shall forthwith set a time and place for the first meeting of the parties or their attorneys to be held within 20 days after the date of the order of reference and shall notify the parties or their attorneys. It is the duty of the referee to proceed with all reasonable diligence. Any party, on notice to all other parties and the referee, may apply to the court for an order requiring the referee to expedite the proceedings and to make the referee's report. If a party fails to appear at the time and place appointed, the referee may proceed ex parte, or, in the referee's discretion, may adjourn the proceedings to a future day, giving notice to the absent party of the adjournment.
(2)	Statement of Accounts. – When matters of accounting are in issue before the referee, the referee may prescribe the form in which the accounts shall be submitted and in any proper case may require or receive in evidence a statement by a certified public accountant or other qualified accountant who is called as a witness. Upon objection of a party to any of the items thus submitted or upon a showing that the form of statement is insufficient, the referee may require a different form of statement to be furnished, or the accounts of specific items thereof to be proved by oral examination of the accounting parties or upon written interrogatories or in such other manner as he directs.
(3)	Testimony Reduced to Writing. – The testimony of all witnesses must be reduced to writing by the referee, or by someone acting under the referee's direction and shall be filed in the cause and constitute a part of the record.
(g)	Report. –
(1)	Contents and Filing. – The referee shall prepare a report upon the matters submitted to the referee by the order of reference and shall include therein the referee's decision on all matters so submitted. If required to make findings of fact and conclusions of law, the referee shall set them forth separately in the report. The referee shall file the report with the clerk of the court in which the action is pending and unless otherwise directed by the order of reference, shall file with it a transcript of the proceedings and of the evidence and the original exhibits. Before filing the referee's report a referee may submit a draft thereof to counsel for all parties for the purpose of receiving their suggestions. The clerk shall forthwith mail to all parties notice of the filing. In situations where more than one referee is appointed, the report and finding of the referees shall be agreed to by a majority vote.
(2)	Exceptions and Review. – All or any part of the report may be excepted to by any party within 30 days from the filing of the report. Thereafter, and upon 10 days' notice to the other parties, any party may apply to the judge for action on the report. The judge after hearing may adopt, modify or reject the report in whole or in part, or may remand the proceedings to the referee with instructions. Except for action referred pursuant to subdivision (3) of subsection (a) of this section, the judge after hearing may render judgment. No judgment may be rendered on any reference except by the judge."
SECTION 2.7.  Article 1B of Chapter 90 is amended by adding a new section to read:
"§ 90-21.12C.  Report of referees.
(a)	In any action brought under this Article, the issue of liability shall be referred as set forth in G.S. 1A-1, Rule 53. Upon completion of discovery on liability as permitted under the Rules of Civil Procedure, the court shall issue an order of reference directing the referees to issue a report and findings on the issue of liability.
(b)	After receiving the report of the referees in accordance with G.S. 1A-1, Rule 53, upon the request of the plaintiff, the court shall proceed to schedule the case for trial. After the issuance of the report of the referees, no additional discovery on the issue of liability shall be permitted except by order of the court upon a finding of good cause. The report of the referees shall be admissible as prima facie evidence on the issue of liability sufficient for the issue to be decided by the jury. The parties may offer such other evidence as the parties deem necessary and appropriate to supplement the report and findings. The court shall instruct the jury that it may consider the report and findings of the referees and may give the report and findings such weight as the jury deems proper, but that the jury is not bound by the report and the findings.
(c)	After presentation of evidence on liability and damages, if the jury finds for the plaintiff on the issue of liability, the jury shall also determine damages. At the close of all evidence and prior to final arguments to the jury, the plaintiff and defendant shall each submit to the court in sealed form the amount of damages they contend the plaintiff is entitled to recover if the jury finds that the defendant is liable for the plaintiff's damages. The sealed amount of damages shall be unsealed by the court and the parties informed of each amount of damages. The amount of damages submitted may not be amended after being unsealed by the court. The parties may argue to the jury the amount of damages proposed in their final arguments. If the plaintiff is found to be entitled to a recovery of damages, then the issue submitted to the jury on damages shall be whether the jury finds for the plaintiff's submission on damages or for the defendant's submission on damages. The jury may not return a verdict for any other amount. Any other finding by the jury on the issue of damages shall be grounds for a mistrial.
(d)	In any action where the jury answers the issue of liability against the plaintiff after a report and finding by the referees that the defendant was not liable, then the court shall award to the defendant its court costs and reasonable attorneys' fees incurred after the filing of the referees' report and finding. In any action where the jury answers the issue of liability against the defendant after a report and finding by the referees that the defendant was liable, then the court shall award to the plaintiff its court costs and reasonable attorneys' fees incurred after the filing of the referees' report and finding.
(e)	Notwithstanding the requirements set forth in subsection (a) of this section, if a plaintiff refiles an action against the same defendant after voluntarily dismissing an earlier action subsequent to the issuance of a report by referees, the report by referees from a prior action against the same defendant will be admissible in lieu of a new reference, except where the court, for good cause, orders a new reference."
SECTION 2.8.  Article 4 of Chapter 8C of the General Statutes is amended by adding a new section to read:
"Rule 414.  Evidence of medical expenses.
In any action brought against a health care provider pursuant to Article 1B of Chapter 90 of the General Statutes, evidence offered to prove past medical expenses may include all bills reasonably paid or incurred and a statement of the amounts actually necessary to satisfy the bills that have been incurred. Evidence of source of payment shall not be admissible."
SECTION 2.9.  G.S. 1‑17(b) reads as rewritten:
"(b)	Notwithstanding the provisions of subsection (a) of this section, an action on behalf of a minor for malpractice arising out of the performance of or failure to perform professional services shall be commenced within the limitations of time specified in G.S. 1‑15(c), except that if those time limitations expire before the minor attains the full age of 19 years, the action may be brought before the minor attains the full age of 19 years, but in no event may an action arising from birth‑related injuries be commenced more than 10 years from the last act of the defendant giving rise to the cause of action."

Subpart C. Deferred Payment of Judgments in Certain Medical Actions.

SECTION 2.10.  Article 1B of Chapter 90 of the General Statutes is amended by adding the following new section to read:
"§ 90-21.18B.  Periodic payment of future economic damages in medical negligence actions.
(a)	As used in this section:
(1)	'Future economic damages' includes all economic damages for future medical treatment, care or custody, and loss of future earnings of the plaintiff following the date of the verdict or award.
(2)	'Periodic payments' means the payment of money to the plaintiff at regular intervals.
(b)	Upon the award of damages in any action brought under Article 1B of Chapter 90 of the General Statutes, the court shall, at the request of either party, after hearing and a determination by the court of the amount of the judgment that should be attributed to future economic damages, enter a judgment ordering that the amount of future economic damages of the plaintiff in excess of the sum of: 
(1)	One hundred thousand dollars ($100,000), 
(2)	The amount of the future medical expenses expected to be incurred by the plaintiff within the next 12 months, including the cost of any special equipment or adaptations necessary for daily care and living arrangements, due to the negligence of the defendant, plus
(3)	An amount equal to the costs and attorneys' fees incurred and payable by the plaintiff in litigating the case multiplied by a fraction, the numerator of which is the amount of future economic damages in excess of one hundred thousand dollars ($100,000) and the denominator of which is the amount of the total judgment in favor of the plaintiff, 
be paid in whole or in part by periodic payments rather than by a lump-sum payment. If the court finds that the sum of subdivisions (1), (2), and (3) of this subsection are insufficient to provide for the plaintiff's immediate needs, the court may make such adjustments in the amount to be paid by periodic payments as the court finds are necessary to ensure that the amount of the nondeferred compensation will be adequate for the plaintiff's immediate needs. In entering a judgment under this section ordering the payment of future economic damages by periodic payments, the court shall make a specific finding of the total dollar amount of periodic payments that will equal the present value of the jury's lump‑sum award to compensate the plaintiff for future economic damages.
(c)	As a condition to authorizing periodic payments of future economic damages, the court in its order of judgment, shall require the defendant to post a bond or security, or otherwise to assure full payment of future damages awarded by the judgment including that payments be made through the establishment of a trust fund or the purchase of an annuity for the life of the plaintiff or during the continuance of the plaintiff's compensable injury or disability. The purchase of an annuity found by the court to be through a duly licensed and adequately capitalized insurance company shall satisfy the requirements of this subsection. A trust fund found by the court to be adequately funded and insured shall satisfy the requirements of this subsection. For periodic payments to be made directly by the defendant, the court shall approve periodic payments of future damages only if it finds that all payments which are due to be made are secured by a bond issued by an insurance company authorized to write such bonds in this State and which is rated "A plus" (A+) or better by Best's Insurance Reports. If the defendant is unable to adequately assure full payment of future damages, the court shall order that all future damages be paid to the plaintiff in a lump sum pursuant to the verdict. No bond may be canceled or be subject to cancellation unless at least 60 days' advance written notice is filed with the court and the plaintiff. Upon termination of periodic payments, the court shall order the return of the security, or so much as remains, to the defendant.
(d)	The judgment providing for payment of future economic damages by periodic payments shall specify the recipient of the payments, the dollar amounts of the payments, the interval between payments, and the number of payments or the period of time over which payments shall be made. Periodic payments shall be subject to modification by the court in the event of death of the plaintiff as provided in subsection (e) of this section.
(e)	In any judgment that orders future economic damages payable in periodic payments, liability for payment of future medical damages not yet due shall terminate upon the death of the plaintiff; however, the court that rendered the original judgment may modify the judgment to provide that damages awarded for loss of future earnings shall not be reduced or payments terminated by reason of the death of the plaintiff, but shall be paid to persons to whom the plaintiff owed a duty of support, as provided by law, immediately prior to the plaintiff's death.
(f)	In the event the court finds that the defendant has exhibited a pattern of failing to make the payment specified in subsection (b) of this section, the court may do one or more of the following:
(1)	Order that all remaining amounts of the award be paid by lump sum within 30 days after entry of the order.
(2)	Find the defendant in contempt of court and, in addition to the required periodic payments, order the defendant to pay the plaintiff all damages caused by the failure to timely make periodic payments, including court costs and attorneys' fees.
(3)	Enter other orders or sanctions as appropriate to protect the defendant.
(g)	Nothing in this section shall preclude any other method of payment of awards, if the method is consented to by the parties."

PART III. PROFESSIONAL LIABILITY INSURANCE CHANGES.
SECTION 3.1.  Article 40 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58‑40‑32.  Health care provider professional malpractice insurance rates.
(a)	As used in this section:
(1)	"Health care provider" has the same meaning as defined in G.S. 90‑21.11.
(2)	"Insurer" means an insurer or State-chartered risk retention group that provides professional malpractice insurance to health care providers in this State.
(b)	No insurer's rate shall be approved or remain in effect that is excessive, inadequate, unfairly discriminatory, as defined in G.S. 58‑40‑20, or otherwise in violation of this Chapter. In considering whether a rate is excessive, inadequate, or unfairly discriminatory, no consideration shall be given to the degree of competition, and the Commissioner shall consider whether the rate mathematically reflects the insurer's investment income.
(c)	Every insurer that desires to change any rate shall file a complete rate application with the Commissioner. A complete rate application shall include all data required by G.S. 58‑40‑30(b) and G.S. 58‑41‑50, and a detailed description of any experience rating or schedule-rating plan used by the insurer. The application shall also include such other information that the Commissioner requires. The applicant has the burden of proving that the requested rate change is justified and meets the requirements of this Article.
(d)	Within 10 days of receiving the rate change application, the Commissioner shall notify the public on the Department's Internet web site of any application by an insurer for a rate change and shall provide written notification of the rate change application to any trade association or organization that represents health care providers and that registers with the Department to receive notification. 
(e)	The application shall be deemed to be approved 60 days after public notice and written notification under subsection (d) of this section unless any of the following occur:
(1)	An insured health care provider, the health care provider's representative, or an association of health care providers, requests a hearing within 30 days after public notice and the Commissioner grants the hearing, or determines not to grant the hearing and issues written findings in support of that decision.
(2)	The Commissioner on the health care provider's own motion determines to hold a hearing.
(3)	The proposed rate adjustment exceeds fifteen percent (15%) of the then-applicable rate, in which case the Commissioner must hold a hearing.
In any event, a rate change application shall be deemed to be approved 120 days after the Commissioner receives the rate application unless that application has been disapproved by a final order of the Commissioner after a hearing. For purposes of this section, "received" means the date delivered to the Department.
(f)	The provisions of G.S. 58-40-45 governing the disapproval and interim use of rates shall apply to this section."
SECTION 3.2.  G.S. 58‑2‑170 reads as rewritten:
"§ 58‑2‑170.  Annual statements by professional liability insurers; medical malpractice claim reports.
(a)	In addition to the financial statements required by G.S. 58‑2‑165, every insurer, self‑insurer, and risk retention group that provides professional liability insurance in the State shall file with the Commissioner, on or before the first day of February in each year, in form and detail as the Commissioner prescribes, a statement showing the items set forth in subsection (b) of this section, as of the preceding 31st day of December. The annual statement shall not be reported or disclosed to the public in a manner or format which identifies or could reasonably be used to identify any individual health care provider or medical center. The statement shall be signed and sworn to by the chief managing agent or officer of the insurer, self‑insurer, or risk retention group, before the Commissioner or some officer authorized by law to administer oaths. The Commissioner shall, in December of each year, furnish to each such person that provides professional liability insurance in the State forms for the annual statements. The Commissioner may, for good cause, authorize an extension of the report due date upon written application of any person required to file. An extension is not valid unless the Commissioner's authorization is in writing and signed by the Commissioner or one of his deputies.
(b)	The statement required by subsection (a) of this section shall contain:
(1)	Number of claims pending at beginning of year;
(2)	Number of claims pending at end of year;
(3)	Number of claims paid;
(4)	Number of claims closed no payment;
(5)	Number and amounts of claims in court in which judgment  was entered, the amount of the judgment, and the actual amount paid on the judgment or in settlement of the judgment. For both the amount of the judgment and the actual amount paid, provide the:
a.	Highest amount
b.	Lowest amount
c.	Average amount
d.	Median amount;
(6)	Number and amounts of claims out of court in which settlement paid:
a.	Highest amount
b.	Lowest amount
c.	Average amount
d.	Median amount;
(7)	Average amount per claim set up in reserve;
(8)	Total premium collection;
(9)	Total expenses less reserve expenses; and
(10)	Total reserve expenses.
(b1)	The Commissioner shall analyze the reports described in subsections (a) and (b) of this section and shall file statistical and other summaries with the General Assembly no later than March 1 of each year. Summaries filed by the Commissioner pursuant to this subsection shall include all of the following:
(1)	Any trends noted or observed from the data.
(2)	All actions taken by the Commissioner in response to these trends.(3)	Any legislative or other recommendations from the Commissioner with respect to actions by the General Assembly in response to these trends.
(c)	Every insurer, self‑insurer, and risk retention group that provides professional liability insurance to health care providers in this State shall file, within 90 days following the request of the Commissioner, a report containing information for the purpose of allowing the Commissioner to analyze claims. The report shall be in the form prescribed by the Commissioner. The form prescribed by the Commissioner shall be a form that permits the public inspection, examination, or copying of any information contained in the report:  Provided, however, that any data or other characteristics that identify or could be used to identify the names or addresses of the claimants or the names or addresses of the individual health care provider or medical center against whom the claims are or have been asserted or any data that could be used to identify the dollar amounts involved in such claims shall be treated as privileged information and shall not be made available to the public. The Commissioner shall analyze these reports and shall file statistical and other summaries based on these reports with the General Assembly as soon as practicable after receipt of the reports. The Commissioner shall assess a penalty against any person that willfully fails to file a report required by this subsection. Such penalty shall be one thousand dollars ($1,000) for each day after the due date of the report that the person willfully fails to file:  Provided, however, the penalty for an individual who self insures shall be two hundred dollars ($200.00) for each day after the due date of the report that the person willfully fails to file:  Provided, however, that upon the failure of a person to file the report as required by this subsection, the Commissioner shall send by certified mail, return receipt requested, a notice to that person informing him that he has 10 business days after receipt of the notice to either request an extension of time or file the report. The Commissioner may, for good cause, authorize an extension of the report due date upon written application of any person required to file. An extension is not valid unless the Commissioner's authorization is in writing and signed by the Commissioner or one of his deputies.
(d)	Every person that self‑insures against professional liability in this State shall provide the Commissioner with written notice of such self‑insurance, which notice shall include the name and address of the person self‑insuring. This notice shall be filed with the Commissioner each year for the purpose of apprising the Commissioner of the number and locations of persons that self‑insure against professional liability."
SECTION 3.3.  G.S. 58‑40‑25 reads as rewritten:
"§ 58‑40‑25.  Rating methods.
In determining whether rates comply with the standards under G.S. 58‑40‑20, the following criteria shall be applied:
(1)	Due consideration shall be given to past and prospective loss and expense experience within this State, to catastrophe hazards, to a reasonable margin for underwriting profit and contingencies, to trends within this State, to dividends or savings to be allowed or returned by insurers to their policyholders, members, or subscribers, and to all other relevant factors, including judgment factors; however, regional or countrywide expense or loss experience and other regional or countrywide data may be considered only when credible North Carolina expense or loss experience or other data is not available.
(1a)	Notwithstanding the provisions of subdivision (1) of this section, an insurer or State-chartered risk retention group that provides professional malpractice insurance to health care providers, as defined in G.S. 90-21.11, may use regional or countrywide expense or loss experience and other regional or countrywide data only upon written approval by the Commissioner. The Commissioner may approve the use of regional or countrywide data only upon a finding of good cause.
(2)	Risks may be grouped by classifications for the establishment of rates and minimum premiums. Classification rates may be modified to produce rates for individual risks in accordance with rating plans which establish standards for measuring variations in hazards or expense provisions, or both. Those standards may measure any differences among risks that have probable effect upon losses or expenses. Classifications or modifications of classifications of risks may be established based upon size, expense, management, individual experience, location or dispersion of hazard, or any other reasonable considerations. Those classifications and modifications shall apply to all risks under the same or substantially the same circumstances or conditions.
(3)	The expense provisions included in the rates to be used by an insurer may reflect the operating methods of the insurer and, as far as it is credible, its own expense experience.
(4)	In the case of property insurance rates under this Article, consideration shall be given to the insurance public protection classifications of fire districts established by the Commissioner. The Commissioner shall establish and modify from time to time insurance public protection districts for all rural areas of the State and for cities with populations of 100,000 or fewer, according to the most recent annual population estimates certified by the State Planning Officer. In establishing and modifying these districts, the Commissioner shall use standards at least equivalent to those used by the Insurance Services Office, Inc., or any successor organization. The standards developed by the Commissioner are subject to Article 2A of Chapter 150B of the General Statutes. The insurance public protection classifications established by the Commissioner issued pursuant to the provisions of this Article shall be subject to appeal as provided in G.S. 58‑2‑75, et seq. The exceptions stated in G.S. 58‑2‑75(a) do not apply."
SECTION 3.4.  The Commissioner of Insurance shall study the utilization and efficacy of experience rating plans and premium stabilization funds as proposed in Senate Bill 1018 of the 2003 General Assembly.  The Commissioner shall report his findings and recommendations, including any proposed alternatives to the solutions proposed in Senate Bill 1018, to the General Assembly on or before January 1, 2005.
SECTION 3.5. Chapter 90 of General Statutes is amended by adding a new Article to read:
"Article 40.
"North Carolina Health Care Excess Liability Fund.
"§ 90-681.  Findings of General Assembly; legislative intent.
(a)	The General Assembly finds that:
(1)	The potential for the inability of health care providers to obtain professional malpractice insurance at affordable and stable rates could have an adverse effect on the provision of health care to the people of this State. 
(2)	The current liability insurance difficulties in the United States are the third such development in the past 30 years. Each has been associated with insurance underwriting cycles and general economic downturns. Economists cannot explain the causes of these cycles of economic expansion and contraction. In essence, profitability creates competition, which leads to underpricing that breeds unprofitability and the flight of competitors from the market; then 'hard' markets produce higher premiums and profitability that attract new companies or encourage expansion, starting the cycle again.
(3)	An excess liability fund could ultimately provide insureds lower premiums, and that there are an adequate number of potential insureds to fund an excess liability fund.
(4)	The uninterrupted delivery of health care services is essential to the health and welfare of the citizens of North Carolina. 
(5)	It is essential to the health and welfare of the citizens of North Carolina that all health care providers have sufficient amounts of professional malpractice insurance. 
(b)	It is the policy and intent of the General Assembly that a health care provider who participates in the Fund set forth in this Article, maintains the designated amounts of professional malpractice protection, and contributes to the Fund for the protection of the provider's patients, fulfills the objectives of this public policy. 
"§ 90-682.  Definitions.
As used in this Article:
(1)	'Board.' – The Board of Directors of the North Carolina Health Care Excess Liability Fund created in G.S. 90-684.
(2)	'Commissioner.' – The Commissioner of Insurance of the State of North Carolina.
(3)	'Department.' – The Department of Insurance of the State of North Carolina. 
(4)	'Fund.' – The North Carolina Health Care Excess Liability Fund created in G.S. 90‑683.
(5)	'Health care provider.' – As defined in G.S. 90-21.11.
(6)	'Manager.' – The person appointed by the Board to administer the Fund as provided for in G.S. 90‑684. 
(7)	'Secretary.' – The Secretary of the Department of Health and Human Services of the State of North Carolina.
"§ 90‑683.  North Carolina Health Care Excess Liability Fund; creation; investment; coverage.
(a)	Fund Created. – The North Carolina Health Care Excess Liability Fund is created. Funds collected and received by the Board shall be used solely for the purposes stated in this Article. The Fund shall be comprised of the following three separate sub‑funds:
(1)	The Hospital Excess Liability Sub-Fund, which shall be funded through assessments and surcharges levied on hospitals licensed under Chapter 131E of the General Statutes, to pay claims from a hospital under this Article.
(2)	The Nursing Home Excess Liability Sub-Fund, which shall be funded through assessments and surcharges levied on nursing homes licensed under Chapter 131E of the General Statutes, to pay claims from a nursing home under this Article.
(3)	The Health Care Provider Excess Liability Sub-Fund, which shall be funded through assessments and surcharges levied on health care providers not included in subdivisions (1) and (2) of this subsection, to pay claims from the health care provider under this Article.
The provisions of this Article shall apply to each sub-fund and to health care providers contributing to each sub-fund. Each sub-fund shall be subject to the direction and oversight of the Board, as provided in this Article. Actuarial services and analyses required under this Article shall apply to each sub-fund. The Board shall apply costs associated with the administration, operation, and defense of each sub-fund to each sub‑fund separately. Each sub‑fund shall be managed so as to be actuarially sound.
(b)	Investment and Management. – All moneys that belong to the Fund and are collected or received under this Article shall be held in trust, deposited in a segregated account, invested and reinvested by the Board in accordance with the investment requirements of G.S. 58-7-160 through G.S. 58-7-205, and shall not become a part of the General Fund of the State. All interest and revenues from moneys belonging to the Fund shall inure solely to the benefit and use of the Fund. The Board may withdraw funds from the account as amounts payable under G.S. 90‑687 and other expenses become due and payable. No part of the revenues or assets of the Fund shall inure to the benefit of or be distributable to the Board or any member thereof or any officer or employee of the Board, except for services rendered. All expenses and salaries connected with the administration and operation of the Fund shall be paid out of the Fund.
(c)	Excess Earnings of the Fund. – The Board shall establish a surplus account that, in the sound business judgment of the Board, will be sufficient to meet the normal contingencies of its operations. All other excess earnings of the Fund shall be returned to the participating health care providers by adjustment of the assessments.
(d)	Prohibition of Use by State. – No moneys, funds, reserves, investments, or property, whether real or personal, acquired, administered, possessed, or held by the Fund, nor any earnings by the Fund, may be taken, used, or appropriated by the State of North Carolina for any purpose.
"§ 90‑684.  Board of Directors; creation; membership; terms; vacancies; powers and duties; manager of fund; immunity from liability of Board members, officers, and employees.
(a)	The Board of Directors of the North Carolina Health Care Excess Liability Fund has the power to:
(1)	Adopt administrative rules that are necessary for the implementation, administration, and interpretation of this Article.
(2)	Employ officers and employees as the Board considers necessary to carry out the provisions of this Article or to perform the duties and exercise the powers conferred upon the Board by law. The Board shall fix the compensation for the officers and employees.
(3)	Sue and be sued in all actions arising out of any act or omission in connection with the business or affairs of the Fund.
(4)	Enter into any contracts or obligations relating to the Fund that are authorized or permitted by law, including contracts for claims management services, including the evaluation, negotiation, defense, and settlement of medical malpractice claims against participating health care providers.
(5)	Conduct all business affairs and perform all acts relating to the Fund, whether or not specifically designated in this Article.
(6)	Assess each person covered by the Fund for contributions to the Fund.
(7)	Establish definitions of coverage to be provided by the Fund.
(8)	Contract with an insurer to administer the Fund.
(9)	Cause all or any part of the potential liability of the Fund to be reinsured, if such reinsurance is available, on a fair and reasonable basis. 
(b)	The membership of and appointments to the Board shall be as follows:
(1)	One medical doctor and one hospital administrator to be appointed by the General Assembly upon the recommendation of the President Pro Tempore of the Senate in accordance with G.S. 120-121.
(2)	One medical doctor and one hospital administrator to be appointed by the General Assembly upon the recommendation of the Speaker of the House of Representatives in accordance with G.S. 120-121.
(3)	One nurse to be appointed by the General Assembly upon the recommendation of the President Pro Tempore of the Senate in accordance with G.S. 120-121.
(4)	One dentist to be appointed by the General Assembly upon the recommendation of the Speaker of the House of Representatives in accordance with G.S. 120-121.
(5)	One nursing home administrator to be appointed by the General Assembly upon the recommendation of the Speaker of the House of Representatives in accordance with G.S. 120-121.
(6)	One member from a health care profession other than those enumerated in subdivisions (1) through (5) of this subsection to be appointed by the General Assembly upon the recommendation of the President of the Senate in accordance with G.S. 120-121.
(7)	One patient advocate who is unaffiliated with insurance or health care industries or the medical or legal professions to be appointed by the Governor.
(c)	Members appointed pursuant to this section shall be residents of the State and shall serve terms of four years, provided that the initial appointees shall serve terms as follows:
(1)	Members appointed under subdivision (b)(1) of this section shall serve initial terms of two and three years respectively.
(2)	Members appointed under subdivision (b)(2) of this section shall serve initial terms of two and four years respectively.
(3)	Members appointed under subdivisions (b)(3), (4), and (5) of this section shall serve initial terms of two, three, and four years respectively.
(4)	Members appointed under subdivisions (b)(6) and (b)(7) of this section shall serve initial terms of two and four years respectively.
(d)	The Secretary and the Commissioner shall be ex officio members of the Board. The Secretary and the Commissioner or their designees shall each have a vote on all matters before the Board.
(e)	Initial appointments to the Board shall be made on or before October 1, 2004. The organizational meeting of the Board shall be held upon the call of the Secretary and within 30 days after initial appointments are completed.
(f)	Any appointment to fill a vacancy on the Board created by the resignation, dismissal, death, or disability of a member shall be for the balance of the unexpired term. At the expiration of each member's term, the appointing authority shall reappoint or replace the member with a member from the same category. At its organizational meeting and on or after July 1 of each year thereafter, the Board shall designate by election one of its members as chair. The Board shall also elect or appoint, and prescribe the duties of such other officers, as the Board deems necessary or advisable, including a secretary and treasurer.
(g)	Any appointing authority shall have the power to remove any member for misfeasance, malfeasance, or nonfeasance in accordance with G.S. 143B‑13. Compensation and allowances for members of the Board shall be as provided in G.S. 138‑5. The Secretary and Commissioner shall not receive compensation and allowances.
(h)	There shall be a manager of the Fund, who shall be appointed by the Board. The manager shall conduct the business affairs of the Fund under the general direction of the Board. Before entering the duties of the office, the manager shall qualify by giving an official bond approved by the Board. The Board may delegate to the manager of the Fund, subject to such conditions as it from time to time prescribes, any power, function, or duty conferred by law on the Board in connection with the administration, management, and conduct of the business affairs of the Fund. The manager may exercise those powers and functions and perform those duties with the same force and effect as the Board.
(i)	There is no personal liability on the part of any member of the Board, the manager, or any officer or employee of the Fund, for or on account of any act performed or obligation entered into in an official capacity, when done in good faith, without intent to defraud, and in connection with the administration, management, or conduct of the Fund or affairs relating to the Fund. 
"§ 90‑685.  Participation in the Fund.
(a)	When a health care provider has proved to the satisfaction of the Board that the health care provider is insured by an insurer authorized by the Department or under a self‑insurance plan approved by the Board against legal liability for damages arising out of professional malpractice in the sums required under subsection (b) of this section, and if the health care provider has paid the current assessment required under G.S. 90‑686, the health care provider shall be deemed to be a bona fide participant in the Fund and shall become subject to the provisions of this Article and the administrative rules of the Board. The financial responsibility requirements herein shall include an obligation of the insurer or self‑insurer to defend an action against the participating health care provider irrespective of payment or offer of payment of the limits provided by the insurer or self‑insurer.
(b)	The Board shall establish the minimum limits of professional liability insurance or approved self-insurance required for participation in the Fund and may increase or decrease such limits as may be necessary to keep the Fund actuarially sound. Unless modified by the Board, the presumptive minimum limits for participation shall be as follows:
(1)	For health care providers providing emergency services and for obstetricians-gynecologists, five hundred thousand dollars ($500,000) for each occurrence and an aggregate liability amount for all occurrences or claims made in any policy year of two million dollars ($2,000,000).
(2)	For all other health care providers not specified in subdivisions (1), (3), and (4) of this subsection, one million dollars ($1,000,000) for each occurrence and an aggregate liability amount for all occurrences or claims made in any policy year of three million dollars ($3,000,000), except as otherwise provided in this section.
(3)	Notwithstanding any other provisions of this section, for a hospital licensed under Chapter 131E of the General Statutes with 500 or fewer beds, two million dollars ($2,000,000) for each occurrence and an aggregate liability amount for all occurrences or claims made in any policy year or risk-loss trust year of six million dollars ($6,000,000). The policy may be written on either an occurrence or a claims-made basis.
(4)	Notwithstanding any other provisions of this section, for a hospital licensed under Chapter 131E of the General Statutes with more than 500 beds, three million dollars ($3,000,000) for each occurrence and an aggregate liability amount for all occurrences or claims made in any policy year or risk-loss trust year of eight million dollars ($8,000,000).
(c)	If a health care provider participating in the Fund has insurance or self‑insurance coverage in excess of the amounts stated in subsection (b) of this section, the Board shall grant an appropriate reduction of the provider's assessment for the Fund.
(d)	The Board shall afford a participating health care provider the same type of coverage, occurrence or claims made, as is provided by his insurer or approved self‑insurer in subsection (a) of this section. 
"§ 90‑686.  Assessment for the Fund.
(a)	Regardless of a health care provider's participation in the Fund, all health care providers are subject to an assessment under this section in an amount to be determined by the Board. The assessment shall be collected on the same basis as premiums by each insurer, risk manager, or surplus lines licensee. The assessment is due and payable within 30 days after the premium for professional liability insurance has been received by the insurer, risk manager, or surplus lines licensee from a health care provider in this State. If an assessment is not paid as required by this section, the insurer, risk manager, or surplus lines licensee responsible for the delinquency is liable for the assessment plus a penalty equal to ten percent (10%) of the amount of the assessment. If the annual assessment is not paid within the time limit specified in this subsection, the license of the insurer, risk manager, and surplus lines licensee shall be suspended until the annual assessment is paid.
(b)	Subject to G.S. 90-698 and beginning July 1, 2005, the assessment shall be set by the Board.
(c)	In determining the assessment, the Board shall consider the rate standards in G.S. 58-40-20. If the Board determines that a health care provider would subject the Fund to a greater risk of payment of funds, the Board may, in its discretion, increase the assessment against that provider. Moneys received by the Board under subsection (a) of this section shall be handled in accordance with the provisions of G.S. 90‑683 and G.S. 90‑688. The Fund is not subject to any premium taxes. 
(d)	Any health care provider who carries a claims‑made policy or is protected by an approved self‑insurance plan and who discontinues participation in the Fund may obtain full occurrence coverage from the Board by purchasing an extended reporting endorsement under G.S. 58-40-140 on the claims‑made policy or self‑insurance plan by payment of the assessment then required by the Board on the same basis as the insurer or self‑insurer requires a reporting endorsement premium to be paid.
(e)	The Fund is not subject to premium taxes in G.S. 105‑228.5. 
"§ 90‑687.  Payment of claims by the Fund; claims management and services; personal liability for malpractice and amount of compensation not limited; actions against Board or Fund.
(a)	For health care providers licensed under this Chapter, any amount due from a judgment, alternative dispute resolution award, or Board‑approved settlement that is in excess of a participating health care provider's insurance or self‑insurance coverage required by G.S. 90‑685 shall be paid from the Fund up to the applicable limits of coverage under the Fund. The presumed amount to be paid from the Fund is subject to the following limits:
(1)	Notwithstanding any other provision of this section, for hospitals licensed under Chapter 131E of the General Statutes an amount not to exceed eight million dollars ($8,000,000) for each occurrence or claim made and fifteen million dollars ($15,000,000) aggregate for occurrences in or claims made in any one year.
(2)	For all other health care providers not specified in subdivision (1) of this subsection, an amount not to exceed four million dollars ($4,000,000) for each occurrence or claim made and six million dollars ($6,000,000) aggregate for occurrences in or claims made in any one year. 
The Board, in its discretion, may increase or decrease the presumed limits for payments to health care providers under this subsection as necessary to maintain the Fund's financial solvency.
(b)	Payment of claims by the Fund as provided in subsection (a) of this section shall only be made when the Board issues a voucher or other appropriate request after the Board receives either of the following:
(1)	A certified copy of a final judgment or alternative dispute resolution award against a participating health care provider.
(2)	A certified copy of a Board‑approved settlement between a participating health care provider and a claimant.
Payments of claims from the Fund on behalf of a participating health care provider shall inure to the benefit of the health care provider.
(c)	A participating health care provider or the health care provider's insurer or self‑insurer or any claimant shall notify the Board of all claims made or reported or actions filed against the health care provider. The notice shall be in writing, mailed to the Board within a reasonable time to provide the Board adequate preparation time to defend or negotiate the claim or action, and shall include the date of the alleged occurrence, the date of the making, reporting, or filing of the claim or action, and the amount demanded, if declared, by the claimant. The Board shall not pay claims on behalf of or provide the services in subsection (d) of this section to any participating health care provider unless adequate notice to the Board has been provided.
(d)	The Board may provide for claims management and services, including the legal defense of participating health care providers in actions filed against them and in settlement negotiations.
(e)	Nothing in this Article:
(1)	Limits the personal liability of any participating health care provider for malpractice arising out of the performance of or failure to perform professional services.
(2)	Limits the amount of compensation from any final judgment, alternative dispute resolution award, or Board‑approved settlement to any claimant injured as a result of the malpractice.
(3)	Permits the filing by any claimant of an action against the Board or Fund except upon a final judgment obtained by the claimant against a participating health care provider or upon a Board‑approved settlement agreement.
(f)	The Fund shall not be liable for awards for punitive damages against participating health care providers. 
(g)	The Board shall report to the North Carolina Medical Board payment of a claim on behalf of a physician within 30 days of payment as required by G.S. 90‑14.13(c).
"§ 90‑688.  Withdrawals; fidelity bond; Fund accounting and audit.
(a)	Moneys shall be withdrawn from the Fund only upon vouchers approved and as authorized by the Board.
(b)	Every person who is authorized to receive deposits, withdraw funds, issue vouchers, or otherwise disburse or handle any Fund moneys shall post a blanket fidelity bond in an amount to be determined by the Board and reasonably sufficient to protect Fund assets. The cost of the bond shall be paid from the Fund.
(c)	The Board shall annually furnish an audited financial report and the actuarial study required by G.S. 90-694 to the Department, the State Auditor, and to Fund participants upon request. An independent certified public accountant shall prepare the audited financial report in accordance with accepted accounting principles.
(d)	The Board shall report annually to the General Assembly and the Governor on the financial condition of the Fund and its statistical claims experience and may make recommendations as to any further legislative actions that may be needed to carry out the intent of this Article. All such reports shall be considered public records. 
"§ 90‑689.  Duty of insurers, self-insurers, and health care providers.
It shall be the responsibility of an insurer or self-insurer and a health care provider to act in good faith and in a fiduciary relationship to the Fund with respect to any claim affecting the Fund. The Board may bring a civil action against an insurer, self-insurer, or health care provider for failure to act in good faith or for breach of fiduciary responsibility.
"§ 90‑690.  Commencement of operations; effective date of coverage.
(a)	The Fund shall provide the excess coverage provided in this Article only for causes of action arising out of occurrences on and after the effective date of participation of a health care provider.
(b)	The Board may provide coverage by the Fund when, in the Board's discretion, the Fund has sufficient moneys and a sufficient number of participants."§ 90‑691.  Acceptance of and compliance with Article and administrative rules of the Board.
Compliance with the provisions of G.S. 90‑685 and G.S. 90‑686 constitute, on the part of a participating health care provider, a conclusive and unqualified acceptance of the provisions of this Article and the administrative rules of the Board. 
"§ 90‑692.  Records; insurance laws; legal defense.
Records held by the Board are not subject to Chapter 132 of the General Statutes. The Fund is not subject to Chapter 58 of the General Statutes, and shall not participate in the North Carolina Insurance Guaranty Association under Article 48 of Chapter 58 of the General Statutes. Except for the Secretary and the Commissioner, the Department of Justice is not responsible for legal defense of the Fund or the Board members.
"§ 90-693.  Fund consulting actuary.
(a)	In accordance with Article 3C of Chapter 143 of the General Statutes, the manager shall retain a qualified, competent, and independent consulting actuary to advise and consult the Fund on all aspects of the Fund's administration, operation, and defense that require application of the actuarial science and to perform and submit the annual actuarial study required by G.S. 90-694. An individual actuary contracted by the Fund, or a principal actuary assigned to the engagement and employed by a partnership, firm, or corporation contracted by the Fund, shall possess formal education and at least a baccalaureate degree in the actuarial sciences, shall be a full member of the Casualty Actuarial Society, and shall have had substantial prior experience in providing services as a consulting actuary to insurance companies underwriting professional health care liability insurance.
(b)	The Fund's contract with a consulting actuary shall provide that the consulting actuary shall be responsible for: 
(1)	Advising the manager with respect to the necessary and proper content and form of claims experience data collected and maintained by the manager.
(2)	Advising the manager and the Office of Risk Management with respect to the establishment, maintenance, and adjustment of reserves on individual claims against the Fund and each sub‑fund and the establishment, maintenance, and adjustment of reserves for incurred but not reported claims.
(3)	Performing actuarial analysis of claims experience data collected and maintained by the manager with respect to the Fund and each sub‑fund, commercial professional liability insurers doing business in this State, self-insured health care providers, together with, as necessary or appropriate, regional or national professional health care liability claims experience data.
(4)	Development, in consideration of the Fund's and each sub‑fund's allocated and unallocated expenses, its organization, administration, and legal and regulatory constraints, of an assessment and surcharge rate structure, rated and classified according to the several classes or risks against which the Fund and each sub‑fund provides compensation, that shall reasonably ensure that the Fund and each sub‑fund is sufficiently funded so as to be and remain financially and actuarially capable of providing the compensation for which it is organized.
(5)	Developing, in conjunction with the manager, assessment and surcharge rate applications and requests for surcharge rate changes in accordance with the consulting actuary's actuarial analyses, for submission to and filing with the Department.
(6)	Personal presentation of the assessment and surcharge rate structure to the Department and with such other interested or affected persons, firms, organizations, and entities as the manager may request.
(7)	Reviewing and advising the manager with respect to the funding and actuarial adequacy of self-insurance trusts and other plans submitted to the manager by self-insured applicants for enrollment with the Fund as evidence of financial responsibility.
(8)	Generally advising and consulting with the manager and the Department on all actuarial questions affecting the administration, operation, and defense of the Fund.
"§ 90-694.  Annual actuarial study.
(a)	An actuarial study of the Fund and each sub‑fund, and the assessment and surcharge rate structure necessary and appropriate to ensure that the Fund and each sub‑fund is and remains financially and actuarially sound shall be performed annually by the Fund's consulting actuary on the basis of an actuarial analysis of all relevant claims experience data collected and maintained by the Fund.
(b)	In the performance of the annual actuarial study and the development of a financially sound and appropriate assessment and surcharge rate structure, the Fund's consulting actuary and the manager shall accord the greatest weight to the claims experience of the Fund and each sub‑fund and of commercial professional health care liability insurance underwriters and self-insurance funds with respect to the risk underwritten by such insurers and self-insurance funds in this State and as particularly reflected in such insurers' then most recent premium rate filings with the Department or such self‑insurance funds' current rate structure and supporting data. However, the data shall be viewed in light of national claims experience data, and the Fund's consulting actuary may place reliance on national claims experience data when, in the opinion of the actuary, claims experience within this State as to any class of risks provides an insufficient basis for reliance thereon for purposes of actuarial analysis or in calculating indicated surcharge rates.
(c)	Without respect to the rate structure indicated by any annual actuarial study of the Fund and each sub‑fund, no rate that, if approved and implemented, would or could result in a reduction of the aggregate annual assessments and surcharges collected by a sub-fund, shall be approved when the total amount of the sub‑fund is, or by effect of such rate change could become, less than one hundred fifty percent (150%) of the sum of the aggregate annual assessment and surcharges collected by the sub‑fund, reserves against individual claims, reserves for incurred but not reported claims, and allocated and unallocated expenses of the sub‑fund's administration, operation, and defense. 
"§ 90-695.  Surcharge on health care providers.
Subject to G.S. 90-698 and if appropriations from the General Assembly are insufficient to adequately capitalize the Fund, in order to adequately capitalize the Fund an annual surcharge may be levied on all health care providers in this State until the Fund is actuarially sound and self‑supporting, as determined by the Board. If the Board determines the Fund is actuarially sound and self-supporting, the surcharge under this section shall not be levied.
"§ 90-696.  Amount of surcharge.
(a)	As used in this section, 'actuarial program' means a program used or created by the Board to determine the actuarial risk posed to the Fund by a health care provider. The program must be: 
(1)	Developed to calculate actuarial risk posed by a health care provider taking into consideration risk management programs used by the provider.
(2)	An efficient and accurate means of calculating a provider's malpractice actuarial risk.
(3)	Publicly identified by the Board by July 1 of each year.
(4)	Made available to a provider's malpractice insurance carrier for purposes of calculating the provider's surcharge under subsection (g) of this section.
(b)	Subject to G.S. 90-698 and beginning July 1, 2005, the annual surcharge shall be set by the Board.
(c)	The amount of the surcharge shall be determined based upon actuarial principles and actuarial studies and shall be adequate for the payment of claims and expenses from the Fund.
(d)	There is imposed a minimum annual surcharge of one hundred dollars ($100.00), until the Board determines the Fund is actuarially sound and self-supporting.
(e)	Subject to a final determination by the Board, the surcharge for a qualified health care provider who is licensed under this Chapter is calculated as follows:
(1)	Not later than July 1 of each year, the Fund's consulting actuary shall calculate the median of the premiums paid for professional liability policies to the three professional liability insurance carriers in this State that have underwritten the most professional liability insurance policies for all health care providers practicing in the same specialty class in this State during the previous 12-month period. In calculating the median, the actuary shall consider the:
a.	Manual rates of the three leading malpractice insurance carriers in this State.
b.	Aggregate credits or debits to the manual rates given during the previous 12-month period.
(2)	After making the calculation described in subdivision (1) of this subsection, the actuary shall establish a uniform surcharge for all health care providers practicing in the same specialty class. This surcharge shall be based on a percentage of the median calculated in subdivision (1) of this subsection for all health care providers practicing in the same specialty class under rules adopted by the Board. The surcharge shall be sufficient to cover and shall not exceed the actuarial risk posed to the Fund by health care providers practicing in the specialty class.
(f)	The surcharge for a health care provider shall be established by the Board through the use of an actuarial program. At the time financial responsibility is established for the provider, the provider shall pay the surcharge amount established for the provider under this section. The surcharge shall be sufficient to cover and shall not exceed the actuarial risk posed to the Fund by the provider.
(g)	An actuarial program used or developed under subsection (a) of this section shall be treated as a public record under Chapter 132 of the General Statutes.
"§ 90-697.  Collection of surcharge; time for payment.
(a)	The surcharge shall be collected on the same basis as premiums by each insurer, risk manager, or surplus lines licensee.
(b)	The surcharge is due and payable within 30 days after the premium for professional liability insurance has been received by the insurer, risk manager, or surplus lines licensee from a health care provider in this State. If a surcharge is not paid as required by this section, the insurer, risk manager, or surplus lines licensee responsible for the delinquency is liable for the surcharge plus a penalty equal to ten percent (10%) of the amount of the surcharge.
(c)	If the annual premium surcharge is not paid within the time limit specified in subsection (b) of this section, the license of the insurer, risk manager, and surplus lines licensee shall be suspended until the annual premium surcharge is paid.
"§ 90-698.  Approval of assessments and surcharges.
The Board shall present all initial proposed assessments and surcharges to the General Assembly for approval and such assessments and surcharges shall not become law unless approved by a separate act of the General Assembly. The Board shall not establish any assessment or surcharge except as specifically authorized by the General Assembly."§ 90-699.  Adoption of rules; comparability of rates.
(a)	In addition to the rule-making authority under G.S. 90-694, the Board may adopt rules establishing the following:
(1)	The manner of determination of the surcharge for a health care provider.
(2)	The manner of payment of the surcharge by that health care provider.
(b)	The surcharge calculation established under subsection (a) of this section shall be comparable for insured and self-insured health care providers."
SECTION 3.6.  There is appropriated from the General Fund to the North Carolina Excess Liability Fund the sum of twenty million dollars ($20,000,000) for the 2004‑2005 fiscal year for the purpose of implementation of Article 40 of Chapter 90 of the General Statutes including capitalization of the Fund, payment of compensation and allowances of Board members and employees, and retention of actuarial, economic, and legal advice. No unexpended surplus of the Fund shall revert to the General Fund.  
SECTION 3.7.(a)  There is appropriated from the General Fund to the Department of Health and Human Services the sum of five million dollars ($5,000,000) for the 2004‑2005 fiscal year.  These funds shall be used to establish the Rural Obstetrical and Emergency Department Care Incentive Fund as provided in this act.
SECTION 3.7.(b)  The Rural Obstetrical and Emergency Department Care Incentive Fund shall be established within the Office of Rural Health and shall be used to make grants to physicians who are practicing obstetrics, or providing emergency department services, in rural and underserved areas of the State and are adversely affected by the high cost of liability insurance.  The grants shall be used solely for the purpose of subsidizing in whole or in part the costs associated with obtaining or maintaining liability insurance for physicians in rural and underserved health care manpower shortage areas of the State as defined by the Office of Rural Health. The Office of Rural Health shall establish guidelines for administering grant funds.
SECTION 3.8.  The Commissioner of Insurance, the Industrial Commission, and the Department of Health and Human Services shall jointly study the utility, efficacy, and advisability of creating a system of no‑fault compensation, with such compensation based on scheduled amounts and subject to limits on total compensation paid, for injuries resulting from regular and ordinary course of care provided at nursing homes, homes for the elderly, other long‑term care facilities, and assisted living facilities.  The results of this study, including findings and recommendations for suggested legislation, shall be reported to the General Assembly on or before January 1, 2005.
SECTION 3.9.  The Legislative Research Commission shall study the issues related to the collateral source rule including whether evidence of collateral sources of payments of expenses recoverable in negligence actions should be admissible and considered by the jury in negligence actions, including medical negligence actions.  This study should also consider the alternative of not presenting evidence of collateral sources to the jury but requiring the court to adjust any jury award by the amount of collateral sources for which the payor of the collateral source does not have a right of subrogation.  This study should also examine whether the right of subrogation should be extended to medical insurance and medical benefit providers, whether just in medical negligence matters or to all negligence claims.  The Legislative Research Commission shall report the results of its study to the 2005 General Assembly.

PART IV. MISCELLANEOUS.
SECTION 4.1.  The provisions of this act are severable.  If a court of competent jurisdiction holds any provision of this act invalid, the invalidity does not affect other provisions of the act that can be given effect without the invalid provision.

PART V. EFFECTIVE DATE PROVISIONS.
SECTION 5.1.  Sections 1.1 through 1.7, 3.4 through 3.9, 4.1, and 5.1 are effective when this act becomes law.  Section 1.8 is effective when this act becomes law and applies to statements made and actions taken on or after that date.  Sections 1.9 and 1.10 become effective October 1, 2004.  Sections 1.11, 2.1, 2.3, 2.4, 2.7, and 2.9 become effective October 1, 2004, and apply to actions filed on or after that date.  Section 2.2 becomes effective October 1, 2004, and applies to judgments entered on or after that date.  Section 2.8 becomes effective October 1, 2004, and applies to causes of action arising on or after that date. Sections 2.5 and 2.6 become effective October 1, 2004, and expire October 1, 2011, and apply to actions commenced on or after the effective date and before the expiration date.  Sections 3.1, 3.2, and 3.3 become effective January 1, 2005, and apply to rate changes filed on or after that date.  The remainder of this act is effective when it becomes law."