SCC rules for reinsurer – Malpractice insurers fail in bid to advance claims against Richmond firm
by Greg Edwards
http://www.inrich.com
Three Tennessee-based malpractice insurers have lost their bid to advance their claims against a Richmond-based reinsurer, Reciprocal of America.
Reciprocal of America was placed in receivership in January 2003, and the State Corporation Commission ordered the company liquidated later that year. The reinsurer wrote hospital liability insurance, workers’ compensation insurance and some ancillary insurance for customers such as nursing homes.
Reciprocal of America also provided reinsurance to Tennessee malpractice insurers Doctors Insurance Reciprocal, American National Lawyers Reciprocal and The Reciprocal Alliance. Those companies now are insolvent and in receivership.
This month, the SCC found that the three Tennessee insurers are general creditors under Virginia insurance law and not policyholders. Under the law, the claims of policyholders take precedence over those of creditors in the distribution of an insolvent insurer’s assets.
The Tennessee companies can ask the SCC for reconsideration of its ruling or file an appeal with the Virginia Supreme Court before the matter is settled.
A receiver of Reciprocal of America is authorized to distribute up to 25 percent of eligible policyholders’ claims from Reciprocal’s assets. The receiver has said, according to SCC spokesman Ken Schrad, that once the issue of the Tennessee companies’ status is settled, distributions could rise to 45 percent to 50 percent of policyholders’ claims.
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