Tennessee Insurance Commissioner Paula Flowers has filed a lawsuit in U.S. District Court against Richmond, Va. – based Reciprocal of America and its network of companies and two reinsurance companies on behalf of three failed malpractice insurance firms.
Flowers is seeking to recover damages for The Reciprocal Alliance, American National Lawyers Insurance Reciprocal and Doctors Insurance Reciprocal. The three Tennessee companies collapsed in January of last year, leaving thousands of doctors, hospitals and lawyers without malpractice coverage and unpaid claims totaling at least $200 million, according to commissioner’s office.
In a 62-page lawsuit filed in the Western District of Tennessee, Flowers claims that Reciprocal defrauded policy holders of the three insurance firms. The lawsuit alleges racketeering, fraud, unjust enrichment, misappropriation of funds and negligence.
Flowers has hired the law firms of Farmer & Luna of Nashville and the Birmingham, Ala-based firms of Beasley Allen Crow Methvin Portis & Miles and Cross Poole Goldasich & Fisher to handle the case.
The Tennessee suit was filed in the same U.S. District Court as three now-combines class-action suits filed in March of last year on behalf of the three companies’ policyholders.
According to the lawsuit, ROA was formed in 1977 as Virginia Hospital Insurance Reciprocal. After a couple of name changes, the company became Reciprocal of America in 2001. ROA initially provided insurance only to hospitals. Later, ROA also began to insure physicians and lawyers and provide reinsurance coverage to the three Tennessee companies.
In January of last year, ROA was placed into receivership in Virginia under the control of the Virginia Corporation Commission. In June of last year, the company was found to be insolvent under Virginia law and was ordered to be liquidated.