Approximately 10,000 doctors nationwide were left without medical malpractice insurance when their insurance company stopped paying claims and went into receivership. As a result, our firm filed a lawsuit on behalf of these doctors, 800 of which are Alabama doctors, who were insured by Doctors Insurance Reciprocal (DIR) and Reciprocal of America (ROA). These two insurance companies are not in receivership in Virginia and Tennessee, respectively.
We have learned that these insurance companies and their top officers devised a fraudulent scheme to deceive doctors, hospitals, and nursing homes that were insured against malpractice claims. The companies also lied to and misled state regulators, which have the responsibility to license and negotiate the companies.
DIR and ROA insure some 800 physicians, 46 hospitals and a good number of nursing homes in Alabama. Interestingly, the insurers generate more premium dollars in Alabama than in any other state.
These out-of-state insurers funneled premium money to other insurance companies as “pay offs” to hide their declining profits and bad financial condition. These “pay offs” totaling millions of dollars were used to “rent” an appearance of solvency and keep state regulators from discovering the dire financial condition of both DIR and ROA.
Many of the premiums paid by participating doctors, hospitals, and nursing homes were sent to offshore companies, which are not regulated, to cover up the scheme.
While physicians, hospitals, and nursing homes covered by DIR and ROA have millions of dollars in equity with the insurers, they won’t recoup those funds due to the fraud perpetrated by the companies. We were shocked to learn that these insurance companies made secret agreements to hide the true financial stability of DIR and ROA. As a result, their insureds were badly misled.
Eventually, regulators discovered the fraudulent conspiracy, downgraded the ratings of the companies, and took over their operations. Many patients of doctors who had coverage through DIR and ROA now find themselves with a doctor who can’t practice medicine without insurance coverage.
What these companies did is pretty much the same as the massive frauds committed by Enron, Tyco, WorldCom, HealthSouth and many other large corporations. The only real difference here is that this fraudulent conduct involves insurance.
The lawsuit was filed in the U.S. District Court in Montgomery, Alabama. The defendants in the lawsuit are: General Reinsurance Corporation, Reciprocal of America, Doctors Insurance Reciprocal, PricewaterhouseCoopers, Milliman U.S.A., John William Crews, Ken Patterson, First Virginia Reinsurance, and General Cologne Reinusrance, P.L.C.
Jere Beasley is a former Lieutenant Governor, who is now a consumer advocate attorney, practicing law in Montgomery. No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.