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News of the Day ... in Perspective


Malpractice insurer fails

With outstanding claims of $770 million, Reciprocal of America imploded, leaving hospitals and doctors without professional liability coverage.

The lives of thousands of lawyers are also “in flux.”

Reciprocal had hidden its insolvency from regulators for more than a decade through devices such as arcane reinsurance products that amounted to short-term loans, shell games run through offshore companies, and old-fashioned accounting cover-ups such as counting liabilities as assets.

Two former executives have pleaded guilty to federal fraud charges.

For outstanding claims, it is estimated that liquidators will eventually pay less than 20 cents on the dollar.

Some doctors are declaring bankruptcy or taking out loans to cover judgments. Some have dissolved their practices and become hospital employees because of inability to find substitute coverage. Hospitals are postponing renovations and equipment purchases. And some lawsuits may not be brought.

In the absence of insurance coverage, some lawyers will refuse to represent patients and their families, said Kansas City attorney B.K. Christopher. “Even if you get a jury verdict, it’s not worth the paper it’s printed on unless you want to garnishee the doctor’s wages for the rest of his life. That takes a lot of time and effort, and it really doesn’t happen in Kansas and Missouri (Timothy L. O’Brien and Joseph B. Treaster, NY Times 4/17/05).

Additional information:

“Risk Shifting,” AAPS News, January 2005.

Physician sues West Virginia Trial Lawyers.

Professional liability

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