Professional Liability Insurance Program Switches to Higher-Rated Carriers

APA members who purchase their malpractice insurance through the Psychiatrists’ Program, the APA-endorsed Psychiatrists’ Professional Liability Insurance Program (the Program), should have been informed by now by Professional Risk Management Services (PRMS), the Program’s manager, that the Program has entered into an agreement in principle for new coverage to be provided by two member companies of the American International Group (AIG). They are the National Union Fire Insurance Company of Pittsburgh, Pa., and Lexington Insurance Company.

Lexington is a surplus lines carrier, which will provide coverage on an interim basis in states in which National Union is not yet an admitted carrier for this Program. PRMS is working to achieve admitted status for National Union in all states and anticipates that this will be accomplished over the course of the next year. Both companies have an A.M. Best rating of A++ (superior).

Approximately 7,650 APA members purchase their liability insurance through the Program, according to figures published at the end of the first quarter of 2002. PRMS announced that as each member’s Legion policy renewal date approaches, PRMS will provide information regarding the options available in his or her state.

The change in insurance carriers came about because of A.M. Best’s downgrading of Legion from “A minus” (excellent) to “B” (fair) and then “E” (under state supervision). PRMS reported that in response to the downgrade, it sought to identify other, higher-rated carriers which could issue new policies to members on a going-forward basis. Legion had been the carrier for the APA-endorsed Program since 1988.

“The situation with Legion has created an enormously difficult time for all of us insured by the APA-endorsed program, but the selection of National Union Fire Insurance Company and Lexington as its new carriers represents a very important and positive development for the Program going forward, “ said Alan Levenson, M.D., president and CEO of Psychiatrists’ Purchasing Group (PPG).

PPG is the sponsor of the Program. Among its functions are advising the carriers and PRMS on matters relating to the practice of psychiatry, advising PRMS on its risk management education programs, and assisting insureds and applicants in their dealings with the carriers.

Legion, which is headquartered in Philadelphia, continues to operate under a rehabilitation court order granted to the Pennsylvania Department of Insurance. PRMS explained that the department is now taking steps, with the company’s cooperation, to stabilize Legion’s assets, conduct an extensive analysis of assets and liabilities to determine appropriate action to correct the problems, and ensure that current policyholders are protected. Current policies remain in force so long as the premium payments are up to date.

AIG is a U.S.-based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in the United States, according to AIG. Its member companies write a large range of general insurance and life insurance products for commercial, institutional, and individual customers through a variety of distribution channels in approximately 130 countries and jurisdictions throughout the world.

In late 2000, Legion and its corporate affiliates purchased the companies involved in the Psychiatrists’ Program—Psychiatrists Mutual Insurance Company and Psychiatrists’ Risk Retention Group (Psychiatric News, November 17, 2000).

“We recognize that this is a situation of enormous concern to our insured members,” said APA President Paul Appelbaum, M.D. “A work group headed by past APA President Harold Eist, M.D., was set up in March to monitor the situation closely, and as events have unfolded, we have tried to stay in touch with affected members.”

Now that two new carriers have been identified to issue policies on a going-forward basis, PRMS is turning its attention to exploring a range of options to protect policyholders for claims of malpractice that may arise from the past, that is, during the time that Legion served as the Program’s carrier, noted Levenson. “If it turns out that none of these options is workable and the worst-case scenario occurs that Legion goes into liquidation, claims would be handled by individual state guaranty funds up to their statutory limits.”

Although PRMS is owned by Legion, it remains a separate corporation, Levenson explained, and in the event that Legion is liquidated, PRMS would likely be kept intact and sold as an asset. He anticipates that PRMS would thus be able to continue managing the Program.

Premiums for the Program are expected to increase an average of 30 percent, but that increase is in no way related to moving the Program to the AIG companies, said Levenson.

“The Program’s rates are based on actuarial results and market conditions,” he said. “Unfortunately, most physicians throughout the country have been faced with steep increases in the cost of liability insurance this year. Psychiatrists, in fact, have been hit less hard—the APA-endorsed program hasn’t raised its rates for more than four years. In other medical specialties, malpractice premium increases of 50 percent or more have been reported in some states. Among the factors that have led to the increases include rising jury verdicts, low interest rates, a weak stock market, and the September 11 terrorist attacks.”

More information from PRMS on these and continuing developments, along with information on AIG and the new carriers, can be accessed on the PRMS Web site at www.apa-plip.com. PRMS can be contacted directly for information at (800) 245-3333, ext. 389. Additional information also appears in “At Your Service” above. ▪