The St. Paul Companies heralded a July 12 Fulton County, Ga., Superior Court ruling that allows the company to continue providing medical liability and other commercial insurance products and services to new customers in the state. With the ruling, the court overturned a June 13 cease-and-desist order that had been issued against The St. Paul by Georgia Insurance Commissioner John Oxendine.
Oxendine had been in a standoff with the St. Paul Companies over its intention to non-renew some medical malpractice policies in the state. In response, Georgia had slapped the Minnesota-based firm with a three-year suspension of its insurance license, along with a one-year probationary period.
“Basically what St. Paul was doing was they’ve tried to cancel all their physicians and surgeons,” Oxendine told IJ. “Under Georgia law, in a market before you can just cancel a lot of business, you have to get regulatory approval. The reason is you don’t want people jumping in and out of the market—it creates instability. St. Paul just decided they didn’t want to follow the law.
“We had a public hearing (June 7) and what came out was not only were they not complying with the statutes, but they were trying to move their malpractice business in violation of the law to the surplus lines market,” Oxendine noted. “The unadmitted surplus lines market is supposed to be there as a last resort; you’re not supposed to take admitted business and move it to the unregulated surplus market.”
Oxendine said his office issued an order which states: “They (St. Paul) were ordered not to cancel anybody else, to rescind all the previous notices they had sent out, and go ahead and renew everybody. As of Sept. 1, (St. Paul) will be suspended from all product lines from writing any further business in the state of Georgia for three calendar years.”
In a hearing in Superior Court of Fulton County June 19, Judge Gail Tusan ruled that St. Paul could not hereafter issue non-renewal notices to physician and surgeon policyholders pending further order of the court, according to Wayne Whitaker in the office of insurance commissioner. Tusan ordered the petitioners (St. Paul) to send notices within 48 hours to the 476 physicians and surgeons to whom the company to date had already issued medical malpractice non-renewal notices. In addition, St. Paul was to inform notice recipients that the petitioners’ challenge to the commissioner’s order would be fully resolved by the court on or before July 13.
Mike Hamel, a spokesman for St. Paul, said the company had a book of business that was losing a lot of money. “We talked to Mr. Oxendine about the situation we were confronting in Georgia, and he made it clear he would not entertain any kind of an increase. For the physicians and surgeons we have down there, it was very unprofitable and we needed to make changes and very quickly.
“We were trying to figure out what we needed to do to return it to profitability. That’s the foundation on which we took the action that we had taken.”
St. Paul accounts for about 15 percent of the medical malpractice policies written in the state, according to Oxendine. The Medical Association of Georgia (MAG) accounts for close to half of the policies.
St. Paul indicated it was paying out $1.79 for each $1 received in medical premiums. Not many companies could sustain that kind of a combined ratio and remain profitable for very long.
“We needed to take dramatic actions to turn that around and that’s what we decided to do,” Hamel said. “We’ve filed for rate increases in more than two dozen states, and in many of those, we already received the increase and the approvals. It’s only in Georgia that we’ve been put in this position.
“The message we had was we wanted to continue serving these customers with these policies, but not without an adequate premium. We made it clear we needed an increased premium rate and (Oxendine) made it clear that would not be entertained. We non-renewed a number of policies as they were coming up for renewal and shortly after that, he called this hearing (June 7).”
Why the September 1 date for suspension? Oxendine indicated that date was set to allow St. Paul to finish up its present business. “That date was set instead of immediately to give agents a chance for business already placed to be able to finish up, or make arrangements with other companies. We didn’t want to disrupt the market. St. Paul can continue to service their existing clients, but they can’t solicit new clients in Georgia.”
Oxendine said the message from this matter is simple. “If you want to write insurance in Georgia, you’re going to treat Georgia citizens fairly and you’re going to follow the laws of the state,” Oxendine said. “I’m here to protect our citizens and enforce the laws, and I will accept nothing less. I’ve never seen a company behave this way.”
The St. Paul maintained that it acted fully within the laws and regulations of the state when addressing the lack of profitability of its physicians and surgeons medical liability business in Georgia. In May, company subsidiary St. Paul Surplus Lines Insurance Co. introduced a new medical liability product in the state, which became effective July 1. The St. Paul said the new product would be the principal St. Paul medical malpractice product available to Georgia physicians and surgeons.
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