An announcement by the law firm Buchanan Ingersoll gives details of the formation of a new medical malpractice insurer — the Professional Casualty Association, which “has closed on a deal in which it assumed all of the medical malpractice insurance policies issued in the state by Professional Risk Retention Group, Inc. (PRRG) this past year and will begin to write new policies in Pennsylvania.”
The bulletin indicated that the new insurer had received a license from the Pennsylvania Insurance Department on June 26, and that as a result of its assuming PRRG’s policies “state medical professionals have a new source for medical malpractice insurance with the added protection of the state guaranty fund safety net.” The Buchanan firm acted as regulatory and corporate counsel in the transaction.
“It’s an evolution of sorts,” explained Barton L. Post, Esquire, the driving force behind the formation of both PRRG and the Association. “The risk retention group is a valuable alternative to a traditional carrier, but it has its drawbacks.” It noted that “PRRG is an insurer organized as a risk retention group under the laws of South Carolina and is authorized to write medical malpractice insurance in Pennsylvania. Unlike a traditional insurance company, which must be licensed to sell insurance in each state that it does business, a risk retention group is a specialty insurer that, under federal law, need only be licensed to sell insurance in one state to do business in all 50 states. One of the trade-offs for such freedom from regulation, however, is that risk retention groups are not permitted to participate (i.e., pay into) in the Pennsylvania Insurance Guaranty Association, which steps into the shoes of a participating insurer to pay claims in the event the insurer becomes insolvent. The Association, unlike PRRG, is able to participate in the state-run insolvency fund.”
“The risk retention group served its purpose,” Post continued. “It filled an immediate need for new malpractice insurers in Pennsylvania. But physicians want guaranty fund protection too, and that’s why we formed the Association.” In addition to assuming the policies issued by PRRG, the Association-based in Eddystone, Pennsylvania-will actively write new business throughout Pennsylvania.
“Without guaranty fund protection, physicians and hospitals are exposed to the first layer of liability if their risk retention group becomes insolvent,” explained Ronald C. Chronister, former Pennsylvania Deputy Insurance Commissioner, who is now an insurance industry consultant in Buchanan Ingersoll’s Harrisburg office. “That translates to a $300,000 per claim safety net that healthcare professionals are giving up by insuring through a risk retention group. Any medical professional insured by some of Pennsylvania’s now insolvent medical malpractice insurers can attest to the importance of that safety net.”
According to Chronister, as a result of the transaction, those physicians who obtained their insurance from the risk retention group will now have that safety net as insureds of the Association.