Court Halts Illinois Suspension of Medical Liability Insurer PLICA

A Chancery Court Judge in Cook County Illinois has halted a state insurance department order that prohibited a medical liability insurer from writing new business in the state.

On Oct. 22, Illinois Director of Insurance Michael McRaith suspended the operations of Professional Liability Insurance Company of America (PLICA), claiming that the insurer’s financial condition and erosion of policyholder surplus were such that it should not be allowed to continue writing business. The state lifted PLICA’s certificate of authority to write new business for a year.

But attorneys for PLICA appealed McRaith’s suspension and on Nov. 2 won a restraining order against its enforcement. As a result, the company can continue writing insurance for physicians in Illinois.

The company said in a statement that the claims against it by Illinois officials are “unfounded and without merit.” Contrary to the Illinois department’s assertions, the insurer says it is financially sound. It also says that competitors have been spreading distortions about its financial condition to producers and insureds.

A court hearing on the issue has been scheduled for Dec. 8.

PLICA has filed its most recent financial statements with state insurance officials in New York, where it is domiciled. For the period ending Sept. 30, 2009, PLICA reported it had policyholder surplus of $23.3 million. PLICA’s reported ratio of net written premiums to policyholder surplus is 1:1, which the insurer said “is consistent with industry average for medical malpractice insurers.” The company said New York has not taken any regulatory action against the firm.

PLICA, which was formed in 2004, conducts business in Connecticut, Illinois, Maryland, Missouri, Ohio and Texas. In Texas PLICA writes coverage under Medical Liability Insurance Company of America.

In August, the Connecticut Department of Insurance restricted PLICA’s operations in that state to the service of existing business only.