The sudden, thunderous collapse of the American Psychiatric Association's endorsed malpractice insurer left thousands of members without reliable liability coverage and with few answers about what to do next.
Legion Insurance Company of Philadelphia has written policies for APA members since 1988. But in just 60 days, from February through April, the firm's rating by industry analyst A.M. Best Company tumbled from A- (excellent) to B (fair) to E (under regulatory supervision). The last rating came when the Pennsylvania Insurance Department received a judge's permission to step in and place the company under "voluntary supervision."
That move, which appears to have nothing to do with the ongoing malpractice insurance troubles affecting doctors nationwide, means that the state is pouring over Legion's books to determine the solvency of the insurer. In the meantime, medical malpractice claims, including those made by APA members, are not being paid. And if Pennsylvania regulators ultimately declare Legion insolvent, the approximately 7,500 APA-member psychiatrists affected could be without even the tenuous coverage they currently have.
"They took a very severe turn very suddenly," said Rosanne Placey, spokeswoman for the Pennsylvania Insurance Department. "This is financially a very troubled company.
If Legion is declared insolvent, Ms. Placey said, claims filed under Legion policies will be paid by a liquidation guarantee association in the state where the claim resides. The limit of coverage varies from state to state, but it typically is $300,000, she said. Any judgment above that is the responsibility of the insured.
While this is a significant issue to APA members insured by Legion, medical malpractice is a very tiny slice of the firm's overall pie. Of more than 1 million total policies, only about 30,000 are medical malpractice policies, one-fourth of those going to psychiatrists referred by the APA. Workers' compensation policies make up nearly 70% of the company's business.
APA members who were Legion customers received a letter April 8 from Professional Risk Management Services Inc., the managing general agent that has handled the APA relationship with Legion since 1988. In it, PRMS President and CEO Martin G. Tracy informed members of the downgrade and the rehabilitation status. He said in the letter that PRMS is in negotiations with other insurers to transfer the APA business. Mr. Tracy referred psychiatrists with questions to call PRMS at 800-245-3333, or to e-mail the company at firstname.lastname@example.org.
On a Web page set up to address Legion's problems (www.apa-plip.com/music/transition.htm), PRMS said that once a new insurer is found, members could expect their premiums to jump 30% or more.
Although PRMS was purchased by Legion in 2000, Ms. Placey said that sort of arrangement is not unusual in the insurance business, and that PRMS has been working very conscientiously" to serve APA members. …