Even before the bankruptcy, both plaintiff and defense counsel knew that the Physicians' Insurance Company (PIC) was "bad news." Plaintiff's counsel knew that even on the most obvious case of negligence, they were not going to get a settlement offer until the eve of trial (and maybe not even then), and defense counsel knew they were going to have to put up with long delays in getting bills paid, and even more petty practices such as PIC not reimbursing them for the cost of obtaining medical records unless the photocopying was done at PIC's privately-owned copying facility.Yes, we knew PIC was bad news years ago, but now, in the full glare of hindsight, it appears as if we did not know how really bad they were. A more complete picture of the PIC travesty emerges in a lengthy investigative article that was published in an Allentown newspaper on May 25, 1998, and authored by news reporters Debbie Garlicki and Rosa Salter. Here are some of the details about PIC's operating practices:
- From the outset, PIC's plan was to sell insurance at ridiculously low rates, yet still make money by taking advantage of the then eight-year backlog in moving civil cases in Philadelphia County; i.e. the modus operandi was to delay in paying claims and invest the premiums in the interim.
- Over a two-year period, the two principle owners of PIC, Carmen J. Cocca and Timothy I. McCarthy, received $11 million in "consulting" fees from PIC.
- The owners of PIC had a habit of hiring relatives of dubious experience for high-management positions. For example, one Executive V.P. was most recently employed as a "bouncer" at an Ocean City, MD nightclub, whereas another V.P. was formally a cook and bookstore clerk.
- It did not comply with normal corporate practices such as holding annual stockholders meetings, and its officers and its directors were not bonded.
People within the medical community raised concerns with the Insurance Department about PIC. For example, as early as 1990 officials at PMSLIC, another major carrier in the medical malpractice insurance market, warned the Insurance Department that PIC was "an insolvency waiting to happen," yet those fears were chalked up to "sour grapes" from a competitor losing market share. Also, in 1995 CAT Fund Director John Reed cautioned the Department about PIC's long-term financial stability as a result of their "deep discount" pricing policies. In the end, Reed and PMSLIC turned out to be right.
Unfortunately, the PIC story is not unique. Indeed, many of the same sorts of practices apparently went on at the Physicians' Insurance Exchange, a large Ohio-based medical malpractice carrier with significant business in Pennsylvania, which went into insolvency just months after PIC.The ultimate question raised by the PIC experience is this: Was the Insurance Department watching this company closely enough? Officials at the Insurance Department have been quoted as saying that they investigated concerns about PIC through the years, but those concerns proved to be unfounded. In light of recent history, however, one must wonder how seriously the concerns were taken and how thoroughly they were investigated. Not being privy to exactly what the Insurance Department did or did not do, it would be unfair to leap to the conclusion that their performance was inadequate. Nevertheless, the experience of two large carriers going "belly-up" in the space of three months at least gives the appearance that we need closer monitoring of these insurance companies.
Ironically, this is one rare instance where the plaintiffs' bar and the medical community feel equally victimized. Our clients have suffered because they face the prospect of reduced recovery as a result of damage set-offs that may be available to the Pennsylvania Insurance Guaranty Association (PIGA), a state operated fund which pays up to $300,000 on claims covered by insolvent arriers.The doctors too have suffered because they face the prospect of personal exposure for damages not covered by PIGA or the CAT Fund.
And the PMSLIC's of the world --- the carriers who charged legitimate premiums and who now, through the industry-wide funding of PIGA, must indirectly pay for the PIC debacle -- will suffer as well.
Yes, it seems that everyone is a loser here except PIC.