District Court Determined Reinsurer Acted as Malpractice Insurer to Hospitals

Ario v. Reliance Ins. Co.

( Pa. Commw. Ct. September 4, 2009)

The court granted the summary judgment motions of two hospitals seeking treatment as third-party beneficiaries of reinsurance agreements where: (1) the primary insurer acted only as a fronting company in which capacity it did not accept an underwriting risk; (2) the primary insurer entered the transaction to generate fee income, not premium revenue; (3) the reinsurer acted as the direct insurer by funding and processing claims through its affiliate; (4) the hospitals chose the program because of the reinsurance carrier’s participation in it, not because of the primary insurer’s minimal participation as a fronting company; and (5) the equities favored the hospitals because to have the reinsurer pay the primary insurer post-insolvency would result in the primary insurer retaining a greater portion of the premium paid by the hospitals that was never intended to be used by the primary insurer and because the primary insurance policies were not backed up by guaranty fund protection.

 

For a copy of the decision, click here

 

By Toni L. Frain and Richard J. Cohen

 

https://www.goldbergsegalla.com/attorneys/Frain.html

https://www.goldbergsegalla.com/attorneys/Cohen.html