Hundreds of physicians in several southern states are expected to lose their malpractice insurance, now that Virginia Insurance Department has declared Virginia-based Reciprocal of America insolvent and is recommending that it be liquidated.
Reciprocal of America, which was declared insolvent on Monday, mainly insures hospitals, but a related company, Doctors Insurance Reciprocal, licensed through Tennessee regulators, insures hundreds of doctors, with concentrations of them in Virginia and Mississippi, sources familiar with the company say.
"There will be a number of doctors whose careers will be significantly affected by this," says Paul Kitchen, executive vice president of Medical Society of Virginia.
DIR covered 2,000 physicians in Virginia alone, and Kitchen says the medical society, acting as an insurance broker, has found new policies for more than 300 of them.
Kitchen says most others will find policies, but two categories will have problems. Doctors with active claims against them will have trouble finding insurance; and retired doctors who had tail coverage from the company for past acts will have trouble finding policies providing tail coverage only, he says.
"It's a mess," Kitchen says.
He reports that one DIR-covered doctor reached a six-figure settlement just days before the Virginia department announced it would stop paying bills for the sister company, Reciprocal of America, which had gone into state receivership earlier this year.
Kitchen says that while DIR is a separate company requiring action from Tennessee authorities, its lawyers have claimed that the Virginia decision applies to them directly and their payments should stop, too.
He says that while the Tennessee Insurance Department recently put DIR into receivership, it has not yet declared it insolvent. But he says that will come soon, if only because the Virginia company provides reinsurance to the Tennessee company and a malpractice carrier cannot survive without reinsurance.
In Mississippi, the state is opening an insurance risk pool for Reciprocal doctors but it will not be running until early summer, which may be too late for some doctors, according to Liz Carroll, an aide for Lt. Gov. Amy Tuck.
Carroll adds that more than two-thirds of Mississippi hospitals are insured through Reciprocal, and they are in the process of putting together a self-insured entity for coverage.
DIR officials did not return phone calls.