Virginia Dismisses Tenn. Risk Groups’ Claims Against Reciprocal of America

February 26, 2008

Virginia insurance regulators have has dismissed the claims of three insolvent Tennessee risk retention groups against Reciprocal of America (ROA).

The State Corporation Commission said it determined that, as reinsureds of ROA, the three insurers are general creditors and not policyholders under the Virginia insurer liquidation statute.

ROA and its attorney-in-fact, The Reciprocal Group, were placed into receivership on January 29, 2003. Receivership of the three Tennessee insurers soon followed.

ROA primarily wrote hospital professional liability insurance, workers’ compensation insurance, and some ancillary insurance for its insureds. It also provided reinsurance to various companies including the three Tennessee risk retention groups – Doctors Insurance Reciprocal, American National Lawyers Insurance Reciprocal, and The Reciprocal Alliance.

In its order dated Feb. 14, the SCC said that it is governed by Virginia insurance law regarding the distribution of assets from the ROA estate, “and there is no provision therein for us to alter the General Assembly’s priority scheme.” Under the scheme, policyholders take priority for distribution of an insolvent insurer’s assets.

The deputy receiver of the liquidated ROA is currently authorized to make distributions to eligible claimants that represent 25 percent of the total claim amount. Receivership assets have been held in reserve pending the outcome of the creditor claims of the Tennessee risk retention groups.

State Corporation Commission

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