Tenn. Moves Forward on Liquidation of Malpractice Firms

Tennessee Commissioner of Commerce and Insurance Paula A. Flowers announced that her department received court approval to liquidate three Tennessee-chartered malpractice insurance companies that issued policies to lawyers, doctors, counselors and medical facilities.

The three companies are reciprocals—American Lawyers Insurance Reciprocal (ANLIR), Doctors Insurance Reciprocal (DIR) and The Reciprocal Alliance (TRA). They were placed into receivership earlier this year. According to the Department of Commerce and Insurance the Davidson Chancery Court converted those receiverships into liquidation proceedings, concluding that all three are insolvent, cannot be rehabilitated, and that their continued operation would be hazardous to policyholders.

Flowers said the situation of the three malpractice operations is essentially the same. They were reinsured by Virginia-based Reciprocal of America (ROA), which was taken into receivership by Virginia on Jan. 28, and were operated by The Reciprocal Group, a management company headquartered in Virginia that is closely tied to ROA. The three reciprocals had no employees or infrastructure of their own.

According to the latest Tennessee records, ANLIR’s known liabilities exceed its assets by at least $35.9 million, DIR’s known liabilities exceed its assets by at least $71.2 million and TRA’s deficiency is at least $25.5 million. In each case the appointed Special Deputy Receivers believe their may be millions more in additional claims against the companies.

At the time they were placed in receivership, ANLIR had 14,642 subscribers nationwide, DIR had 3,690 and TRA had 17,393.