Insurer had limited Nevada presence

Chris Jones

Monday, Feb. 18, 2002 | 10:39 a.m.

The failure of a Pennsylvania malpractice insurer is expected to have little effect on any unpaid claims it may have in Nevada.

A Pennsylvania judge closed Phico Insurance on Feb. 1 after that state's insurance department discovered the company had a reserve deficiency of more than $250 million. The company was immediately shut down to avoid further risk to its policyholders, claimants and creditors, said Diane Koken, Pennsylvania's insurance commissioner.

Phico wrote about $434,000 in premiums in Nevada in 2000 -- a small portion of the overall $242 million in premiums the company wrote in the United States, Puerto Rico and Washington, D.C., that year. Most of its policyholders were in Pennsylvania, Texas, Florida, Indiana and New York.

"The few doctors or nurses who were insured by them will have to get insurance from somebody else, but that's not horrible because they didn't have a lot of business (in Nevada)," said Cliff King, chief insurance examiner for the Nevada Insurance Division. King said the division did not record how many policies Phico wrote in Nevada. However, the company's Nevada statements showed direct losses incurred of about $400,000 and unpaid direct losses of about $865,000 for the year 2000, said Bob Burch, chief insurance examiner for the state.

"That's the latest information we have," Burch said. "There could be some (future) claims made for events that have already occurred but have not been reported, but we'd have no way of knowing that yet."

Although the Nevada Insurance Division suspended Phico's license to operate in the state in September 2001, King said the Nevada Insurance Guaranty Association will cover premiums and losses written in the state for up to $300,000.

Phico's troubles were revealed in August when the company filed unaudited financial statements that showed its surplus fell from $127 million at the close of 2000 to only $6 million as of June 30, 2001.

The Pennsylvania Insurance Department assumed control of the company and later conducted an independent analysis that showed Phico actually had a deficit of more than $250 million as of June 30, 2001.