Wednesday, May 14, 2003 | 11:57 a.m.
CARSON CITY -- A ruling by the Nevada Supreme Court may allow the state Insurance Division to pursue its complaint against St. Paul Medical Liability Insurance Co. seeking more than $10 million in fines.
The court Tuesday denied St. Paul's petition to allow it to depose witnesses and to issue subpoenas before the administrative hearing begins.
The company pulled out of the medical malpractice business last year, touching off a medical malpractice crisis in Clark County, where it covered about 60 percent of physicians.
The complaint, filed last year, accused the company of illegal practices before it pulled out. The insurance division is seeking the $10 million in fines for six counts of alleged misconduct related to the pullout.
The division alleges St. Paul lied when it assured the commission it was committed to the state, illegally took premiums for a type of coverage it later canceled and excessively raised rates for some doctors, among other things.
The company maintains it did not violate regulations.
The administrative hearing, before Douglas Walther of the state Department of Business and Industry, was delayed while St. Paul appealed Walther's decision to prohibit St. Paul from issueing subpoenas and taking testimony of witnesses in advance.
The company said it was being deprived of the opportunity to make a complete record of the case, which would be used in an appeal to the district court. The courts usually make decision based on the record before the hearing officer.
Senior Deputy Attorney General Bob Auer said he hoped the disciplinary hearing could now begin.
Dennis Kennedy, the Las Vegas attorney representing St. Paul, was on vacation and could not be reached for comment. Andrea Wood, senior communications specialist of St Paul, also was not available.
The division said it approved a rate increase for St. Paul Cos. based on the representations the company would remain in the Nevada market. The complaint said St. Paul threatened to withdraw if the new increased premiums were not approved.
When the company departed Nevada, hundreds of doctors had to scramble for insurance and faced premiums that exceeded $100,000 in some cases.
"The failure of St. Paul Cos. to disclose their intent to leave the Nevada market at the time the rates and plan were approved has forced physicians to pay higher premiums for tail and other coverage than they would have paid had these physicians voluntarily surrendered coverage by the St. Paul Cos. or have been non-renewed for loss experience."
The complaint said the company unlawfully collected premiums from doctors to provide tail coverage for physicians, which covers any claims that would precede the start of new malpractice coverage. But Carr said the tail coverage was not provided.
It said the rates filed with the state by St. Paul showed that 2 percent to 3 percent of the premium paid would provide the tail coverage. St. Paul officials, the complaint said, "have intentionally committed unfair trade practices."
The complaint also alleges the company illegally charged 161 doctors a 25 percent increase in premiums when it was authorized to raise rates only to a few.
In addition, the division alleges St. Paul:
Illegally withdrew its coverage without giving proper notice to doctors who specialize in surgery-obstetrics, gynecology, emergency medicine and surgery.
Unlawfully paid a 1 percent commission on the premium collected on new policies and 0.5 percent on continued renewed policies to the Nevada State Medical Association. The payment of these "royalties constitutes a payment of a commission to an unlicensed entity" and violates the law.
Provided notices of cancellation or nonrenewal to at least four doctors that did not contain adequate information about the policyholders' right to make a request for certain information.
The insurance commissioner should be aggressive in pursuing those companies that violate the rules, Larry Matheis, executive director of the Nevada State Medical Association, said.
The departure of St. Paul had a "disproportionate effect on the market and should be reviewed," Matheis said. The malpractice problem was building slowly, but St. Paul's pullout accelerated it.
"Not only did doctors lose their insurer but they were offered policies only at high levels," Matheis said. He said some doctors were hit with premiums in excess of $200,000 that had to be paid immediately. And that led to doctors leaving or closing down their practice.
The medical association represents the majority of physicians in Nevada.
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