Update on Developments Regarding Legion Insurance

This article is aimed at updating APA members on the situation involving Legion Insurance Company, which issued malpractice insurance policies to many APA members through the Psychiatrists' Program prior to spring 2002. Although there have been no dramatic developments, there are several issues of which members who were insured by Legion should be aware. The APA Board of Trustees has established a working group to monitor the situation and to keep the Board and members apprised of the situation. This is one of a continuing series of informational efforts to accomplish that goal.

The Psychiatrists' Program (Program), which is endorsed by APA (but not owned or operated by APA) and offers professional liability insurance to APA members, continues to provide insurance to almost 7,500 of our members, a number that is greater than it has been in almost three years. Members receive the benefits of a Program designed specifically for psychiatrists and the risk and claims management services of Professional Risk Management Services (PRMS), the most experienced third-party administrator in the field, and of the Psychiatrists' Purchasing Group (PPG), which sponsors the Program, is run and managed by APA members, and assists members insured through the Program.

As reported in earlier articles as well as in direct communications from PRMS and PPG, Legion Insurance Company was placed into rehabilitation by the Commonwealth Court of Pennsylvania approximately three years ago. In summer 2003, the Commonwealth Court of Pennsylvania ordered that Legion should be liquidated. However, ruling on motions of PPG, which intervened in the proceeding, the court also ordered that psychiatrists insured through the Psychiatrists' Program should have direct access to the reinsurance that had been purchased for their benefit from Transatlantic Reinsurance Company (TRC).

If upheld—and if TRC is not successful in any subsequent challenges it might make to such a ruling—it would mean that most members insured through the Program who have claims against them for which Legion would have been responsible would have those claims paid by TRC, rather than being managed and covered by their respective state guaranty funds. This would provide members the best chance of full coverage of the claims against them, without the denials and limitations of coverage that may occur when a guaranty fund assumes responsibility for claims against an insolvent insurer.

The commonwealth of Pennsylvania, which had opposed PPG's motion, appealed this aspect of the Commonwealth Court's decision to the Supreme Court of Pennsylvania. The Supreme Court heard oral argument on the appeal on March 8. APA has been advised that the court frequently takes between a year and two years following oral argument to rule.

In fall 2003 and summer 2004, as required by Pennsylvania state law, the Pennsylvania Insurance Commission sent many members who had Legion policies notices about filing a Proof of Claim, which would permit them to share in the assets of the Legion estate to cover a judgment against them or other expenses associated with a claim for professional liability that would have been covered by Legion were it not in liquidation.

By letter dated March 31, PPG has also written to those members insured through the Program whom it believes received the Proof of Claim notice from the state to provide information about the Proof of Claim and general advice about responding to it. PPG's Web site,<www.psychpurchasing.com>, includes a copy of the letter from Alan Levenson, M.D., PPG president and CEO. PPG suggests that “[i]f you were covered by a Legion policy at any time,... depending on your circumstances, you complete and file one or more Proof of Claim forms in order to protect your interests in connection with any malpractice claim(s) that may have been filed against you or that you think may be filed against you in the future.”

We urge any of you who have been insured by Legion in the past to review very carefully all materials you have received from the commonwealth of Pennsylvania or from PPG, or to visit PPG's Web site if you have not received this correspondence or cannot locate it. As the materials indicate, guaranty fund coverage of an individual malpractice claim is limited in amount—a limit that varies from state to state—and may be unavailable for a variety of reasons. It is possible that guaranty funds in some states may be unwilling to cover claims against APA members, based in part on technical considerations related to the structure of the program in its early years. Accordingly, it is important that you take any steps necessary to ensure your ability to share in the Legion estate.

The March 31 letter from Dr. Levenson provides clear, general advice as to who should file the forms, what kind of information may help to preserve the rights of those who file them, and how to respond if requested information is not known or available. In addition, Dr. Levenson's letter contains useful information about where to submit the forms, the deadline for doing so, and where additional information about the situation may be obtained. Dr. Levenson also attaches a copy of the Proof of Claim form and the instructions provided by the state for filling it out and filing it.

APA will continue to work with PPG and to support it in its efforts to find solutions to the challenges and problems associated with the Legion situation that members may face. In addition to appearing as amicus in the Commonwealth Court proceeding, APA secured expert services in support of PPG's positions. To the extent the Supreme Court of Pennsylvania upholds the finding of direct access, and PPG is successful in any challenges by TRC, most insured members will have their claims funded by TRC rather than having to rely on state guaranty funds. In addition, APA will continue to work with PPG and others to try to determine whether there are other products that may offer protection to members who may not have adequate guaranty fund coverage. We will keep you updated about these efforts.

In his March 31 letter, Dr. Levenson indicates that PPG is unable to provide individual advice to members about the Proof of Claim and suggests that questions about the notice and liquidation should be addressed to the Pennsylvania Insurance Commissioner, who serves as the statutory liquidator of Legion, at (215) 979-7879. In addition, PRMS, which is a Legion subsidiary and continues to administer the Program, provides information about the status of Legion and other matters related to the Program and its operation on its Web site at<www.prms.com>.▪