... and Justice for All

Parents' Underinsured Motor Vehicle Coverage Applies to Vehicle Owned by Child

    Underinsured motor vehicle insurance (UIM) coverage that parents purchased applied to the passenger (one of their children) who was tragically killed in a truck owned by another of their children the Kentucky Supreme Court ruled in Williams v. State Farm (No. 2006-SC-000856 decided June 19, 2008).  The key issue, as the Court saw it, was whether the truck was "furnished" to the driver, one of their children who lived with them.  Since it was undisputed that the child owned the truck, the Court concluded that the truck was not "furnished" to him within the meaning of the policy.  Therefore, the Court ruled that the parents' UIM coverage applied. 

Robert L. Abell
www.RobertAbellLaw.com

Windfall Profits for Kentucky Medical Malpractice Insurance Companies

    That Kentucky's four largest medical malpractice insurers are reaping windfall profits at the expense of Kentucky's doctors, hospitals and patients was shown by a recent examination of the profitability, performance and financial condition of these companies for the time period 2002 - 2006.  The examination, which was conducted by Jay Angoff, the former Insurance Commissioner for the State of Missouri, analyzed the loss ratios, claims payments, reserves, surplus and dividend payments made during this period by Medical Protective Company (MedPro), State Volunteer Mutual Insurance Company (SVMIC), ProNational Corporation (ProNational), and American Physician's Assurance Corporation (APAC).  The report was based on the annual statements these companies have filed with the Kentucky Department of Insurance and the National Association of Insurance Commissioners.

    The study revealed the following notable conclusions: (1) SVMIC, ProNational and MedPro each had an incurred loss ration of less than 62%.  An incurred loss ratio of 62 means that for each dollar an insurer brings in in premiums, it projects that it will ultimately pay out 62 cents in claims, thus leaving 38 cents of the premium dollar, as well as all investment income, available for expenses and profit.  (2) MedPro, SVMIC, and ProNational each had a paid loss ratio of less than 31%.  An insurer's paid loss ration measures and insures actual claims payments and is an indicator, not of an insurer's profitability, but rather its cash flow.  Most notably, it was found that ProNational took in $71.4 million in premiums during the study period but paid out only $2.5 million in claims.  (3)  All four of the companies have paid out substantially less in claims than they initially estimated: ProNational's estimates were overstated 12.6%, MedPro's 14.4%, SVMIC's 23.0%, and APAC's 33.5%.  (4)  Because of their cash flow each of the companies were sitting on mountains of cash far exceeding the minimum surplus that the National Association of Insurance Commissioners require them to hold: ProNational's surplus was 385%, APAC's 509%, SVMIC's 618%, and MedPro's 897%.  None of the companies had issued any dividends to the policy holders. 

    The Kentucky Insurance Commissioner is without authority to order refunds be paid to doctors who have paid excessive rates.  Instead of pursuing this reasonable objective, the thrust of the Kentucky General Assembly these past few sessions has been to pursue legislation that would limit the amount that an insurance company would have to pay on the most egregious and harmful cases of medical malpractice.

Robert L. Abell
www.RobertAbellLaw.com