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Lawsuit claims Indiana’s high-risk insurance pool hoards cash

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Health care providers who’ve been rejected by private malpractice writers turn to a state-run insurer that typically charges two to three times more for coverage. A class-action lawsuit claims the high-risk pool owes its policyholders a $31 million surplus.

More than 1,000 providers from family doctors to specialty practice groups have been covered since the year 2000 by the Indiana Residual Malpractice Insurance Authority, plaintiffs attorneys say. Marion Superior Civil Division 7 Judge Michael Keele in April certified the class-action suit in which plaintiffs argue IRMIA’s own auditors say the fund has more cash on hand than it could possibly spend to pay claims or cover expenses.

“If IRMIA were a private company, that money would be distributed to shareholders. It’s a profit, but IRMIA wasn’t set up to make a profit,” said James K. Wheeler, a partner with Coots Henke & Wheeler P.C., in Carmel. Wheeler’s firm, with Cohen & Malad LLP of Indianapolis, was appointed as class counsel.

Notices to class members began after Keele approved an order May 23 giving potential members 30 days to opt

out of the proposed class. The suit is Larry J. Ley, et al. v. Stephen W. Robertson, in his capacity as Commissioner of the Indiana Department of Insurance, and the Indiana Residual Malpractice Insurance Authority, 49D07-1203-PL-9386.

IRMIA was created by statute in 1998 and under I.C. 34-18-17 covers practitioners who have been rejected by two or more private carriers, commonly because of prior malpractice suits. The state argues in its response that IRMIA has done no wrong and that its policyholders aren’t entitled to refunds.

Tina Korty, general counsel for the Department of Insurance, referred requests for comment to the Office of the Indiana Attorney General. The office responded to questions about the IRMIA surplus with a statement from spokesman Bryan Corbin.

“We are not able to comment on financial details of the IRMIA fund but will respond in court to the plaintiffs’ legal assertions at the appropriate time. As the lawyer for state government, the Attorney General’s Office will vigorously defend its state clients: the Department of Insurance, Commissioner Robertson and IRMIA itself,” Corbin said.

“Our office opposed the plaintiffs’ motion for class certification arguing that the plaintiffs did not meet their burden on the elements necessary for class certification. Having represented state government previously in various other unrelated class actions, our office now will move forward into this new phase of the case, and we respect the ruling of the court,” he said.
 

irwin levin Levin

Cohen & Malad managing partner Irwin Levin said the money IRMIA lists on its balance sheets as “undistributed funds” represents “tens of millions of dollars more than they will ever, ever need to pay claims, according to two separate actuaries hired by IRMIA.
“I have no idea why IRMIA insists on holding on to the money,” he said. “It should go back to the people who paid it. … All they’re doing right now is hoarding money, and it should be put back into the economy.”

Levin said the suit doesn’t challenge IRMIA’s premiums or the methodology the authority uses to set them. “They can charge whatever rates they deem reasonable,” he said, but IRMIA doesn’t have a right to hold a “big pot of cash sitting in a cave they keep adding dollars to.”

The suit also alleges that IRMIA has failed to segregate surpluses for investment as required by statute under I.C. 34-18-17-8, and it asks the court to mandate compliance.

Barring a ruling of summary judgment, resolution through court-ordered mediation or other settlement, the matter is set to proceed to trial on Feb. 3, 2014.

Terre Haute lawyer Michael Sacopulos, of the firm Sacopulos Johnson & Sacopulos, has defended IRMIA claims for the state in southwest Indiana. He believes the authority could face a challenge in justifying its balance sheet.

“It seems to me that this is a knowable type of equation that’s used in the amount of money that you hold in reserves,” he said, noting IRMIA’s coverage limits and the often years-long maturity horizon for malpractice claims in process give the authority a good level of claims predictability. “You cannot hold excessive amounts.”

At the same time, Sacopulos said IRMIA may be able to prevail on its posture as a carrier of last resort. “Is it a reasonable amount given their exposure? … Pools of the physicians (IRMIA compared to those privately insured) are not apples-to-apples,” he said. “Higher-risk pools, not just in Indiana, but nationally, if you’ve been sued, statistically you’re more liable to be sued again.”
That’s in line with some of the 22 affirmative defenses proffered by the state in response to the suit. “But for IRMIA, Plaintiffs would have been significantly limited in their ability to practice medicine in Indiana, and, accordingly, Plaintiffs have received significant benefits including, without limitation, all income remuneration that they have earned during the periods of time that they were covered by IRMIA,” the response says.

But Levin and Wheeler said IRMIA has accounted for all known risks and costs of coverage and has built a surplus that climbed from nothing around 2000 to $7 million in 2007 and $16 million in 2009. IRMIA’s most recent balance sheet from Dec. 31, 2011, shows a total of $31,790,424 in undistributed funds. The authority’s total of reserves, liabilities and undistributed funds for 2011 was $64.3 million.

“Indiana is different from almost every other state,” Wheeler said of its malpractice pool. Because IRMIA covers only the first $250,000 of a practitioner’s liability per claim with an annual aggregate limit of $750,000, its worst-case scenarios are known.

“That makes it easier for the actuaries because of the limits of liability in the state of Indiana,” Wheeler said.

Meantime, attorneys are still unraveling the exact number of practitioners covered by IRMIA policies. In 2012, there were 135 policies, the fewest since 2001, but there have been as many as 664 in prior years. Wheeler said because many of the insured were in the pool for five years or more, compiling a complete list of those insured by the fund since 2000 has been difficult.

Wheeler believes that IRMIA may have over collected premiums in the early 2000s during what he described as a national malpractice scare. Fewer claims than expected may have resulted, producing the surplus. “As claims matured into the later 2000s a

 

malpractice

nd went away, that’s what caused this number to grow,” he said.

The richness of the fund also might say something about practitioners who’ve found themselves with no place else to go for coverage, Wheeler hypothesizes. “I think doctors who got put into the fund ended up being a better risk,” he said.

“I think they got the bejeezus scared out of them and probably were more careful.”•

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  1. Applause, applause, applause ..... but, is this duty to serve the constitutional order not much more incumbent upon the State, whose only aim is to be pure and unadulterated justice, than defense counsel, who is also charged with gaining a result for a client? I agree both are responsible, but it seems to me that the government attorneys bear a burden much heavier than defense counsel .... "“I note, much as we did in Mechling v. State, 16 N.E.3d 1015 (Ind. Ct. App. 2014), trans. denied, that the attorneys representing the State and the defendant are both officers of the court and have a responsibility to correct any obvious errors at the time they are committed."

  2. Do I have to hire an attorney to get co-guardianship of my brother? My father has guardianship and my older sister was his co-guardian until this Dec 2014 when she passed and my father was me to go on as the co-guardian, but funds are limit and we need to get this process taken care of quickly as our fathers health isn't the greatest. So please advise me if there is anyway to do this our self or if it requires a lawyer? Thank you

  3. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

  4. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

  5. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

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