- 17 -
Mr. Castille, who had been the risk manager of Humana Inc.,
a competing hospital chain, was hired to head Parthenon's loss
prevention and quality assurance operation. Mr. Anderson, a
former controller of an insurance brokerage firm in the State of
Kentucky, became head of Parthenon's financial operations.
On October 28, 1977, HCA contributed an additional $1
million to Parthenon as paid-in capital.
During March 1978, HCA management learned that Continental,
which had been providing workers' compensation insurance to
petitioners, was not interested in renewing coverage under any
type of insurance plan. As a captive insurer, Parthenon could
not insure workers' compensation risks directly, but it could
reinsure7 the risks of an admitted company, if the admitted
company agreed to "front" the business; i.e., to insure the risks
and then reinsure them with Parthenon. In that event, the States
would look to the admitted company for payment of the losses, and
the admitted company would look to Parthenon for reimbursement.
Accordingly, during March 1978, HCA, Ideal Mutual Insurance Co.
(Ideal Mutual), and Parthenon negotiated an arrangement whereby
Ideal Mutual agreed to provide workers' compensation insurance to
petitioners and Parthenon agreed to reinsure Ideal Mutual on that
7 Reinsurance is a contract with a second insurer in which the
second insurer agrees to provide coverage of risks that the first
insurer has already assumed under an insurance contract with
another party. 1 Couch on Insurance 3d, sec. 1:4, at 1-8 to 1-9
(1995).
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