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insurance. As a condition to Ideal Mutual's willingness to
complete the transaction, HCA executed a May 18, 1978 "comfort
letter". That letter provided as follows:
In consideration of the issuance of the Workers'
Compensation and Employers Liability Policies by Ideal
Mutual Insurance Company ("Ideal") to Hospital Corporation
of America ("HCA"), its affiliated and subsidiary companies
and certain of its managed hospitals and the reinsuring of
said policies with Parthenon Insurance Company
("Parthenon"), HCA agrees that in the event, refusal or
inability of Parthenon to provide or maintain the required
Letter of Credit or to pay Ideal the cash advance against
reinsurance losses recoverable under the Reinsurance
Agreement, HCA will pay itself on behalf of Parthenon or
cause Parthenon to pay all the reinsured losses recoverable
by Ideal from Parthenon in accordance with the terms of the
Reinsurance Agreement until all such claims have been
settled or otherwise disposed of.
The general and hospital professional liability policy form
used by Parthenon for policy years 1978 through 1985 was
substantially unchanged and covered all losses arising out of
occurrences during the policy period. For each of those years
Parthenon issued one policy of general and hospital professional
liability insurance to "Hospital Corporation of America, or its
owned hospitals, corporations, and other subsidiaries".
Premiums for the liability insurance coverage provided by
Parthenon to petitioners were based on actuarial analyses of the
projected loss and loss expense adjustment, using industry loss
experience (and, subsequently, using the hospitals' loss
experience supplemented by industry experience), to which was
added Parthenon's operating expenses and the reinsurance costs.
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