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(hereinafter also referred to as Parthenon), which latter company
became the surviving corporation. During December 1978,
Parthenon submitted to the Department of Insurance for review and
approval the form of general and hospital liability policy to be
issued to petitioners in 1979, and an Actuarial Review.
Effective January 1, 1979, Parthenon was licensed by the State of
Tennessee as a captive insurance company.
As a licensed captive insurance company under Tennessee law,
Parthenon was subject to the regulatory supervision of the
Department of Insurance. During August 1979, Parthenon adopted
procedures and guidelines to govern the investment of its reserve
and surplus funds, including an incorporation of the Tennessee
regulations governing insurance company investments.
During December 1979, Mr. Reeves, as president of Parthenon,
requested that HCA contribute an additional $1 million to
Parthenon's capital.
Parthenon's Operations During the Years in Question
HCA management required that the hospitals owned by
petitioners acquire their liability insurance from Parthenon.
Parthenon did not market liability insurance coverage to
hospitals owned by petitioners because they were automatically
covered by the Parthenon policy. For each of the years in issue,
Parthenon issued one liability insurance policy which covered
HCA, its owned hospitals, corporations, and other subsidiaries.
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