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coverages of risks above Parthenon's retained limits of
liability. Final adjustments were made at the end of each year
to recalculate the ultimate premium reflected by the actual
number of appropriate exposure units.
After receiving bills from Parthenon, HCA generally paid the
premium amounts in a timely fashion by check or wire transfer
and, using the schedules provided by Parthenon's accounting
department described above, charged each hospital its individual
premium, determined by application of rates to that hospital's
exposure base and adding the hospital's share of the reinsurance
premium.
During early 1985, Mr. Klaassen concluded that Parthenon's
losses were developing more adversely than originally had been
anticipated. Additionally, Parthenon made certain procedural
changes to improve its claims reporting process that had the
effect of making actuarial predictions temporarily more
difficult.
Accordingly, on four occasions during 1985 through 1987,
Parthenon's consulting actuary advised Parthenon that its
reserves were no longer adequate. Consequently, HCA paid
Parthenon payments classified by HCA as additional premiums to
fund reserve deficiencies. In each case, the additional amount
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