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affect the existence of Parthenon as a separate corporate entity.
Accordingly, we conclude that the fact that Parthenon filed on
the consolidated return with HCA and the sister subsidiaries does
not render the insurance arrangement between Parthenon and HCA
and the sister subsidiaries a sham.
Additionally, respondent further contends that HCA's use of
a $2,250,000 dividend from Parthenon to effectuate the formation
of PCIC, the failure of HCA and the sister subsidiaries to timely
pay quarterly premiums for the 1986 policy year, and the
calculation of the premium for the 1986 claims-made policy on the
rate for an occurrence basis policy, show that Parthenon was
controlled at all times by HCA for HCA's benefit and support a
conclusion that the insurance arrangement between Parthenon and
HCA and the sister subsidiaries was a sham. Although those
events are factors to consider, we do not find them dispositive.
Respondent does not contend that payment of the dividend to HCA
or its use in forming a surplus lines insurance company was
prohibited by statute or regulation. HCA formed PCIC because, as
a captive insurer, Parthenon could not provide medical
malpractice insurance to unrelated parties. HCA and the sister
subsidiaries delayed payment of the 1986 quarterly premiums while
HCA management reconsidered its insurance objectives. The 1986
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