-7-
estimating its ultimate losses each year, petitioner adjusted its
prior estimates of earlier years' ultimate losses to factor in
its loss experience.
Petitioner's president, Martin J. Oslowski (Oslowski),
recommended an amount to report as annual statement unpaid losses
to the board of directors. Oslowski was petitioner's claims
manager before he became president in December 1986.
Petitioner wrote only one line of insurance, and thus
petitioner could not offset reserve deficiencies with surpluses
in another line as multiline companies could do.
F. Occurrence Basis and Claims-Made Basis Policies
Medical malpractice insurance may be written on an
"occurrence" basis or on a "claims-made" basis. An occurrence
basis policy covers losses that occur within the policy period
whenever reported. A claims-made basis policy covers only losses
from occurrences during the policy period (or a previous policy
period) for which claims are made or which are otherwise reported
during the period. From 1978 to 1985, petitioner and most of the
medical malpractice insurance industry offered only occurrence
basis policies.
In 1984, petitioner's financial position was tenuous because
its losses in the early 1980's were significantly larger than its
4(...continued)
year" instead of "accident year" because this case involves both
occurrence and claims-made coverage.
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