-34-
the basic limits data contained in respondent's exhibits does not
show claims that are paid or reserved at more than $100,000.
Gleeson pointed out that petitioner's retention was about
$350,000 and that the basic limits data does not account for the
development between the $100,000 basic limits and petitioner's
$350,000 retention amount.25 Thus, Gleeson found Hurley's ranges
to be actuarially sound.
9. Whether Respondent's Use of Hindsight Was Proper
Respondent points out that hindsight may be used in deciding
whether to sustain respondent's proposed adjustments. Hanover
Ins. Co. v. Commissioner, 69 T.C. at 270 (the Commissioner
reasonably used hindsight to test the reasonableness of the
taxpayer's reserves); Hospital Corp. of Am. v. Commissioner, T.C.
Memo. 1997-482 (the taxpayer did not prove that its reserves were
reasonable because the Commissioner's expert used hindsight to
show that the taxpayer's reserves were overstated). Respondent
relies on petitioner's 1996 annual statement to support
respondent's contention that the development of petitioner's
actual losses shown in the reestimates of ultimate losses for
coverage years 1987 to 1992 as of the end of 1996 confirms that
respondent's proposed adjustments are reasonable. We need not
decide whether respondent's adjustments are reasonable since
petitioner's loss reserves were fair and reasonable. Compare
25 Gleeson testified that petitioner's retention was about
$350,000. We have found that it was $375,000-$400,000. The
difference in retention amounts does not affect Gleeson's
explanation.
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011