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Michael R. Schlessinger and Michael A. Clark, for
petitioner.
Katherine Lee Wambsgans, for respondent.
OPINION
LARO, Judge: This case is before the Court fully
stipulated. See Rule 122. Central Reserve Life Corporation and
Subsidiaries petitioned the Court to redetermine respondent's
determination of deficiencies of $1,936,766 and $225,070 in its
consolidated Federal income tax for 1991 and 1992, respectively.
Following the parties' concessions, we must decide whether the
phrase “unpaid losses * * * not included in life insurance
reserves” as used to define the term “total reserves” in section
816(c)(2) includes accrued unpaid losses on cancelable accident
and health (CA&H) insurance policies.1 We hold it does not.
Unless otherwise stated, section references are to the Internal
Revenue Code in effect for the subject years. Rule references
1 An “unpaid loss” generally is an insurer's estimate of its
liability for claims arising out of injuries which have already
occurred. Unpaid losses may be accrued or unaccrued. Assume,
for example, that a policyholder fractures his pelvis in an
automobile accident and is transported to the emergency room by
ambulance. The expenses incurred in the emergency room are
accrued because reimbursement may be claimed at any time. Future
rehabilitation expenses are unaccrued; although these expenses
may be estimated before they are incurred, the insurer need not
pay for them until they are incurred. See Harco Holdings, Inc.
v. United States, 977 F.2d 1027, 1029 (7th Cir. 1992).
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