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reforms, continuing increases in the frequency and severity of
medical malpractice claims resulted in an affordability crisis
for medical malpractice insurance coverage. In the 1980s,
certain large commercial carriers withdrew from the market. The
Wisconsin State Medical Society proposed the establishment of a
physician-owned medical malpractice insurer to provide the
requisite primary coverage for its members, resulting in
petitioner’s incorporation in 1986.2
Petitioner’s Insurance Policies
On November 1, 1986, petitioner began issuing “claims-made”
medical malpractice insurance policies–-i.e., policies that cover
alleged acts of malpractice for which a claim is filed while the
policy is in force, provided that the alleged act of malpractice
to which the claim relates occurred after the “retroactive date”
(typically the date on which the insured first purchases
coverage). Petitioner’s policies also included an option to
provide “tail coverage”--i.e., coverage for claims relating to
events that occurred before the retroactive date. During the
years in issue, about 85 percent of petitioner’s policies were
issued on a claims-made basis; the remainder were “occurrence-
2 Initially, petitioner was capitalized by a $3.25 million
contribution from the Physicians Insurance Co. of Ohio (PICO) and
a $250,000 contribution from the State Medical Society. During
the first 3 years of petitioner’s operations, physicians whom
petitioner insured were required to purchase stock in petitioner.
The capital raised from policyholder-owners was used to redeem
nearly all of PICO’s interest in petitioner.
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Last modified: May 25, 2011