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based” policies–-i.e., policies that cover alleged acts of
malpractice committed while the policy is in force, regardless of
when the injury is discovered or the claim is reported.
Under petitioner’s policies, no formal claim was required to
establish coverage within a given policy period. Rather, to
establish coverage, it sufficed for an insured to notify
petitioner of an incident that might ultimately give rise to a
claim. Petitioner referred to such informal notifications as
“incident reports”.
To discourage frivolous claims and protect the reputations
of its physician insureds, petitioner maintained an aggressive
defense policy with respect to any claim that was viewed as
nonmeritorious. The existence of the Fund, which covered
indemnity payments above petitioner’s statutorily mandated policy
limits, constrained petitioner’s risk exposure.3 Petitioner was
statutorily required, however, to defend the interests of the
Fund for claims that might involve indemnity payments above the
policy limits. Because of the existence of the Fund, petitioner
did not secure any reinsurance protection concerning its medical
malpractice risks.
3 By Wisconsin statute, the policy limits for property and
casualty (P&C) companies issuing malpractice policies were
$200,000 per claim arising from an occurrence (and $600,000
aggregate per year) for occurrences before July 1, 1987; $300,000
for each such claim ($900,000 aggregate) for occurrences between
July 1, 1987, and June 30, 1988; and $400,000 for each such claim
($1 million aggregate) for occurrences after June 30, 1988.
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