Hospitals May Seek Payment Directly From Reinsurer, Court Rules

PHILADELPHIA - Two hospitals may seek payment of medical malpractice claims directly from the reinsurer of a now-insolvent fronting company because the reinsurer essentially functioned as their malpractice insurer, a Pennsylvania state court has ruled. Ario v. Reliance Insurance Co., No. 269 M.D. 2001 (Pa. Cmwlth. Ct.).

A three-judge panel of the Pennsylvania Commonwealth Court ruled Sept. 4 that the hospitals met the standards of Koken v. Legion Insurance Company, 583 Pa. 400, 878 A.2d 51 (2005) by showing that they were the intended beneficiaries of the reinsurance contracts, issued by American Healthcare Insurance Co. (AHIC).

In the 1960s, broker …