news in brief

Harrisburg – The Mechanicsburg-based PHICO insurance company was recently placed in rehabilitation after Pennsylvania Insurance Commissioner Diane M. Koken petitioned the Commonwealth Court, calling PHICO’s dramatic quarterly drop in surplus “substantial and alarming.”

PHICO, which provides medical malpractice insurance for hospitals, physicians and physician groups, filed a quarterly statement that reflected a surplus of just $6.8 million, down $120.2 million from its year-end 2000 surplus of $127 million. The company’s direct written premiums were in excess of $242 million that same year.

The low surplus placed PHICO in the “mandatory control level” under the state’s Risk Based Capital requirements under Act 40 of 1997. The RBC is used to monitor the solvency of insurers and to identify companies whose capital position may be weakening.

Although PHICO is based in Pennsylvania, it is licensed to write insurance in all 50 states, Puerto Rico and the Virgin Islands. Pennsylvania and New Jersey are among the states with the largest number of PHICO policyholders.

“The toughest part of this is that [if PHICO is later declared insolvent], it would be national,” said Steven F. Perrone, a claims manager for the Pennsylvania Property and Casualty Insurance Guaranty Association.

Perrone said the loss could be greater than those of PIC Insurance Group and PIE Mutual Insurance Co., which filed for insolvency within a month of each other in December 1997 and January 1998. Those two failed med mal insurers’ combined losses were about $375 million.

But there is no word of an insolvency yet. For now, the order of rehabilitation signed by Senior Judge Charles P. Mirarchi of the Commonwealth Court will allow the state Insurance Department to analyze, evaluate and oversee PHICO’s finances.

“By placing PHICO in rehabilitation, we are protecting not only the company’s policyholders – specifically hospitals and physicians – but also patients and other consumers of medical services,” Koken said.

Class Action Filed Against Bayer Over Baycol

Philadelphia – Lawyers at Beasley Casey & Erbstein filed a suit against the Pittsburgh-based Bayer Corp. on behalf of all individuals in Pennsylvania who have used Bayer’s cholesterol-lowering drug Baycol, known in its generic form as cerivastatin sodium.

James E. Beasley and James J. McHugh are seeking class action status in Carroll v. Bayer Corp. The suit, filed in Philadelphia Common Pleas Court, alleges that Bayer, “in an intentional and reckless disregard for human life and health, deliberately, intentionally and purposely withheld and concealed” medical and scientific data which indicated that Baycol was “likely to become hazardous to the life, health and safety of persons in the position of plaintiffs.”

The complaint goes on to say that the drug manufacturer was “prompted by pecuniary motives” in its refusal to take action to warn consumers of the dangers of Baycol, which can lead to serious weakening of human muscle tissue or death.

The seven-count complaint includes claims in strict liability, negligence, intentional misrepresentation/fraud, negligence, breach of implied and express warranties, wrongful death, survival and loss of consortium.

The plaintiffs are seeking compensatory damages in excess of $100,000, exclusive of interest and costs, for injuries suffered from the ingestion of Baycol as well as punitive damages, reimbursement for medical testing and treatment and the creation of a trust funded by Bayer to finance medical monitoring services.

Approved in the United States in 1997 by the U.S. Food and Drug Administration, Baycol is a member of a class of cholesterol-lowering drugs that are commonly referred to as “statins.” Statins lower cholesterol levels by blocking a specific enzyme that the human body uses to process cholesterol.

Bayer voluntarily pulled the drug from all countries except Japan earlier this month.

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