State insurance officials accused the company which until recently provided much of Nevada's malpractice insurance of illegal practices.
Insurance Commissioner Alice Molasky-Arman filed an administrative complaint accusing St. Paul Insurance Companies of numerous legal violations in handling its malpractice insurance customers, including illegally changing malpractice policies, illegal policy cancellations and failing to return unearned premium payments.
The complaint orders St. Paul Companies to produce evidence defending the allegations against it. If ruled guilty of the violations, each instance could result in fines of $5,000 to $10,000.
Attorney General Frankie Sue Del Papa said the withdrawal of St. Paul Companies from covering Nevada physicians precipitated the malpractice insurance crisis in Nevada by leaving many Nevada doctors either unable to get coverage or able to buy it only at much higher rates than they had been paying.
"This is a grave situation where already there are expectant mothers who cannot obtain the services of physicians due to the difficulty OB/GYNs are having in obtaining medical malpractice insurance," said Del Papa, whose staff prepared the complaint.
"This is just one example of the ripple effect of unlawful behavior in the marketplace," she said.
The complaint charges that St. Paul hit all Clark County physicians with a 25 percent debit, which it says is not a permitted premium modification unless specifically approved by the Insurance Division. It charges that St. Paul set up a program sponsorship agreement with the state medical association paying the association 1 percent of premiums written under the deal.
St. Paul got doctors to buy policies by offering them "free" tail coverage if they die, retire or become disabled. Then, the complaint says, St. Paul did not renew policies, leaving those policy holders with no tail coverage. Tail coverage is insurance for past actions that haven't yet become the subject of a lawsuit.
The policies actually identified 2 percent of the premium as providing that coverage, which the complaint says means St. Paul collected premium money for tail coverage which was not provided.
In addition, the complaint accuses St. Paul Companies of actions designed to withdraw from covering surgery, obstetrics and gynecology "without providing notice of cancellation or non-renewal to the commissioner at least 60 days prior to the notice being delivered or mailed to the insured."
The complaints says failing to disclose their intent to leave the Nevada market forced doctors to pay higher premiums than they would otherwise have had to pay and constitute unfair and deceptive practice.
Andrea Wood, communications specialist for St. Paul, said the company hasn't yet received the complaint but denied that the company violated state law and rules. She said St. Paul's rates were "consistent with Nevada law" and had been reviewed by the insurance division.
She said the decision to withdraw from the malpractice insurance market "had nothing to do with Nevada" and was, in fact, a nationwide decision by the company.
She said the policies provide free tail coverage to doctors who die or become disabled and for doctors who retire after having been insured five years or more. But she said the rates "do not contemplate free tail coverage for those who do not die, become disabled or retire."
The company could be fined, penalized or lose its license to sell insurance in Nevada.