A Vermont Superior Court has approved a state takeover and rehabilitation plan for a medical professional liability insurer for 1,300 physicians that the state says is in hazardous financial condition as a result of a $35.4 million arbitration judgment against it.
On April 11, the Vermont court approved the petition by the Vermont Department of Financial Regulation (DFR) to appoint the insurance commissioner as the rehabilitator for CARE Risk Retention Group Inc.
As a result of the court-approved order, all in-force CARE RRG policies are being canceled, all claims payments have been paused for 60 days, and litigation has been stayed for 90 days.
As of December 31, 2024, CARE RRG booked a $1 million reserve against the possibility of an adverse result in an arbitration proceeding concerning its alleged failure to timely settle a California medical malpractice claim within the policy’s $1 million limit. On March 30, 2025, the arbitrator for that proceeding issued a final award of $35.5 million against the insurer.
The $35.4 million award creates what Vermont regulators call a “mandatory control event” since it exceeds the $1 million reserve that CARE had posted by more than the company’s capital and surplus of $3.5 million as of December 31, 2024. When the final award liability is added to the company’s balance sheet, its capital and surplus will be negative and below the $1 million statutory minimum. Further, officials told the court, the company’s negative surplus due to the final award obligates the insurance commissioner to take control under applicable regulations.
The company is a stock insurer owned by CARE Professional Liability Association, the members of which are health care providers. CARE RRG provides medical professional liability insurance to more than 1,300 insureds and currently writes business in 33 states. That business is principally concentrated in California, Florida and New York. Approximately 75% of the insureds practice family medicine and 15% are general surgeons and obstetricians.
Risk retention groups are not covered by any state insurance insolvency guaranty fund.
CARE policyholder members are being sent written notice of policy termination, which will be effective on the earlier of the date on which the member advises CARE that alternative coverage is in place or 90 days from the date of notice.
The rehabilitation plan pauses payment of all policy-level claims. That pause includes, among other things, the payment of defense expenses, indemnity, and return premium. The order further directs the rehabilitator to take control of CARE’s assets and administer its operations.
Over the next 60 days, the rehabilitator is tasked with evaluating CARE’s financial condition and developing a report to court that assesses the company’s ability to pay its obligations and a recommendation for the next steps. The state indicated that it anticipates that these recommendations will include a plan for resuming payment, on at least a percentage basis, of policy-level obligations, although the amount and timing of such distributions are unknown at this time.
CARE was originally licensed as an association captive on October 30, 2003 in the District of Columbia and commenced business on January 1, 2004. It redomesticated to Vermont and was issued a new certificate of authority on December 31, 2018.
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