The VLW Blog

Read it and weep if you had a claim that you thought was covered by American National Lawyers Insurance Reciprocal or Doctors Insurance Reciprocal.

The State Corporation Commission ruled today that you have the same status as a general creditor in the receivership for Reciprocal of America, the parent of the retention groups. Because the commission estimates that ROA has a negative surplus of almost half a billion dollars, your chances of getting even a few cents on the dollar are minuscule.

ROA provided reinsurance for the risk retention groups, which are based in Tennessee, and they were declared insolvent shortly after ROA went under in January 2003.

Attorneys for the groups had contended that ROA and the groups were so closely related that they should be considered a single entity, with the policyholders of the groups having the same priority as those of ROA.

While acknowledging that irregularities probably occurred, the commission said it was powerless to change the priority status established in Virginia Code §38.2-1509.

The House Judiciary Committee has asked Paul J. McNulty what he knows about why the criminal investigation of General Reinsurance and an officer at Reciprocal of America were dropped earlier this year.

McNulty was the U.S. attorney for the Eastern District of Virginia during much of the investigation and had been elevated to deputy attorney general in the U.S. before the investigation was dropped. He is now a partner in the Washington office of Baker & McKenzie.

Corporate Crime Reporter has a long article about the investigation with a link to the letter the subcommittee sent McNulty in July. McNulty has asked for an extension of time to reply to the letter, which also includes questions about what Democrats allege to be political reasons for replacing some U.S. attorneys.

The CCR article credits Virginia Lawyers Weekly with publishing the first article about the apparent demise of the investigation.

Marisa Taylor of McClatchy Newspapers Washington Bureau has an extended article on the U.S. Justice Department’s abandonment of the criminal investigation of the implosion of Reciprocal America, first reported in Virginia Lawyers Weekly on April 2.

The article elicited more than 40 comments on the liberal blog. the Daily Kos, most of which view it, not surprisingly, as further evidence of the incompetence and corruption of the Bush Administration.

Taylor emphasizes the frustration of those who worked on the case and thought that General Reinsurance and officials of ROA should have been indicted but also notes that the abandonment came when DOJ was taking some hits for overzealous prosecution of corporate officers.