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Dynamic Chiropractic – March 26, 1993, Vol. 11, Issue 07

Calif. Issues "Cease and Desist" Order against PIC, CARE and Rose

CARE and Rose "in violation" of Insurance Code and "a source of potential injury and loss"

By Editorial Staff
On February 3, 1993, the California Department of Insurance issued an "Order to Cease and Desist and Notice of Hearing" to Professional Indemnity Corporation (PIC), the Chiropractic Association for Research and Education (CARE) and William A. Rose, DC, managing director. This order comes just three months after the Washington State Insurance Commissioner's Office issued a similar order (please see "Washington State Order's Malpractice Insurer to Cease and Desist" in the February 26, 1993 issue).

The order states:

"NOTICE IS HEREBY GIVEN that the Insurance Commissioner of the State of California has reasonable cause to believe that Respondents (PIC, CARE and Rose) are conducting business in such a manner as to threaten to render it insolvent or in a hazardous condition; are conducting a business and affairs in a manner which is hazardous to its policyholders, creditors, and the public, or have committed or engaged in certain acts, practices, and transactions which would render such company subject to conservation or liquidation proceedings; and it further appears that such conduct will result in the irreparable loss and injury of the property and business of the insurer in California unless the Insurance Commissioner acts immediately, all as more specifically set forth and described in Paragraph I herein below, and that by reason thereof the Insurance Commissioner intends to make certain orders necessary to correct, eliminate, and remedy such conduct and conditions, which such proposed orders are specifically set forth in Paragraph II herein below; and

"NOTICE IS FURTHER GIVEN that a public hearing will be held before the Insurance Commissioner of his duly authorized Deputy at 10:00 a.m., on March 3, 1993 at the offices of the Department of Insurance located at 45 Fremont Street Avenue, San Francisco, California 94105, for the purpose of determining the matters set forth herein."

The order further states:
"Neither CARE nor William A. Rose is licensed as an insurance agent, broker, or solicitor in the state of California and neither is authorized to solicit for or in any other way transact the business of insurance in this state. CARE and William A. Rose are in violation of various provisions of the California Insurance Code, including but not limited to CIC SS1531 and 1761 and are a source of potential injury and loss to the people of this state."
Beside the investigations in California and Washington state, nine other states are currently investigating PIC/CARE: Connecticut, Delaware, Illinois, Iowa, Minnesota, Missouri, New York, Texas, and Wisconsin.

Elena Stern, spokeswoman for the California Department of Insurance stated: "The Department believes that they (CARE/PIC) have been operating without a license and are endangering those they purport to insure. If you want to do business in this state, you had better play by the rules or you won't be allowed in the game."

If you are currently a client of Professional Indemnity Corporation, and are concerned about your malpractice coverage, you may want to contact your insurance commissioner's office.


PIC, CARE and Rose -- Unanswered Questions

After Dynamic Chiropractic received a copy of the "Cease and Desist Order" issued by the California Department of Insurance, a second interview was requested of William Rose, DC, FACC, managing director of the Chiropractic Association for Research and Education (CARE). This was his response:

"We greatly appreciate the opportunity to answer the questions and the printing of the questions and answers accurately.

"However, at this time CARE and Professional Indemnity Counsel are preparing to file a law suit in the state of Washington against the Insurance Commissioner. Counsel is asking that there be no more press releases or information published, as this could prejudice the results of the suit."

Unfortunately, this response still leaves some very important unanswered questions, and thus we ask Dr. Rose incommunicado:
  1. In the February 8, 1993 interview (please see "Interview with William A. Rose, DC, Managing Director of CARE" in the February 26, 1993 issue), you stated that CARE and PIC (Professional Indemnity Corporation) "are unrelated." You said that "PIC is owned by its stockholders, one of whom is Dr. R.E. Busch, publisher of the American Chiropractor magazine and the scientific journal Chiropractic." Unfortunately, you failed to mention that CARE is an assumed business name for The American Institute of Chiropractic of which Richard E. Busch, DC, is president, one of the incorporaters, one of the directors, and its registered agent. Could you please explain?


  2. From all the information gathered, it doesn't appear that PIC has a reinsurer for its malpractice insurance policies. In the previous interview, you stated that "PIC has a net worth in excess of two million dollars." Most states have a statutory requirement of a minimum _surplus_ of funds. Even if your "net worth" were an actual cash surplus (e.g., California requires a minimum surplus of $5 million), the standard surplus within chiropractic profession is approximately $5,000 per policyholder ($5 million for 1,000 policyholders).

Current data suggests that the occurrence of malpractice claims is as high as five percent. Assuming that PIC has 1,000 policyholders (as stated in your previous interview), this would equate to 50 malpractice claims per year. Even assuming that you have incredibly good attorneys who can resolve 60% of your claims without payment (the average is 50%), PIC can expect to pay 20 claims per year. Based on these figures, two million dollars could not even cover two, $1,000,000 claims plus attorneys fees. Would you please explain how you are protecting you policyholders?

3. Why isn't PIC or CARE apparently licensed in any state?

4. When asked in the previous interview, "Are PIC and CARE having problems in other states?", you answered "NO." You said, "The state of Washington stands alone in such a cease-and-desist order." How do you explain the fact that the week before you answered the previous interview, the state of California issued their cease-and-desist order?

In addition, how do you explain the letter sent to you on December 21, 1992 by the Delaware Department of Insurance? (Please see below.)

Again the question, what other states are taking actions against PIC, CARE and yourself?

5. Finally, in your interview you claimed that Professional Indemnity Corporation "is licensed by the Republic of Corterra." Where exactly is the Republic of Corterra? We have been unable to locate the country in the Rand McNally World Atlas.

In consulting with a stamp collector, he determined that, unlike almost every other country in the world, the Republic of Corterra doesn't appear to issue stamps. Can you provide us with the latitude and longitude of Corterra so we can locate it?


December 21, 1992

Mr. William A. Rose
Managing Director
Chiropractic Association for Research & Education
3220 N Street, Suite 188
Washington, D.C. 20007

Dear Mr. Rose:

It has come to the attention of the Delaware Insurance Department that the Chiropractic Association for Research & Education is soliciting Delaware residents for insurance policies to be issued by Professional Indemnity Corporation. In order to transact insurance in Delaware you must hold a Delaware Certificate of Authority.

Neither you, the Chiropractic Association for Research & Education or Professional Indemnity Corporation are licensed to transact insurance in Delaware. In order to avoid any penalties that may incur, please notify me of all Delaware residents whom you have done business with.

In addition, please notify me in writing that you and the Chiropractic Association for Research & Education will not transact insurance in Delaware.

If you have any question you may contact me at 302-739-4251.

Very truly yours,

Roger H. Needham
Admissions Chairperson


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