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Anthem confirms talks to sell Acordia to non-insurance buyer

INDIANAPOLIS-Anthem Insurance Cos. Inc. is closer to a deal with a company outside the insurance industry for the sale of Acordia Inc.'s property/casualty business.

Indianapolis-based Anthem, a mutual insurance company, announced last week that it is in negotiations with a "financial buyer" but the two have "significant differences" regarding terms of the transaction, including the purchase price. This is the first time Anthem has confirmed the third party is not an insurance industry organization.

The prospective buyer's original indication of interest was $335 million, subject to various assumptions and contingencies, but Anthem said discussions to date indicate the price will be less than that.

Anthem also announced that its tender offer for the remaining outstanding shares of Acordia's common stock has been extended until midnight July 9 (BI, June 9). Anthem currently owns 66.8% of the broker. When the tender offer is complete, Acordia will discontinue its business relationship with Anthem and become a separate, 100% Anthem-owned property/casualty broker, Acordia executives confirmed.

Of Acordia's $661 million in 1996 revenues, $326 million was derived from providing sales, marketing and administrative services for Anthem's health care products. The remaining $335 million is attributable to Acordia's property/casualty business.

HMO enrollees can sue: Court

OAKLAND, Calif.-Health maintenance organization enrollees are not bound to arbitrate claims against HMOs and can instead take them to court if the HMO doesn't arbitrate as quickly as it promises, the California Supreme Court ruled last week.

The court ruled there is evidence that supports a lower court finding that a unit of Oakland-based Kaiser Permanente fraudulently delayed scheduling arbitration in a case involving a California man with lung cancer who died before his case could be heard.

The family of Wilfredo Engalla charged that Kaiser delayed selecting arbitrators in the 1991 medical malpractice claim for 144 days instead of 60 days as promised in its contracts.

The high court returned the case to trial court to determine whether the HMO actually committed fraud in the delay.

In a statement, Kaiser Permanente said it believes facts at the trial will show the HMO did nothing to intentionally delay arbitration.

Storms hit Detroit area

DETROIT-Fierce thunderstorms and tornadoes tore through the Detroit area last Wednesday night, heavily damaging many businesses and homes and leaving more than 220,000 residents and businesses without electric power.

"It's crazy; there's confusion," a spokesman for the Detroit Police Department said the morning after the storm. "The streets are blocked, trees are uprooted, and homes are crushed."

The storms, which hit hardest on the west side of Detroit and the cities of Hamtramck and Highland Park north of Detroit, killed at least five people and injured at least 100, with hundreds left homeless.

Officials and insurance executives could not give immediate estimates of property damage. All of Wayne County, including Detroit, was declared a disaster area.

Late last week, efforts were under way to restore power.

"Thank God it was not the downtown area that was affected by it," said Angela Moss, risk manager for the city of Detroit. Although stores downtown were spared, she said, in residential neighborhoods "houses were ripped apart; debris and poles and bricks are everywhere."

Alan Must, president of Dairy Fresh Foods in Highland Park, said he estimated the storm caused $100,000 in damage to his milk and deli products plant when it partially pulled off the roof and allowed water to stream in. "We're lucky," he said. "We could have lost the whole building last night."

Meanwhile, U.S. catastrophes caused an estimated $980 million in insured damage during the three months that began April 1, according to the Property Claim Services division of the American Insurance Services Group Inc. First-half catastrophe losses of $1.84 billion were only slightly higher than the average of $1.59 billion since 1989, PCS said.

Med mal surcharge suspended

ALBANY, N.Y.-Self-funded employers and health insurers in New York will save more than $100 million over the next 12 months under a bill approved by state lawmakers that suspends assessments for the New York Excess Medical Malpractice program.

While self-funded employers will enjoy savings, it is not clear whether insurers will pass the savings to their employer policyholders.

The bill, passed last week by the New York House and Senate and signed by Gov. George E. Pataki, will suspend assessments for the program for one year and orders a study to assess whether the fund could be perpetually self-funding.

The program provides free excess medical malpractice coverage to 20,000 doctors: $1 million excess of $1 million per incident and $3 million excess of $3 million in the aggregate.

The program was funded by a surcharge on hospital discharge fees incurred by payers, such as insurers and self-insurers. The program has collected more than $2 billion since it was established in 1985, and more than $700 million was "borrowed" by the state to help balance the New York budget in recent years. The program has been criticized by employers as a "hidden tax" on businesses. But doctors insist the coverage is necessary but unaffordable for most doctors (BI, May 5).

It is not clear whether health plans will pass savings to employers.

The reduced cost of funding the program will likely be overshadowed by other health care cost increases, said Gerard Conway, director of governmental affairs at the Medical Society for the State of New York.

Lloyd's Council picks Taylor

LONDON-Max Taylor, group executive director of Willis Corroon Group P.L.C., is the Council of Lloyd's choice to become the market's next chairman.

Last week, the 18-member Council, the ruling body of Lloyd's of London, voted unanimously for Mr. Taylor, 49, to succeed Sir David Rowland, who will retire at the end of this year.

While he has been selected by the Council members, Mr. Taylor must still be elected to the Council by working members in the fall elections to take up the three-year post as of 1998. The Lloyd's Act 1982 requires that the chairman must be a working member of Lloyd's elected to the Council, and Mr. Taylor is not a member of the Council.

Council elections will be held early in November to replace working members Sir David and broker Graham McKean. Typically several candidates run for each slot and Mr. Taylor will be among the candidates.

Mr. Taylor has spent his working life with Willis, joining 27 years ago as a junior aviation broker. In 1990 he was appointed to the board of Willis Faber P.L.C., shortly before its merger with U.S. broker Corroon & Black Corp. After the merger, he became a director of Willis Corroon Group P.L.C.

Currently, Mr. Taylor is chairman of the Lloyd's Insurance Brokers' Committee, and is a director of the World Insurance Network.

State settles tobacco suit

JACKSON, Miss.-Mississippi's settlement of its lawsuit with the tobacco industry could lead other states to strike similar deals before Congress approves a proposal that would settle all the claims of states that have sued.

Mississippi last week agreed to settlement terms that will ensure it receives more than $3 billion to resolve its lawsuit seeking to recover the state's cost of treating smokers' illnesses regardless of whether the national proposal is approved.

The tobacco industry was facing a trial scheduled to begin this week in Mississippi.

Under the proposed national settlement worked out last month, the tobacco industry would pay more than $360 billion to 40 litigating states over 25 years to recover the costs of paying for health care for smoking-related illnesses (BI, June 23). If the proposed national settlement is approved, it would supersede the Mississippi settlement.

In Florida, where an August trial is scheduled, talks have begun between the state and the tobacco industry regarding settlement of that state's claims, according to a spokesman for the Florida Attorney General's office.

Meanwhile, the industry is facing a class-action lawsuit from two multiemployer health plans covering workers in two Connecticut unions.

"We're seeking basically the same thing and to recover our costs in treating tobacco-related diseases" as are the state suits, said Robert Connerton, a partner with Washington law firm Connerton & Ray and co-counsel for the plaintiffs.

Two Stockton Re execs leave

HAMILTON, Bermuda-Finite risk reinsurer Stockton Reinsurance Ltd. lost two senior underwriters last week.

Richard Black and Michael Cascio, who were instrumental in setting up Stockton in 1994, both voluntarily resigned for undisclosed reasons.

Stockton President Thomas F. Dailey indicated the two vps were in dispute with Stockton top executives over the underwriters' relations with the company.

"Most business disputes are over positions or money, aren't they?" he asked rhetorically.

He added that there was "no way that the company was displeased" with the performance of Messrs. Black and Cascio.

Mr. Black said he and Mr. Cascio had no immediate plans to join or establish another company. "We'll be taking the summer off," he said.

Messrs. Black and Cascio helped set up Stockton Re in 1994, when they both left their jobs at Centre Reinsurance (Bermuda) Ltd. to join the new company (BI, Aug. 15, 1994).

Stockton, which is backed by Commodities Corp., a Cayman-registered asset management firm based in Princeton, N.J., is now an established finite risk reinsurer with $134.4 million in profits for 1996, compared with $25.5 million in 1995.

Chris Nelson will take over as acting head of underwriting, and additional staff members likely will be recruited, Mr. Dailey said.

Briefly noted

Mellon Bank Corp. of Pittsburgh said it paid $225 million to acquire Buck Consultants Inc. in a deal that was completed last week. New York-based Buck, which in 1996 was the world's eighth-largest benefits consultant, will continue to operate under its own name. . . .David Strauss, currently deputy chief of staff for Vice President Al Gore, was named last week to be the new executive director of the Pension Benefit Guaranty Corp. . . .U.S. Supreme Court Chief Justice William Rehnquist appointed U.S. District Judge Sam C. Pointer Jr. of Birmingham, Ala., to hear all federal breast-implant product liability cases against Dow Chemical Co. and Dow Corning Corp., a joint venture of Dow and Corning Inc. The appointment does not apply to cases against other defendants, such as Baxter International Inc., Bristol-Myers Squibb Co. and Minnesota Mining & Manufacturing Co. Meanwhile, in Detroit, U.S. Bankruptcy Court Judge Denise Page Hood has overturned a March 1996 ruling in Dow Corning's bankruptcy case to disband a lawyer-dominated committee to represent the interests of implant recipients. . . .Workers compensation rates in Vermont have dropped an average of 14%, the third consecutive year comp rates have fallen in the state after three consecutive years of increases in 1992 through 1994. . . .Children living near power lines are no more likely to develop childhood leukemia than those who do not, according to a survey released last week by the National Cancer Institute. The survey followed a comprehensive study released by the National Academy of Sciences last year that showed no link between electromagnetic fields and all forms of cancer except childhood leukemia (BI, Nov. 4, 1996). The NAS study said previous surveys could not categorically rule out a link between EMFs and the childhood disease.