The Doctors Co. confirms federal investigation is over

by Chris Rauber

The Doctors Co., which acquired fellow medical malpractice liability specialist SCPIE Holdings Inc. late last month, said Thursday that a cloud hanging over that merger has dissipated.

In a written statement to the San Francisco Business Times, the Napa-based medical malpractice insurer said the U.S. Attorney in Los Angeles has informed the company that it will not proceed with a criminal investigation of Doctors Co. relating to possible unauthorized pre-merger use by company personnel of SCPIE’s computer system.

“The Doctors Company is pleased to confirm that it was advised by the U.S. Attorney in Los Angeles that the government will not proceed further with the investigation,” company officials said July 17. “The U.S. Attorney also confirmed that no action is planned with respect to any employees of The Doctors Company.”

A spokeswoman said the statement is the only comment the company is making at this time.

Doctors Co. and SCPIE completed their $281 million merger June 30. The California Department of Insurance approved the merger in late June, concluding it “would not substantially lessen competition” in California, after seeking a legal opinion from state Attorney General Jerry Brown’s office. But the insurance department required Doctors Co. to submit rate applications for itself and SCPIE by Sept. 1, “and at least every three years thereafter,” to make sure the merged company’s rates are not excessive, and in an unusual step the DOI’s general counsel also publicly announced that regulators had become aware of the U.S. Attorney’s investigation.

In late June, Doctors Co. reacted angrily to those comments, arguing that the U.S. Attorney’s investigation was publicly disclosed in a SCPIE proxy statement “more than five months ago” and adding that it was surprised the insurance department “chose to comment on a pending proceeding by another government agency.”

Despite the DOI’s comments, the merger closed June 30 and Los Angeles-based SCPIE was delisted at the end of trading by the New York Stock Exchange. The merger, announced in October 2007, was approved by SCPIE’s shareholders March 26.

The combined company, the largest malpractice insurance carrier in the nation, according to Doctors Co., now provides liability coverage to 43,000 doctors and surgeons, including 19,000 in California, after adding SCPIE’s 8,000 physician policyholders.

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