ProAssurance Corporation Class Action Lawsuit
- Company Name
- ProAssurance Corporation
- Stock Symbol
- Class Period
- April 26, 2019 to May 7, 2020
- Northern District of Alabama
The ProAssurance Corporation class action lawsuit charges ProAssurance and certain of its officers with violations of the Securities Exchange Act of 1934 and seeks to represent purchasers of ProAssurance common stock between April 26, 2019 and May 7, 2020, inclusive (the “Class Period”). The ProAssurance class action lawsuit was commenced on June 16, 2020 in the Northern District of Alabama and is captioned Sheet Metal Workers Local 19 Pension Fund v. ProAssurance Corporation, No. 20-cv-00856.
ProAssurance is one of the largest medical liability insurance providers in the United States. ProAssurance’s most important division is its Specialty Property and Casualty segment (“Specialty P&C”), which has consistently accounted for at least 60% of ProAssurance’s gross premiums written since 2015.
The ProAssurance class action lawsuit alleges the defendants made false and/or misleading statements and/or failed to disclose that: (i) ProAssurance lacked the adequate underwriting process and risk management controls necessary to set appropriate loss reserves in its Specialty P&C segment; (ii) ProAssurance failed to properly assess a large national healthcare account that had experienced losses far exceeding the assumptions made when the account was underwritten; and (iii) as a result, ProAssurance was subject to a materially heightened risk of financial loss and reserve charges.
On January 22, 2020, ProAssurance announced that because of a deteriorating loss experience related mainly to one large healthcare account underwritten in 2016, ProAssurance was estimating a $37 million adverse development in its Specialty P&C loss reserves for the fourth quarter of 2019. Additionally, ProAssurance stated that since mid-2019 it had been executing a “comprehensive underwriting strategy in response to emerging trends and changing conditions in healthcare professional liability.” On this news, the price of ProAssurance stock fell 11%.
On February 20, 2020, ProAssurance revealed that the adverse development from this one large national healthcare account was actually $51.5 million, much larger than the initial estimate of $37 million only a month prior. ProAssurance also disclosed that, “[i]n the span of twelve months, we restructured the majority of our executive team [and] consolidated our Specialty P&C operations” under new leadership.
Then, on May 8, 2020, ProAssurance announced that the large healthcare client would likely not renew its policy and instead would likely exercise an option for tail coverage that would result in an additional $50 million in losses in the second quarter of 2020. This loss, when combined with the $51.5 million adverse development, meant that ProAssurance would suffer over $100 million in losses from a single account. On this news, ProAssurance’s stock price fell an additional 22%.
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