MGU Liability in Stop Loss Litigation

According to industry experts, roughly 25% of the $4-$6 billion annual stop loss market is sold through independent Managing General Underwriters. Another unknown, but certainly hefty, share is sold through “captive MGUs” — MGUs wholly owned or controlled by carriers. Against this backdrop, it is not at all surprising that MGUs become litigation targets in stop loss claims-related litigation. When this occurs, and the MGU is named as a co-defendant with the stop loss carrier, interesting legal issues can arise — issues on which the courts are not consistent, and predictability is difficult and uncertain.

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