CDI Reacts to The Doctors Company Purchase

Following consent by the Department of Insurance (Department) to the acquisition of SCPIE Holdings Inc. (SCPIE) by The Doctors Company (Doctors), the Department's General Counsel, Adam Cole, issued the following statement:

"The governing statute, Insurance Code Section 1215.2(d), delineates specific criteria under which this transaction was considered. After careful review and extensive input from objectors and Doctors, the Commissioner authorized the application of Doctors to acquire SCPIE.

"During the review, concerns were expressed that this transaction would lessen competition in medical malpractice insurance in California. To address that issue, the Commissioner retained Attorney General Jerry Brown's office to render an opinion. The Attorney General's office concluded twice that Doctors' acquisition of SCPIE would not substantially lessen competition in insurance in California. The Federal Trade Commission also took no action to prevent Doctors' proposed acquisition of SCPIE in response to Doctors' Hart-Scott-Rodino Act filing.

"In order to ensure that neither Doctors' nor SCPIE's rates are excessive, the Commissioner required that Doctors, as a condition of the authorization, submit rate applications for both itself and SCPIE by September 1, 2008, and at least every three years thereafter. Doctors agreed to these conditions.

"During the review, the Department became aware that a federal criminal investigation was opened against Doctors and/or one or more current or former Doctors employees related to possible unauthorized access by Doctors to SCPIE's computer system. The U.S. Attorney's office in Los Angeles declined to comment on the status of this matter. The Department is unable to ascertain whether the criminal investigation is likely to lead to any action against Doctors.

"Additionally, two directors and an officer of Doctors made statements to the Department in connection with the application that later turned out to be false or misleading. They are no longer with Doctors."

SCPIE Holdings Inc. announced it had entered into a definitive agreement to be acquired by The Doctors Company last October for $28 per share in cash, or an aggregate purchase price of approximately $281 million.