Who pays the first few million when a hospital gets sued - the parent company or the subsidiary? An excess insurer wants a Tennessee federal judge to decide.
That, in essence, is the question National Fire & Marine Insurance Company put before the US District Court for the Middle District of Tennessee on April 17, 2026, when it sued Quorum Health Corporation seeking a declaratory judgment over who is on the hook for the self-insured retention - the SIR - beneath a long-running tower of excess coverage.
The story, as National Fire tells it, is a familiar one to any claims professional who has worked a large corporate program. Quorum bought excess coverage for itself and a roster of subsidiary "Member Hospitals," agreeing to absorb the first several million dollars of any loss itself. Above that sat $5 million of underlying healthcare professional liability coverage, with National Fire's excess layer providing up to $25 million per event.
Then came the lawsuits. According to the filing, claimants have sued Quorum and its hospitals in several states. National Fire says Quorum has covered parts of the SIR in some cases - chiefly by paying defense costs for its hospitals - but is refusing to fully fund it, arguing instead that the subsidiary hospitals, or even the individual employees named as defendants, should pay. Those hospitals, the insurer contends, are "either unable or unwilling to pay."
The practical effect, National Fire argues, is that settlements are being held up, exposure is rising for the hospitals and the carrier, and the excess layer is being asked to respond before the self-insured layer has been spent.
There is a second thread worth watching. At Quorum's request, the insurer says, it issued what it calls a "Change Endorsement" that swapped out the original "Quorum Health Self-Insurance Trust" for a straight SIR - and backdated the change to the 2016 inception of the program. National Fire claims Quorum never gave the immediate notice the policy required before making such a shift.
The policy wording will do a lot of work here. The earlier policies say SIR limits "may not be reduced or exhausted for any reason other than the payment of judgments or settlement" that would be covered, and that National Fire "will have no duty to pay any excess loss" unless the insured pays the underlying layer "in full." The later policies go further, stating the excess coverage "shall not drop down" and that the risk of any failure to collect is "expressly retained by the insured."
For excess carriers, brokers and claims leaders watching from the sidelines, the case is a useful test of how far those drop-down and maintenance clauses really stretch when the named insured is a parent company and the checks are supposed to come from subsidiaries. A ruling favoring National Fire would reinforce SIR-exhaustion language across corporate programs; a ruling the other way could prompt insurers to revisit how they define "insured" and "underlying coverage" in multi-entity towers.
The allegations have not been tested, and no court has weighed in on the merits.
