Editor's note: This is the second in an occasional series that examines medical malpractice and its effect on physicians, patients and hospitals. Today, we look at the fall of a leading malpractice insurer.

As Pennsylvania's medical malpractice insurance crisis reached a peak early this year, doctors and lawyers clashed over which side was to blame for rates raging out of control.

Insurers, meanwhile, managed to stay in the shadows.

On Feb. 1, the bright lights found the insurance industry.

That's when the PHICO Insurance Co., the third largest insurer of doctors and hospitals in the state, collapsed under a mountain of claims it would not be able to pay.

Since the Mechanicsburg, Cumberland County, company's meltdown began, customers across the country, mostly doctors and hospitals, have had to seek new insurers. They found them — offering astronomically higher rates.

Potential malpractice victims have seen their cases frozen, with the possibility of delayed, if not reduced, payment for their claims.

The state's remaining insurers were clobbered, too. They'll be assessed hundreds of millions of dollars for a bailout fund, costs that filter down to consumers in higher property and casualty insurance rates.

And taxpayers will take a hit as well, picking up the tab for a tax break that helps out insurers hurt by the assessments. The cost will reach $34 million next year.

PHICO's implosion showed that allegedly risky and negligent insurance business decisions also have contributed significantly to the crisis.

PHICO's failure also raises questions about the state's role in regulating the $58 billion insurance industry in Pennsylvania. The industry's interests so permeate state government — where the top regulators are insurance executives, and some legislators on insurance committees work in the industry they regulate — that some believe even-handed regulation is impossible.

With its rapid decline, allegedly falsified financial reports and heavy costs to the public, PHICO calls to mind another recent corporate collapse.

''There are, just like Enron, supposed to be traps in place to prevent things like this,'' said state Rep. T.J. Rooney, D-Lehigh/Northampton, a member of the House Insurance Committee.

''PHICO didn't get in trouble last week. This is a slope they had been headed down for a while.''

As in the Enron debacle, PHICO's failure swamped many in its wake. Unlike the Enron case, however, lawmakers aren't scrambling to root out the cause and pass laws to prevent a recurrence.

Neither committee in the state House or Senate that oversees the insurance industry has scheduled a hearing into the matter.

PHICO's history

The PHICO story begins and ends with medical malpractice insurance crises in Pennsylvania. In the mid-1970s, the cost for new malpractice insurance soared, if it was available at all, because major insurers withdrew after mounting losses.

The Hospital Association of Pennsylvania, the state's main hospital lobbying and resource organization as it was then known, pooled its resources to form the Pennsylvania Hospital Insurance Co. That entity in 1976 would become PHICO.