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                                                                   EXHIBIT 10.39



REINSURED:                    SCPIE HOLDINGS, INC.,
                              AND/OR S.C.P.I.E. INDEMNITY COMPANY,
                              AND/OR AMERICAN HEALTHCARE INDEMNITY COMPANY,
                              AND/OR AMERICAN HEALTHCARE SPECIALTY COMPANY,
                              AND/OR S.C.P.I.E. INSURANCE SERVICES, INC.
                              AND/OR S.C.P.I.E. MANAGEMENT SERVICES, INC.
                              BEVERLY HILLS, CALIFORNIA

TYPE:                         FIRST EXCESS OF LOSS REINSURANCE

BUSINESS
COVERED:                      Physicians and Surgeons Comprehensive Professional
                              and Business Liability Policies, including Clinics
                              and Clinical Laboratories, Professional and
                              Business Liability Policies for Hospitals and
                              Errors and Omissions Liability Policies for
                              Managed Care Organizations.

TERM:                         January 1, 1998 to December 31, 1998 as respects
                              claims made during the calendar year 1998.

                              The term "claims made" as used herein shall mean
                              (A) In respect of Claims Made Policies, claims
                              first notified to the Company during the term of
                              this Agreement on any inforce policy or reporting
                              endorsement arising out of incidents subsequent to
                              the retroactive date of said policy as the result
                              of the rendering of or failure to render a
                              professional service or the reporting of losses
                              which arise from the insured premises and
                              operations incidental to the practice of a
                              physician, hospital or managed care organization
                              and/or (B) In respect of Occurrence Policies,
                              claims or losses first notified to the Company
                              during the term of this Agreement.

                              Retroactive date January 1, 1976, except for Extra
                              Contractual Obligations which is January 1, 1979.

                              In the event of cancellation, and at the option of
                              the Reinsured, Reinsurers agree to run-off
                              policies in force until natural expiration not to
                              exceed 12 months from the expiration date hereon,
                              subject to a Premium equal to 50% of the Actual
                              Earned Reinsurance Premium.

TERRITORY:                    As per the Company's original policies, contracts,
                              or binders.

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EXCLUSIONS:                1.     Insolvency Funds.
                           2.     Nuclear Incident - Liability - Reinsurance.

LIMIT AND
RETENTION:                    

                           A.)      $1,000,000 each and every loss in excess of
                                    $1,000,000 each and every loss as respects
                                    Physicians and Surgeons Comprehensive
                                    Professional and Business Liability
                                    Policies, including Clinics and Clinical
                                    Laboratories and/or Errors and Omissions
                                    Liability Policies for Managed Care
                                    Organizations arising from any one incident.

                           B.)      $500,000 each and every loss in excess of
                                    $1,500,000 each and every loss as respects
                                    Physicians and Surgeons Comprehensive
                                    Professional and Business Liability
                                    Policies, including Clinics and Clinical
                                    Laboratories and/or Errors and Omissions
                                    Liability Policies for Managed Care
                                    Organizations and Professional and Business
                                    Liability Policies for Hospitals arising
                                    from any one incident.

                                     It is understood and agreed that Section
                                    (A) would respond to individual Physician
                                    losses under Physicians and Surgeons
                                    Comprehensive Professional and Business
                                    Liability Policies and/or Multiple
                                    Physicians losses under Physicians and
                                    Surgeons Comprehensive Professional and
                                    Business Liability Policies and/or losses
                                    under Errors and Omissions Liability
                                    Policies for Managed Care Organizations
                                    and/or any combination thereof. It is
                                    further agreed that Section (B) would
                                    respond in the same fashion as Section (A)
                                    including losses under Professional and
                                    Business Liability Policies for Hospitals
                                    arising from any one incident.


                              Notwithstanding the foregoing it is a condition
                              hereto that an Annual Aggregate Deductible equal
                              to .80% of G.N.E.P.I. shall first be deducted
                              before any liability attaches to Reinsurers
                              hereon.

WARRANTY:

                             1. As respects Professional and Business
                                Liability Policies for Hospitals written
                                on or after January 1, 1996 and prior to
                                October 1, 1997, Policy Limits greater
                                than $500,000 reinsured elsewhere on an
                                Excess of Loss basis or so deemed.

                             2. As respects Professional and Business Liability
                                Policies for Hospitals written prior to January
                                1, 1996, Policy Limits greater than $5,000,000
                                reinsured elsewhere on an Excess of Loss basis
                                or so deemed.

                             3. As respects Professional and Business Liability
                                Policies for Hospitals written on or after
                                October 1, 1997, Policy Limits greater than
                                $1,000,000 reinsured elsewhere on an Excess of
                                Loss basis or so deemed.




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MAXIMUM
AGGREGATE:            Reinsurers maximum liability during the term of this
                      Contract shall be $8,500,000 or 182.5% of Reinsurance
                      Premiums Earned during the Contract term, whichever is
                      the greater.

PREMIUM:              2.88% of G.N.E.P.I.

                      Deposit - $3,100,000, payable $775,000 quarterly.

                      Minimum - $2,465,000

ATTACHMENT OF
LIABILITY:            (A) For purposes of determining the attachment of
                          the Reinsurer's liability hereunder as respects
                          any one loss, all losses (including Discovery
                          Period Losses) involving one or more Original
                          Insureds, arising from the same medical incident,
                          and in which First Notice of Claim or Circumstance
                          is notified to the Company during the term of this
                          Agreement shall be covered hereunder. Where first
                          notice falls in Agreement Years prior to January
                          1, 1992 the "Interlocking Clause" to apply hereon
                          for Physicians and Surgeons Comprehensive
                          Professional Liability Policies only.

                      (B) The date of a loss hereunder shall be the
                          earliest date, within the term of this
                          Contract, that the Company has received First
                          Notice of Claim or Circumstance.

PROFIT
COMMISSION:             The Company shall receive a Profit Commission
                        equal to 90% of the net profit accruing to the
                        Reinsurers under this Contract, computed as
                        follows:

                        1. Reinsurance Premiums Earned;

                        2. Less: Losses and Loss Adjustment Expenses
                           Incurred;

                        3. Less: Management Expenses of 25% of Reinsurance
                           Premiums Earned.

                        Unlimited deficit carryforward to next Contract
                        period.

                        The term under consideration in respect of "Profit
                        Commission" as above shall be the period January
                        1, 1998 through December 31, 1998. It is further
                        agreed that the first calculation of Profit
                        Commission shall be computed as of December 31,
                        1998 and annually thereafter, and that the first
                        and final payment of any Profit Commission shall
                        be made by the Reinsurers to the Company as of
                        December 31, 2002. The Company agrees that payment
                        of any Profit Commission shall be subject to
                        complete commutation as respects all losses known
                        and unknown within the Profit Commission period.
                        Payment of any Profit Commission by the Reinsurers
                        shall constitute full and final release from all
                        further loss development.



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<TABLE>

<S>                           <C>
ACCOUNTING: 

                              Premiums - Payments within 60 days of respective due date.
                              Losses - Payments within 60 days of receipt of proof of loss.
                              Outstanding losses reported individually as they occur.

GENERAL
CONDITIONS:                   Loss Adjustment Expenses to be Pro-Rated. Excess
                              of Original Policy Limits Clause. 80% Extra
                              Contractual Obligations Clause. Ultimate Net Loss
                              Clause including Declatory Judgement Expenses
                              incurred in connection with coverage questions and
                              legal actions related to a specific claim.
                              Net Retained Lines Clause.
                              Notice of Loss Clause.
                              Loss Funding Clause - Including IBNR (See Attached).
                              Special Funding Clause.
                              Confidentiality Clause.
                              Commutation Clause.
                              Federal Excise Tax Clause.
                              Errors and Omissions Clause.
                              Insolvency Clause.
                              Service of Suit Clause.
                              Arbitration Clause.
                              Access to Records Clause.
                              Guy Carpenter & Company, Inc. Intermediary Clause.

REINSURERS
HEREON:                       Domestic:
                              BCS Insurance Company                          2.50%
                              Gulf Insurance Company                         5.00%
                              Odyssey Reinsurance Corporation                5.00%
                                                                            ------
                                           Domestic Total                   12.50%

                              Australia:
                              Through Guy Carpenter & Company, Pty. Ltd:
                                  GIO Insurance Ltd.
                                  trading as:
                                  GIO Reinsurance                            7.75%
                                                                            ------
                                           Australia Total                   7.75%

                              Germany:
                              Hannover Ruckversicherungs AG                 22.50%
                                                                            ------
                                           Germany Total                    22.50%


</TABLE>


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<TABLE>

<S>                           <C>                                                   <C>
REINSURERS
HEREON:                       United Kingdom:
(Cont'd)                      Through Guy Carpenter & Company, Ltd. (UK)
                                London, England
                              Underwriters at Lloyd's
                               SVH   1007                                            17.000%
                               DPM    435                                             6.000%
                               SJC   1003   28.00%
                                     2003   72.00%                                    6.750%
                               JHV    376   45.80%
                                     2376   54.20%                                    3.250%
                               FRW    190                                             1.500%
                               ROS    227   73.00%
                                     2227   27.00%                                    1.500%
                               BFC    780                                             3.000%
                               PJG    79                                              5.000%

                              CNA International Reinsurance Co., Ltd.                 8.500%
                              Unionamerica Insurance Company, Ltd.                    4.750%
                                                                                    -------
                                           United Kingdom Total                      57.250%

                                               Domestic Total                        12.500%
                                               Foreign Total                         87.500%
                                                                                    -------
                                               Grand Total                          100.000%  
                                                                                    =======
</TABLE>



This Cover Note is to confirm the terms and conditions which have been
negotiated between Guy Carpenter & Company, Inc. and the participating
Reinsurers on your behalf. We request that you review this Cover Note with
regard to the specific placement details and subscribing Reinsurers listed
herein. In the event that any of these details do not meet with your approval or
security of the subscribing Reinsurers does not meet with your requirements,
please notify this office immediately. If all is found to be in order please
sign and return the enclosed duplicate copy of this Cover Note for completion of
our files.


-------------------------------------
Signature

-------------------------------------
Date


                              Guy Carpenter & Company, Inc.

                              By 
                                 ----------------------------
                                 Managing Director



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