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                                                                   EXHIBIT 10.31

GUY CARPENTER                                                         COVER NOTE

                                                     No.              01-98-0020

Memorandum of Reinsurance
effected through Guy Carpenter & Company, Inc.
180 Maiden Lane, New York.  NY 10038-4993


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          Physicians and Surgeons Comprehensive Professional and
COVERED:          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.

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


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LIMIT AND                  A.     $1,000,000 each and every loss in excess of
RETENTION:                        $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 of after October 1,
                           1997, Policy Limits greater than $1,000,000 reinsured
                           elsewhere on an Excess of Loss basis or so deemed.

MAXIMUM                    Reinsurers maximum liability during the term of this
AGGREGATE:                 Contract shall be $8,500,000 or 182.3% of Reinsurance
                           Premiums Earned during the Contract term, whichever
                           is the greater.


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

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

                   Minimum - $2,465,000

ATTACHMENT OF     (A)      For purposes of determining the attachment of the
LIABILITY:                 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            The Company shall receive a Profit Commission equal to 90% of
COMMISSION:       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.

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.



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GENERAL           Loss Adjustment Expenses to be Pro-Rated.
CONDITIONS:       Excess of Original Policy Limits Clause.
                  80% Extra Contractual Obligations Clause
                  Ultimate Net Loss Clause including Declaratory Judgment
                  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:
<TABLE>
<S>               <C>     <C>                <C>                                  <C>
                          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>        <C>                                      <C>
REINSURERS        United Kingdom:
HEREON:           Through Guy Carpenter & Company, Ltd. (UK)
(CONT'D)              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.

/s/ Donald J. Zuk
---------------------------
Signature


March 13, 1998
---------------------------
Date

                                         Guy Carpenter & Company, Inc.



                                         By  /s/ Managing Director
                                             ---------------------------------
                                             Managing Director



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