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                                                                   EXHIBIT 10.38




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:                        Second Excess of Loss Reinsurance.

BUSINESS
COVERED:                     The following types of policy forms as written by
                             the Company:

                             1.  Professional and Business Liability Insurance
                                 Policy - Modified Claims Made Coverage
                                 Hospitals and Medical Centers (Primary and
                                 Excess).

                             2.  Professional and Business Liability Insurance
                                 Policy - Claims Made Coverage Hospitals and
                                 Medical Centers (Primary and Excess).

                             3.  Excess Automobile Liability and Excess
                                 Employers Liability associated with the policy
                                 forms outlined above.

TERM:                        October 1, 1998 to September 30, 1999, both days
                             inclusive, as respects all risks attaching during
                             the twelve (12) month period.

                             It is agreed that Modified Claims Made Policies
                             include an Automatic Pre-Paid Extended Reporting
                             Period for a period not exceeding eighty four (84)
                             months. It is understood and agreed that, to
                             preserve the claims made nature of this
                             reinsurance, subject to availability of markets to
                             renew this agreement sufficiently at its expiry,
                             Reinsurers hereon will be relieved of all liability
                             for any claims not made in the First Annual
                             Reporting Period of each policy. In consideration
                             Reinsurers hereon will release to renewing markets
                             Premium equivalent to 65% of the total Net Ceded
                             Premium (Gross Ceded Premium less applicable ceding
                             commission) derived from such Modified Claims Made
                             Policies attaching during the term of this
                             Agreement.

                             In the event of non-renewal, and at the option of
                             the Company, Reinsurers agree to Run-Off Policies
                             In Force until natural expiration; in respect of
                             Claims Made Policies, such period not to exceed
                             Twelve (12) months plus odd time not exceeding
                             Twenty Four (24) months in all from the expiration
                             date hereon; in respect of Modified Claims Made
                             Policies, such period not to exceed Ninety-Six (96)
                             months from the expiration date hereon.


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TERM:
(Cont'd.)                    In the event that an Original Insured's policy is
                             canceled or non-renewed, a further Extended
                             Reporting Period Endorsement for an unlimited
                             period may be purchased by an Original Insured
                             provided the purchase is made within the Ninety
                             (90) day period prior to the expiration of the
                             Eighty Four (84) months Extended Reporting Period
                             Endorsement and subject to the payment of an
                             Additional Premium of 25% of the last Annual
                             Modified Claims Made Premium applicable prior to
                             the date of cancellation or non-renewal of the
                             Original Policy. Any such Additional Premium shall
                             be payable on the date that the original Eighty
                             Four (84) months Extended Reporting Period
                             Endorsement expires and shall be deemed fully
                             earned on that day. Any claim reported under any
                             further unlimited Extended Reporting Period
                             Endorsement shall be deemed to have been made on
                             the date of expiration of the original Eighty Four
                             (84) months Extended Reporting Period Endorsement.

                             Further, at the option of the Company, non-renewal
                             may be effected on a Cut-Off basis as of the
                             expiration date hereon and Reinsurers shall return
                             to the Company their respective share of the
                             Unearned Premium Reserve at that time.

INFORMATION:                 The factors to be used in calculating the Earned
                             Premium as respects Modified Claims Made risks
                             attaching during the term of this and subsequent
                             agreements shall be as follows:

                             Reporting Period             Earned Premium Factors
                             ---------------------------------------------------
                             1st 12 months                       35%
                             2nd 12 months                       15%
                             3rd 12 months                       15%
                             4th 12 months                       10%
                             5th 12 months                       10%
                             6th 12 months                        5%
                             7th 12 months                        5%
                             8th 12 months                        5%

TERRITORY:                   As per the Company's Original Policies, Contracts
                             or Binders.

EXCLUSIONS:                  

                              1. Insolvency Funds.

                              2. Nuclear Incident - Liability - Reinsurance.

                              3. Assumed Reinsurance other than for Licensing or
                                 Financial Rating purposes.

                              4. Other Exclusions to follow the Company's
                                 Original Policies as interpreted by Regulatory 
                                 or Judicial Authorities.

                              5. Financial Guarantee Business.




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LIMIT AND
RETENTION:                   100% of $40,000,000 each and every Claim Made for
                             Indemnity only during the term of this Contract in
                             excess of $10,000,000 each and every Claim Made
                             for Indemnity only during the term of this
                             Contract.

                             The term "Claim Made" shall be as defined in the
                             Company's Original Policies.

                             The Company's retention shall be the difference
                             between USD 1,000,000 each and every claim made for
                             indemnity only and the underlying Self Insured
                             Retention (S.I.R.) where applicable but always
                             subject to a minimum retention of USD 500,000 each
                             and every claim made for indemnity only.

                             As respects Medical Staff Members, including any
                             other Associated Individuals or Entities, added by
                             Endorsement to the Policies subject to this
                             Contract under a Unification Plan, the following
                             shall apply:

                              A. When a Hospital or any of their Insured Medical
                                 Staff Members, including any other Associated
                                 Individuals or Entities, are determined by the
                                 Company to be jointly involved in any claim or
                                 suit, the Total Limits of Liability issued to 
                                 the Hospital shall be shared by the Hospital 
                                 and by all of its Insured Medical Staff 
                                 Members, including any other Associated
                                 Individuals or Entities.

                             B.  When a Hospital is determined by the Company
                                 not to be involved in any claim or suit, the
                                 Total Limits of Liability available to all
                                 Insured Medical Staff Members, including any
                                 other Associated individuals or Entities, shall
                                 be limited to $5,000,000 each and every loss.

                             The term "Unification Plan" is understood to mean
                             where coverage is provided on a shared limit basis
                             to a Hospital or any of their Insured Medical Staff
                             Members, including any other Associated Individuals
                             or entities for the purpose of obtaining a common
                             defense.

                             In determining if a Hospital is jointly involved in
                             any claim or suit, the Hospital shall be deemed to
                             be jointly involved if the medical incident which
                             gave rise to the claim or suit occurring on the
                             Hospital premises, including any Insured Affiliated
                             locations, or if members of the Insured Medical
                             Staff were acting on behalf of the Hospital. The
                             mere naming of the Hospital as a Defendant in a
                             claim or suit shall not, in itself, determine if
                             the Hospital was involved in the claim or suit.


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MAXIMUM
AGGREGATE LIMIT:        The maximum amount of losses recoverable hereunder
                        during the term of this agreement shall not exceed
                        $100,000,000.

CO-PARTICIPATION:       The Company agrees to retain 10% net.

PREMIUM:                The Company shall pay to the Reinsurers 100% of
                        Original Gross Excess Limit Premium and Extended
                        Reporting Period Endorsement premium calculated by
                        the Company for policy limits excess of $10,000,000
                        up to $50,000,000 as respects policies covered
                        hereunder.

                        The term "Original Gross Excess Limit Premium"
                        shall mean premiums calculated by the Company for
                        policy limits excess of $10,000,000 up to
                        $50,000,000 after application of scheduled rating
                        credits/debits only.

CEDING COMMISSION:      Original acquisition cost plus 15% not to exceed
                        25% in all.

ACCOUNTING:             Premium:

                        Within 45 days after close of each Fiscal Month the
                        Company shall pay to Reinsurers an amount equal to
                        the Ceded Excess Limit Premium less Ceding
                        Commission.

                        Losses:

                        Payments immediately upon receipt of satisfactory
                        proof of loss. Outstanding Losses reported
                        individually as they occur.

GENERAL
CONDITIONS:             Loss Adjustment Expenses are excluded hereunder.
                        Excess of Original Policy Limits Clause (90%/10%
                        basis).

                        Extra Contractual Obligations Clause (90%/10% basis).
                        Ultimate Net Loss Clause.
                        Notice of Loss Clause.
                        Loss and Unearned  Premium  Reserve  Funding - Including
                        IBNR  as  respects  Unauthorized  Reinsurers  only - See
                        attached IBNR Schedule.
                        Follow the Fortunes Clause
                        Confidentiality Clause
                        Commutation Clause - Mutual Agreement Only.
                        Federal Excise Tax Clause.
                        Errors and Omissions Clause.
                        Insolvency Clause.
                        Service of Suit Clause.
                        Arbitration Clause.
                        Offset Clause - this Agreement only.
                        Access to Records Clause.
                        Guy Carpenter & Company, Inc. Intermediary Clause.


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REINSURERS
HEREON:                   Domestic:
                          Odyssey Reinsurance Co.                       3.000%
                          Gulf Insurance Company                        3.000%
                          Zurich Reinsurance Company                   10.000%
                                                                       ------
                                               Domestic Total          16.000%

                          Australia:
                          Through Guy Carpenter & Company, Pty. Ltd.
                               GIO Reinsurance Co.                      7.500%
                                                                       ------
                                               Australia Total          7.500%

                          Germany:
                          Hannover Ruckversicherungs AG                 8.000%
                                                                       ------
                                               Germany Total            8.000%

                          United Kingdom:
                          Through Guy Carpenter & Company, Ltd. (UK)
                                 London, England
                               Underwriters at Lloyd's
                               SJB   1212                                2.2380%
                                     1213                                1.8311%
                               RCV   1007                                4.0000%
                                     1007                                4.0000%
                               SJC   1003                                2.2400%
                                     2003                                5.7600%
                               BFC   780                                 0.7825%
                               MFN   1027                                0.2907%
                                     2027                                0.6483%
                               MHE   529                                 1.2520%
                               RAE   219                                 2.5041%
                               MEL   1223                                2.8171%
                               ROS   227                                 0.4570%
                               CMP   2227                                0.1690%
                               RJH   122                                 1.4085%
                               BAR   990                                 0.9390%
                               HGJ   205                                 2.5041%
                                     205                                 1.2520%
                               DPM   435                                 5.6250%
                               SAM   727                                 0.3913%
                               JHV   376                                 1.4336%
                                     2376                                1.6965%
                               FRW   190                                 1.5650%
                               PJG   79                                  1.5650%
                               CNA International Reinsurance Co., Ltd.   8.0000%
                               Odyssey Reinsurance Ltd.                  3.1302%
                                                                         ------
                                               United Kingdom Total     58.5000%

                                               Domestic Total           16.000%
                                               Foreign Total            74.000%
                                                                        ------
                                               Grand Total              90.000%
                                                                        ======




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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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