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Medical Malpractice Insurance "Crisis" Is Caused By
Insurance Companies, Not the Legal System
For
years, insurance companies who wish to justify raising their
premiums have used the "need for tort reform" as a
handy excuse upon which to base their rate hikes. In the area
of medical malpractice insurance, insurance companies have succeeded
in convincing health care providers that the lawyers and the
legal system are causing physician malpractice rates to climb.
However, many studies and statements totally
disprove this bogus claim. For instance, the Wall
Street Journal reported in a front page investigative
story on June 24,2002, "a price war that began in
the early 1990's led insurers to sell malpractice coverage
to obstetrician-gynecologists at rates that proved inadequate
to cover claims....Some of these carriers had rushed into
malpractice coverage because an accounting practice widely
used in the industry made the area seem more profitable in
teh early 1990's than it really was. A decade of short-sighted
price slashing led to industry losses of nearly $3 billion
last year." In this article, the Wall Street Journal
specifically referenced St Paul Co., one of the country's
then largest medical malpractice insurers for mismanaging
their underwriting and reserve policies.
Multiple other credible sources from inside
the insurance industry echo these sentiments. Charles Kolodkin,
of Gallagher Healthcare Insurance Services is quoted as reporting
"The [medical malpractice insurance] market is in
chaos...Throughout the 1990's... insurers were... driven by
a desire to accumulate large amounts of capital with which
to turn into investment income. Regardless of the level of
...tort reform, the fact remains that if insurance policies
are consistently underpriced, the insurer will lose money."
Donald J. Zuk, chief executive of a leading
malpractice insurer in California has been quotes as saying
"I don't like to hear insurance-company executives
say it's the tort[injury-law] system-it's self-inflicted."
In June 2002, Reliance Insurance , a major provider
of medical malpractice insurance to physicians was sued by
the Pennsylvania Insurance Commissioner alleging a breach
of fiduciary duty for allowing more than half a billion dollars
in dividends to be paid to holding companies of which the
Reliance directors were major shareholders.
In Mississippi, which waged a successful battle
in the Mississippi legislature over medical malpractice "tort
reform," Medical Assurance Co. of Mississippi notified
doctors that it would raise its rates by 45% in 2003 "regardless
of the special session outcome" since "tort
reform" does "not provide a magical 'silver bullet'
that will immediately affect medical malpractice insurance
rates."
In August 2002, less than a month after the
passage of a bill enacting severe caps on medical malpractice
awards, two major insurance companies in Nevada proclaimed
that they would not reduce insurance rates this year or next.
In West Virginia, a group of Charleston surgeons
have sued St. Paul for "grossly poor management"
that led St. Paul to drop malpractice coverage there. In Louisiana,
St. Paul has stopped writing medical malpractice premiums
notwithstanding the fact that Louisiana has had a cap on medical
malpractice claims in effect since 1975.
Sherman Joyce, president of the American Tort
Reform Association has been quoted as saying "We
wouldn't tell you or anyone that the reason to pass tort reform
would be to reduce insurance rates." In a March
13, 2002 press release Debra Ballen executive vice president
of the American Insurance Association was quoted "
Insurers never promised that tort reform would achieve specific
premium savings."
According to the Center for Justice & Democracy
in its paper "A Short Guide to Understanding Today's
Medical Malpractice Insurance "Crisis", "during
years of high interest rates insurance companies engaged in
fierce competition for premium dollars to invest for maximum
return. When investment income decreases because of the drop
in interest rates, the industry must respond by sharply increasing
premiums."
All of this information readily illustrates
that the insurance companies, not the tort system, are to
blame for the rising cost of medical malpractice insurance.
Rather than accept responsibility for their poor underwriting
and under reserving of claims, they blame the trial lawyers.
Do not be fooled by the propaganda. The research points to
the insurers as the sole problem.
The Cochran Firm - Dallas, L.L.P.
Turtle Creek Centre, Suite 1400
3811 Turtle Creek Boulevard
Dallas, Texas
75219
phone:
214.651.4260
| fax: 214.651.4261
Edward H. Moore is Board Certified, Personal Injury Trial Law. Unless otherwise noted, not certified by the Texas Board of Legal Specialization.
The statements and information provided on this web site are for the information of the recipient only. This site is not intended to provide legal advice and no attorney-client relationship should be deemed to arise from the receipt this page and its associated pages. |
Copyright © 2003 The Cochran Firm - Dallas, L.L.P.,
All Rights Reserved.
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