In October of 2002 I wrote a piece on some of the misconceptions people have regarding so called "tort reform", the attempt by insurance companies to increase their already staggering profits by convincing us, using lies and histeria, to surrender even more of our rights. That article was in response to an opinion piece suggesting that malpractice insurance costs were "out-of-control" causing many medical professionals to leave the practice. Although I agree that malpractice insurance costs are far too high, especially in rural areas, I strongly disagree with the assertion that surrendering our only protection against malpractice, the right to bring legal action, will in any way reduce malpractice insurance costs. I have revised the article I wrote a year ago for publication here.

Fears about rising insurance costs and the necessesity of so-called "tort reform" revolve typically around three major misconceptions which I will attempt to address at some length:

Misconception #1: "Tort Reform" will reduce insurance costs.

An article in the West-Virginia based Herald-Dispatch (Insurance Companies Largely to Blame for Malpractice Woes - August 18, 2002) states "An in-depth, nationwide study of the effect of tort reform on malpractice premiums from the mid 1980's until 1999 concludes that states which have adopted tort reform (measures that limit or restrict a malpractice patient from obtaining compensation) do not experience lower insurance costs. In fact, California, which has some of the most severe and onerous limits on the rights of malpractice patients to be compensated, saw its malpractice premiums grow more quickly than the national average." (Center for Justice and Democracy, "Premium Deceit -- The Failure of "Tort Reform" to Cut Insurance Prices.") This same article goes on to quote insurance industry executives who admit the fallacy of this thinking. "In response to these empirical studies, Sherman Joyce, president of the American Tort Reform Association, said, "We wouldn't tell you or anyone that the reason to pass tort reform would be to reduce insurance rates." ATRA's general counsel, Victor Schwartz, said "many tort reform advocates do not contend that restricting litigation will lower insurance rates, and I've never said that in 30 years." Even the American Insurance Association, a large industry trade group, said "insurers never promised that tort reform would achieve specific premium savings." I pose the question then, if giving up our rights to sue will not reduce premiums, what can it possibly accomplish but lining the pockets of insurance executives. Clearly, this is not the appropriate solution.

Misconception #2: High jury verdicts are to blame for high malpractice insurance costs.

The USA Today article "Soaring Malpractice Premiums Stun Many Doctors" (December 4, 2001) states that "For much of the 1990s, most doctors enjoyed fairly stable premiums, which, driven by competition, sometimes even dipped. Insurers were sitting on fat reserves, thanks to the booming stock market, so they could afford to undercut each other. Then the stock market dropped just as the cost of the average malpractice claim began rising." Clearly, according to this article, the blame for rising insurance costs lies firmly with the insurance companies. As some smaller insurance companies leave the medical malpractice arena so they can focus their attention on more profitable areas (they are not losing money, but they can make more elsewhere) other carriers can raise prices due to the relaxed competition. Molly Ivins reports in her syndicated column on June 25, 2002 that "...the reason malpractice rates are skyrocketing is on account of the insurance industry's own pricing errors and lost investment income. In a useful summary of the situation, The Wall Street Journal reported this week: 'While malpractice litigation has a big effect on premiums, insurers' pricing and accounting practices have played an equally important role. Following a cycle that recurs in many parts of the business, a price war that began in the early 1990s led insurers to sell malpractice coverage to ob-gyns 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 the early '90s than it really was.' Again, the insurance industries own practices have caused the increase in insurance rates and limiting jury verdicts will not have any effect on reducing premiums.

Misconception #3: Jury verdicts are rising at a tremendous rate.

While it is difficult to know for certain what payouts are actually made to litigants, it is important to recognize that only a small percentage of jury awards are actually paid by insurance companies. In many cases, jury awards are reduced or eliminated completely by the judges. In fact, Lawyers Weekly USA reported on January 7, 2002 that every one of the top-10 jury verdicts for 2001 was either "lowered by judges or settled for undisclosed amounts". The Wall Street Journal, long known as a friend to the insurance industry, reported that the data typically cited to show the increase in dollar amounts from jury verdicts (from Jury Verdict Research) was found to have significant "gaps". Since it is Jury Verdict Research's alarming account about the increase in the size of malpractice verdicts that has been driving some of the hysterical media coverage on this issue, it is important to take all of this coverage with a very large grain of salt.



Since most attempts at supporting "tort reform" make no effort to prove a correlation between rising malpractice verdicts and rising malpractice insurance costs, and since it is clear that even the insurance industry does not claim that reducing our right to sue will reduce malpractice insurance premiums, it would be madness for us to allow it to occur! The legal system is our only defense against the few who cause injury and insurance carriers have, in many cases, made medical professionals willing participants in their propaganda campaign to get us to give up our rights, thereby increasing their profits even further.

We have already seen how bad things can get when we limit our ability to sue. Take HMOs for example. The fact that people cannot sue their HMO means that these corporations can decide, with impunity, who lives and who dies, and can base that decision entirely on profit. The solution here is not to subject ourselves to the whims of those few who put profit over people, but instead to create a situation where it is reasonable and profitable for all Americans to have access to medical care while protecting the caregivers and allowing the insurance carriers their fair profit. We can do so through better federal oversight of insurance carriers to equalize the profit margins on the various types of insurance. This will encouraging more carriers to offer more insurance, including malpractice coverage, in order to maximize profits. In the meantime, we can also encourage companies to carry malpractice insurance through licensing requirement. That is, in order to participate in the more highly profitable areas of underwriting, you must also provide a minimum amount of coverage in less profitable areas. This will bring the market back into balance and help to moderate premiums. Any efforts to further limit our rights is simply madness.