Insurers’ med-mal defense costs drop

From the Charleston Gazette December 10, 2003, Wednesday
Copyright 2003 Charleston Newspapers

The amount that medical malpractice insurance companies paid to defend their cases dropped dramatically between 2001 and 2002, according to a report released to legislators Tuesday.

In 2001, defense costs ate up 46 cents of every dollar insurers collected in premiums, compared to 21 cents last year, according to the state Insurance Commission report.

One company, Medical Assurance, showed a more dramatic decline. In 2001, it spent 88 cents of every premium dollar on defense costs, but only 13 cents in 2002.

Frank O’Neil, vice president of Medical Assurance, said he didn’t know all the reasons for the drop, but that tort reforms passed in 2002 probably had little effect.

Instead, he said the company responded to the “difficult legal environment” of West Virginia by deciding to settle more cases.

Medical Assurance has pleased doctors by its take-no-prisoners approach to defending malpractice lawsuits.

“Defending your reputation is our reputation!” is one slogan on its Web site.

Some believe that attitude prevented the company from settling claims, which drove up insurance prices for doctors.

“This suggests the company had a strategy to justify tort reform,” said Delegate Carrie Webster, D-Kanawha. “We should not be rewarding companies for bad management.”

In the past two years, doctors rallied at the Capitol and even went on strike because of skyrocketing malpractice premiums. The Legislature responded by passing tort reforms, such as capping most lawsuit noneconomic damages at $ 250,000.

Medical malpractice continues to be the least-profitable line of insurance in 2002, although it was better off than the year before, the report said.

Sen. Evan Jenkins, D-Cabell, said that Medical Assurance continued to lose money, even after it cut its defense costs. Jenkins is director of the state Medical Association, which until recently had a secret agreement to lobby the Legislature for tort reform in exchange for discounts for members.

The report also found “no clear pattern” of increasing number or size of judgments in the past 10 years.

It said the size of settlements has increased from an average of $ 165,000 in 1993 to $ 208,000 in 2002.

Doctors and insurers said that the increasing number and size of payouts was driving up the cost of medical malpractice insurance.

The analysis omitted some “outliers,” or very-high dollar claims, for statistical reasons. Jenkins said that throws the results into doubt.

The report found that 62 percent of medical malpractice lawsuits were settled over the last decade, while 29 percent were dismissed and 9 percent resulted in judgments.

About 3 percent of malpractice claims actually ended up with a jury awarding money to an alleged victim, the report said.