Vested Interest - April 2005 Issue

The President’s Thoughts

An excellent trial attorney and ITLA member described a recent conversation that he had following a discovery deposition of a surgeon in northern Illinois. The surgeon complained that his insurance rates have increased sharply as a result of patients and trial lawyers filing more medical malpractice cases and getting higher settlements and verdicts. The doctor, though never named in any litigation, stated that he was not fond of trial attorneys and patients because of the increases. The surgeon reasoned that the only solution was to restrict the legal rights of patients through serious tort reform.

Unfortunately, the trial lawyer did not know the facts underlying rising malpractice insurance rates. He was not able to inform the surgeon that medical malpractice filings have steadily decreased in Illinois during the last ten years. Nor did he know that overall payouts by medical malpractice carriers have remained flat. In addition, the trial lawyer was unaware that the largest medical malpractice carrier in the United States has stated that tort reform will not give doctors any rate relief.

The above conversation begs the question - - What should all trial lawyers know about medical malpractice insurance in Illinois and across the United States?

First, in 2004 ISMIE Mutual Insurance Company, the largest malpractice carrier in the State of Illinois wrote $420 million in premiums and paid $150 million in claims resulting in an underwriting gain (premiums minus payouts) of $270 million. After the disclosure, ISMIE announced it will not raise rates in 2005. However, doctors should be demanding rate reduction due to the excessive underwriting gains.

Second, ISMIE Mutual has a huge conflict of interest with doctors. ISMIE Mutual has refused to share its loss data with a number of medical malpractice carriers who wish to write malpractice coverage in the state. According to representatives of the Illinois Division of Insurance, incoming insurers require loss data to price their products properly when entering the market. Thus, ISMIE Mutual is hampering competition in the marketplace and preventing doctors from competitive insurance pricing by not disclosing its loss data.

Third, recent testimony in the Illinois House of Representative by David Hyman, M.D.,J.D., a professor of law and medicine at the University of Illinois, revealed a new academic study on the relationship between the civil justice system and the rise in medical malpractice insurance rates. It covers years of medical malpractice claims data in Texas dating back to 1988. Professor Hyman was joined in his research by two professors from the University of Texas and one from Columbia University. They reviewed a comprehensive database in Texas, which the AMA rates as a medical malpractice "crisis" state similar to Illinois. The study discovered that insurance awards, jury awards and defense costs have changed little between 1988 and 2002. The only figure that rose sharply during that period was the cost of insurance. Professor Hyman concluded that there is no evidence of a medical malpractice crisis. Instead, the insurance crisis is due to forces outside of the tort system. Professor Hyman cautioned the Illinois Legislature to properly diagnose the cause of the problem (rising malpractice rates) before prescribing a cure.

Fourth, a similar study in Florida (another crisis state) confirms the same disconnect between the tort system and the spiking of insurance rates. Meanwhile, Missouri experienced a 40 percent drop in claims and a 50 percent drop in payouts during the same time period as the Texas study, yet it was also dubbed a crisis state. Unfortunately, insurance companies hire spokespersons to wrongfully blame the civil justice system.

Could it be that insurers and some politicians falsely blame the courts to hide their huge failures in healthcare policies-- e.g. higher medical insurance rates, less coverage, fewer people insured, etc.?

ITLA has worked diligently in the legislature and elsewhere to rebut the anecdotes used to urge tort reform. However, the legislators in Springfield are considering reform bills due to the misperception of a tort created crisis causing spikes in medical malpractice rates. It is not enough for ITLA to rebut the repeated distortions. We ask for your help to disseminate the facts. Every trial lawyer should:

• Know the issues and know the facts regarding malpractice insurance. ITLA through this publication and its website publishes the facts as they become known. Consult the website for a longer list of facts, our position paper and other articles.
• Publish the facts in firm websites, email lists and newsletters.
• Be prepared to answer the questions that will continue to arise.
• Take advantage of every opportunity in business, social or casual settings to relate the facts.
• Share your knowledge with your legislators.

Kevin Conway, President
Illinois Trial Lawyers Association