Vested Interest - News and Notes - April 2003 Issue

State Farm Posts a Loss for 2002

State Farm Companies posted a $2.8 billion net loss for 2002, the second year the nation’s largest insurance company has been in the red. The news was better than the $5 billion loss the previous year, however, and the loss would have been $1.6 billion but for write-downs for investments that declined in value. The company’s revenue from premiums rose from $40 billion in 2001 to $44.4 billion last year as State Farm increased rates by an average of about 10 percent for auto policies and 19 percent for homeowner coverage. Nevertheless, claim costs rose faster, and underwriting losses were $6 billion. State Farm said the reason was higher costs per claim rather than a higher number of claims. State Farm said the Sept. 11, 2001, attacks cost it $20.3 million in auto, fire and life insurance claims. Its largest previous payout was $3.7 billion for Hurricane Andrew. (Liability & Insurance Week – March 3, 2003)

Insurers, Hospitals Try Apologies for Errors

Malpractice insurers’ mantra is often "deny and defend" when a doctor or hospital is accused of a medical injury. But at least one insurer and several hospitals are trying a different tack. The Copic Cos., a Denver malpractice insurer, encourages its doctors to report incidents of medical injuries or complications. Within 72 hours, the insurer responds to the patient, offering to cover lost wages or medical costs resulting from the injuries. A number of hospitals, mainly in the Department of Veterans Affairs system, have "honesty policies" to encourage staff to admit to patients when errors are made. Instead of lawsuits, they are finding a drop in the number of claims and smaller payouts. (ATLA Law News Digest – March 6, 2003)

Crackdown on Workplace Safety

The Bush administration announced policy changes that will give the federal OSHA more power to crack down on businesses that persistently flout workplace safety rules. Under the new policies, OSHA officials will be directed to conduct more follow-up inspections of companies that commit safety violations of "the highest severity." Businesses that don’t correct violations will, in some cases, find themselves facing contempt of court orders from federal judges to force action. Some safety advocates said the policy changes are welcome, but they don’t address deeper structural weaknesses at OSHA, such as: the fines it imposes on transgressors have been raised only once in its 32-year history. (Chicago Tribune – March 11, 2003)

Email Illuminates Doctors’ Protest

A month after New Jersey doctors staged a work stoppage to protest rising malpractice insurance rates, a series of email messages between doctors and protest organizers offers an intriguing glimpse into the strategies and sentiments that drove the work stoppage. The email messages, distributed by The Foundation for Taxpayer & Consumer Rights, reveal the intense frustration and anger felt by physicians in New Jersey. Lawyers are referred to as "prostitutes’ and "blood suckers," and doctors who refuse to participate are called "scabs" and "parasites." One doctor proposed to cease writing prescriptions for inexpensive generic medications and write prescriptions only for limited quantities so patients are forced to make multiple return visits. (ATLA Law News Digest – March 13, 2003)

House Passes Bill to Limit Med Mal Awards

By a vote of 229-196, the U.S. House passed H.R.5, the outrageous insurance industry backed bill that would preempt state law and inflict a wide range of constraints, including a $250,000 one-size-fits all cap on noneconomic damages, in healthcare-related liability actions. The federally imposed limits in the bill would apply in medical malpractice cases, product liability cases regarding drugs and medical devices, and cases alleging negligence by nursing homes and HMOs. The legislation has moved on to the Senate. (ATLA)

House Passes Bill to Reduce Medical Errors

By a vote of 418-6, the U.S. House passed a bill that would create a voluntary, confidential system to collect data about medical errors from health care professionals. The bill, H.R.663, would authorize the Department of Heath and Human Services to grant $25 million annually to health care providers for upgrading technology and other actions to reduce the possibility of medical errors. Passage came as HHS Secretary Tommy Thompson announced the FDA would create a bar coding system to reduce medical mistakes. (Liability & Insurance Week – March 17, 2003)

Health Insurance Coverage Failing

The Wall Street Journal reported March 12 that health insurance increasingly fails to cover key parts of treatments – for example, paying for an organ transplant but not for the often costly search for a donor or for one mastectomy but not two. Key treatments no longer included on some policies: ventricular assist devices, which help the heart pump while a patient awaits a heart transplant; and coverage for drugs that are necessary to treat chronic medical conditions such as hepatitis C, hemophilia and Crohn’s disease. (Liability & Insurance Week – March 17, 2003)