Vested Interest - News and Notes - April 2004 Issue

New Asbestos Study Reveals Shocking Mortality Rates

The Environmental Working Group Action Fund has launched the first-ever analysis of asbestos mortality records and the impending public health crisis. According to EWG Action Fund’s research on government data, almost 10,000 Americans die every year from asbestos-related illnesses, and ten times that many could die in the next decade. The study reports that 30 million pounds of asbestos are used in the U.S. each year, lists dozens of widely-used consumer products that still contain it and says more than one million workers are exposed every year.The study concludes that the current Senate proposals are inadequate because asbestos-related diseases take up to 50 years to show up, so even if everyone who is sick today was helped, the fund would deny justice to hundreds of thousands who have yet to become ill. To view the study go to http://www.ewg.org. (ATLA Law News Digest – March 4, 2004)

House Tightens Belt on Fatty Food Suits

The U.S. House of Representatives approved a bill to prohibit lawsuits seeking to hold restaurants liable for a customer’s weight gain. The "Personal Responsibility in Food Consumption Act" now goes to the Senate, where its prospects are uncertain. Critics of the House bill, such as Consumers Union, contend that the threat of litigation has encouraged the food industry to think healthier. McDonald’s, for example, recently announced that it was dropping "super-size" fries and drinks from its menu. The bill applies only to obesity-related claims. Lawsuits can go forward if someone gets sick from eating a tainted hamburger. Nor does the measure preclude suits for false advertising and mislabeling. David S. Casey Jr., ATLA president, called it a "ridiculous solution to a nonexistent problem." Noting that obesity-related lawsuits have been dismissed, he said, "It is not the role of Congress to do what the courts themselves are already doing." (ATLA Law News Digest – March 11, 2004)

EPA Probes Microwave Popcorn Chemicals

The EPA is studying the chemicals released into the air when a bag of microwave popcorn is popped or opened. Exposure to vapors from butter flavoring in microwave popcorn has been linked to a rare lung disease contracted by factory workers in Chicago, Missouri, Iowa and Nebraska. The National Institute for Occupational Safety and Health has said it suspects the chemical diacetyl caused the illnesses. Health officials insist people who microwave popcorn and eat it at home are not in danger. (Chicago Sun-Times – March 12, 2004)

Reverse Grievance

For years, Thomas Donohue, president and chief executive of the powerful U.S. Chamber of Commerce, has waged an all-out battle to limit lawsuits against businesses, arguing that the litigious nature of American society is harmful to the United States’ economy. So it came as something of a surprise when Donohue threatened to sue to block a proposed Securities and Exchange Commission rule that would allow dissatisfied shareholders to nominate an alternative slate of directors in certain circumstances. (ATLA Law News Digest – March 18, 2003)

Nevada Med-Mal Insurer Seeks Rate Increase

Medical Protective Co., which provides malpractice insurance for 200 doctors located mainly in southern Nevada, has filed for a 24 percent rate increase. MedPro wants the increase to take effect July 1. It would be atop a 63 percent increase the company got in mid-2002, not long after MedPro started offering policies in the state. (Insurance Journal – March 26, 2004) [Nevada legislators enacted legislation in July 2002 that capped noneconomic damages at $350,000. Supporters said the cap would drive malpractice rates down for doctors and keep doctors from fleeing the state.]

Patients’ Right to Sue HMOs Before High Court:
White House Wants Texas Healthcare Law Voided

The Supreme Court took up this year’s major healthcare case in a dispute that pits the compassionate conservatism of Texas Gov. George W. Bush versus the pro-business stand of the Bush administration. At issue is whether patients who are denied needed medical care can sue insurance companies and health maintenance organizations. In 1997, then Gov. Bush allowed the legislation, which he had previously vetoed, to become law. Without his signature, the Texas Health Care Liability Act was the first state law that gave patients the right to sue HMOs for denying them "appropriate and medically necessary" treatment. But, Bush administration lawyers joined the insurance industry in urging the high court to void the right-to-sue provision in the Texas law and to block state lawsuits against HMOs for denying benefits. These state claims "are subject to complete preemption" by the federal law and must be dismissed, said lawyers for the U.S. solicitor general. (ATLA Law News Digest – March 25, 2004)

Lifetime to Pay Penalty for Failing to Report Hazard with Portable Basketball Hoops

The U.S. Consumer Product Safety Commission (CPSC) announced that Lifetime Products Inc., of Clearfield, Utah, has agreed to pay an $800,000 civil penalty to settle allegations that it violated federal reporting requirements associated with its portable basketball hoops. CPSC staff alleged that between March 1999 and July 2001, Lifetime Products learned of 23 reports of injuries that occurred when basketball players came in contact with a protruding bolt. Although the company made changes to improve the safety of the hoops in May 2000, Lifetime never reported a possible product defect or injuries to consumers until the CPSC opened an investigation in July 2001. In March 2002, Lifetime Products agreed to a recall of the basketball hoops because a sharp, protruding bolt on the players’ side of the pole could cause serious leg or body lacerations. According to federal law, manufacturers, distributors, and retailers are required to report to CPSC immediately (within 24 hours) after obtaining information which reasonably supports the conclusion that a product contains a defect which could create a substantial risk of injury to the public, presents an unreasonable risk of serious injury or death, or violates a federal safety standard. In agreeing to settle the matter, Lifetime Products Inc. denies that the portable basketball hoops were defective and that it violated the reporting requirements of the Consumer Product Safety Act. (CPSC Press Release – March 29, 2004)

Auto Insurance Rate Increases Dropping

The cost of auto insurance is expected to rise by 3.5 percent in 2004, the smallest increase in four years, according to the Insurance Information Institute. The declining number of auto accidents due to better drivers and safer cars and crackdowns on fraud and abuse are behind the trend, though rising costs for medical care, vehicle repair costs and skyrocketing jury awards remains a problem, according to the I.I.I. analysis. A chief economist for I.I.I. said "A reduction in auto accidents, combined with improved insurer financial performance are contributing to a significant moderation in the cost of auto insurance in 2004." (Insurance Journal –March 30, 2004)

Doctor Education Program to Lower Malpractice Claims

A Chicago-based health-care information company secured more than $4 million in private funding to market a patient education program doctors can use to fight malpractice claims. Rightfield Solutions said sales are growing for its Emmi Expectation Management and Medical Information, which informs patients about surgical procedures through a series of Internet-based education programs. Rightfield expects physicians and malpractice carriers to want to use it as a risk-management tool, especially in the area of documentation of the patient’s experience. The program records each click a patient makes, "to create a permanent record of everything the patient saw, heard and responded to while viewing the program," Rightfield executives said. (Chicago Tribune – April 1, 2004)

Placing a Dollar Value on Life

In an article published on April 1, 2004, in the Atlanta Journal-Constitution, reporter Jay Bookman noted "Up in Washington, for example, many of the same people who are pushing a $250,000 cap on noneconomic damages awarded to malpractice victims are also pushing legislation that would fine radio DJs up to $500,000 for saying a banned word on the air. In other words, you would have to pay twice as much for saying naughty things as you would if you ruin someone’s life with a sloppy scalpel."

9/11 Fund Saving City $500 Million

The September 11th Victim Compensation Fund will likely save the city of New York more than $500 million by averting lawsuits, the head of the fund said. The fund accepts claims from victims and their survivors in exchange for giving up the right to sue. "I predict that when the program terminates this June, we probably will have saved the City of New York half-a-billion dollars or more," Kenneth Feinberg, the fund’s administrator, told the Daily News. Feinberg made his first remarks about the fiscal impact of the controversial program in response to criticism of the rules, proving a tough hurdle for many people. Of the 7,372 claims, nearly a third have been denied, closed or withdrawn without a payment. But Feinberg noted that only about 30 of the rejected claims involved a death. (ATLA Law News Digest – April 1, 2004)

Insurance Market Turning

Here are a few pieces of evidence indicating that the medical malpractice cycle has turned and that malpractice carriers will soon be cutting prices and new carriers will be entering the business:

1. The 2003 reinsurance profitability results are out, and the combined ratio has dropped by 20 points—a phenomenal amount—to about 100. That means that all—not just part, as is typically the case—of the investment income insurers earn is profit.
2. Preliminary profitability figures for 2003 are out for a group of 16 large property/casualty insurers (including AIG, which is a major malpractice insurer), and these figures show profitability up by almost 90%, and a combined ratio of under 100—which means they’re making money even before investment income, another phenomenal result.
3. ProAssurance, a major malpractice insurer, tripled its income in 2003 and has bought the renewal rights to OHIC Insurance Company’s medical malpractice business in Illinois. This both demonstrates that that business is profitable—since if it weren’t profitable ProAssurance wouldn’t be buying it—and gets a huge carrier with lots of capital and the potential to force ISMIE to compete on price into the Illinois malpractice market.

Texas Med-Mal Insurer Plans Rate Hike

GE Medical Protective, a large medical malpractice insurer in Texas, plans to bypass Texas regulators in order to raise insurance rates for doctors 10 percent. The carrier insures about 7,000 of the state’s 38,000 physicians and plans to switch from a rate-regulated line of insurance to one that does not require approval. The switch came after state regulators balked at its request to raise rates 19 percent. (Insurance Journal – April 13, 2004)

Public Citizen Ranks Performance of State Medical Boards in 2003

Using information from the Federation of State Medical Boards, Public Citizen has ranked the performance of the 50 state medical boards and the District of Columbia based on the rate of serious disciplinary actions taken against doctors in 2003. Illinois ranks among the worst states, at number 38, with 2.54 actions per 1,000 physicians. Rhode Island ranked the lowest, 1.46 actions per 1,000 physicians and Kentucky ranked the best at 11.58 actions per 1,000 physicians. Pennsylvania and Illinois have been in the bottom 15 states for eight of the last 3-year average periods. Public Citizen stated: "It is extremely likely that patients are being injured or killed more often in states with poor doctor disciplinary records than in those states with consistently high performance." Public Citizen also lists favorable conditions that enable a Board to better discipline physicians, including adequate funding, staffing, and proactive investigations. (Public Citizen – April 14, 2004)

Insurance Industry Posts Nearly 1000% Profit Increase

New data from Insurance Services Office Inc. and the Property Casualty Insurers Association of America documents nearly a 1000% increase in profits for property and casualty insurance companies between 2002 and 2003. Insurers posted $29.88 billion in profits in 2003 as compared to the $3.05 billion profits reported in 2002. In Texas, the insurance industry refuses to pass the benefits along to homeowners, doctors and other policyholders. Texans are still waiting for lower insurance premiums, as well as for the promised decreases in the cost of products and services that were guaranteed as a result of eliminating key constitutional rights. (Texas Watch Press Release – April 15, 2004)