Friday, March 07, 2003

Mark emails:
I'm not sure who to believe regarding all the costs involved with medical care these days, and I suspect that lawyers, especially those that are now legislators, are not entirely blameless. However, most of the "cures" sound worse than the problem.

I work as a programmer at an engineering company, and when something goes out of whack, we figure out what changed and put it back the way it was. Perhaps I'm naive, but isn't that how the problem of out-of-control legal costs be fought? (Assuming there is such a thing...)

If something in the tort system has gone out of control, isn't the best response to figure out what rules or procedures or laws or precedents have changed and fix them?
It's not like we removed the caps and jury awards shot up. We never had caps. That's not what changed. Why do we need them now?

Big Insurance would like to have you believe that hat's changed is a so-called increase in big verdicts. Unfortunately, the data demonstrate otherwise. What's changed is what always changes when the carriers start increasing premiums [and it happened in the 70s and the 80s, and they always blame trial lawyers and lawsuits] -- Big Insurance is showing reduced profits because the markets have gone to hell. they are recouping those losses by increasing premiums, and at the same time they are scapegoating trial lawyers and the system as it is now. It's shameless profiteering of the worst kind.

A word about some of Mark's assumptions. He suspects that lawyers are not entirely blameless. I agree that some lawyers are bad lawyers and/or prosecute bad cases, but no profession is all-good -- or all-bad for that matter. But if we're looking for who's to blame for high premiums, who do you blame? I, for one, blame the at-fault defendants whose negligence led to the claim or lawsuit in the first place. I blame the insurance companies, which are increasing premiums to buck up their sagging profits while blaming someone else for their unsound investment practices. I do NOT blame the lawyers who, as a group, are seeking redress from at fault parties, which at fault parties have bought and paid for insurance to protect them against that very risk.

I believe that the theory is sound that lawyers who seek money damages against negligent parties can indirectly do society good, by forcing negligent parties to be responsible for the consequences of their actions. Case in point: you don't hear about Pintos blowing up any more. For that matter, you don't hear about Pintos any more. I'd like to believe that Ford, one way or another, got the message that unsafe or defective products will not be tolerated. If that result is a by-product of what I and others like me do, then that's OK by me.

Wednesday, March 05, 2003

If this is a medical malpractice crisis, why are homeowners and auto insurance rates going up, too? Says one official with the Florida Consumer Action Network:
"I don't want to hear the excuse about medical malpractice or lawsuits," said Newton. "That doesn't explain the rate increases for homeowners or auto insurance. None of those affect auto or homeowners, and frankly there has not been much of a raise in malpractice lawsuits, claims or judgments. The only answer is insurance reform."

While Big Insurance representatives deny the charge and blame the premium rises on pharmaceuticals and malpractice cases,

officials with Sankar Investments, an independent firm of financial advisers based in Chicago, think the insurance industry made poor investment decisions in the 1990s, especially with regards to the energy and telecommunication bonds at Enron and WorldCom.

When accounting scandals sent both corporations plunging into bankruptcy, the ripple effects jolted insurers.

"Because of the lack of choices and diversity these companies had in bond portfolios, when the companies went downhill" so did the fortunes of the insurance companies, said Jay Taparia, a principal at Sanskar Investments and professor of finance at the University of Illinois.

"This is really a systemwide problem," added Taparia. "They screwed up, and now everyone is feeling the effects of that."

The article places a lot of the blame on the well-known but largely ignored fact that Big Insurance, unlike any other industry, is allowed to collude to fix prices. The McCarran-Ferguson Act in 1945, I believe, exempted the insurance industry from antitrust enforcement. There was some effort in 1986, when I was an intern in Sen. Paul Simon's Judiciary Subcommittee office, to revoke this exemption, but the Reagan Administration was basically intent on pretending there was no such thing as antitrust enforcement, so it went nowhere. As far as I know, there has not been any concerted effort since then. Big Insurance is very big.

Here are a couple of good reasons why malpractice premiums have risen sharply recently:
Throughout the 1990s, that lowered premium earnings until they were less than what insurers expected to pay in malpractice awards. But for most of the decade, insurers could make up the difference from their investments on bonds and stocks.

In addition, insurers could lower their risk and sell off excess capacity to overseas "reinsurance" companies, much the way banks sell home mortgages to other institutions.

But the international reinsurance market tightened in 2000, meaning there was no market for the excess policies.

And that's when First Professionals Insurance Corp. of Jacksonville filed for a 9.7 percent premium hike based almost entirely on the increased cost of reinsurance.

After that, the malpractice insurance business only got worse. The terrorism attacks of Sept. 11 hit reinsurance companies hard and investment rates dropped, wiping out the margins that had kept insurers afloat - and premiums low.

"Almost everything that could have go wrong, has ... short of a hurricane," said Tom Gallagher, the state's former insurance commissioner and now its Chief Executive Officer, in charge of the Department of Financial Services.

First Professionals' parent company, The FPIC Group, took back-to-back charges on its books in 2000 and 2001. They amounted to a $29.8 million admission that profits had been undermined by inadequate reserves.

It's hard for the average Joe Citizen to understand the byzantine maneuverings of insurance companies. That's why it's so easy to make a scapegoat out of trial lawyers and their clients. There's plenty of data to indicate that malpractice claims affect insurance rates minimally, if at all.

From Gannett News Service: "Despite industry fuss, malpractice crisis doesn't exist." It says: "A Gannett News Service examination of court records and state and national insurance data found no significant increase in malpractice cases in recent years, few jury awards to speak of, and only modest growth in payments made to settle cases with patients. That's true across Florida and throughout [the] nation, records show. " Consider:
* The number of malpractice claims filed per capita in Florida has decreased significantly, and somewhat steadily, since 1995, state insurance records show. Floridians today file malpractice cases at their lowest rate since 1984.

* Jury awards against doctors are rare, state data shows. In 2002, juries accounted for 27 out of 1,308 claims paid by malpractice insurance companies. That's about 2 percent.

* In Brevard County, patients have filed 764 malpractice lawsuits against doctors in the past six years, local court records show. Of those, seven have gone to trial. And of those, just one resulted in a jury verdict for the injured patient.

* A review a insurance data for the same period revealed another two jury awards in Brevard, from cases filed before 1997. Jury verdicts accounted for 1 percent of the 190 malpractice insurance payouts in Brevard in the past six years.

* Adjusted for inflation, the average jury award in Florida - which supposedly drives insurance companies to agree to high settlement amounts - has dropped every year since 1999 to $326,070.

* Total payouts by malpractice insurers statewide have dropped an average of 2 percent a year every year since 1997.

1 plaintiff's verdict out of 764 lawsuits. What crisis?

A message from the people [at least one people, that is]:
For those who, in letters to the editor and in comments, attack our juries and say they can't determine the value of human loss, please read the following:

To realize the value of 10 years: Ask a newly divorced couple.

To realize the value of four years: Ask a graduate.

To realize the value of one year: Ask a student who has failed a final exam.

To realize the value of nine months: Ask a mother who gave birth to a stillborn.

To realize the value of one week: Ask an editor of a weekly newspaper.

To realize the value of one hour: Ask lovers who are waiting to meet.

To realize the value of one minute: Ask a person who has missed the train, bus or plane.

To realize the value of one second: Ask a person who has survived an accident.

To realize the value of one millisecond: Ask the person who has won a silver medal in the Olympics.

To realize the value of a friend: Lose one.

To realize it's all only worth $250,000: Ask a politician, your physician, or the insurance industry.


USAToday's page 1 lead: "Hype outraces facts in malpractice debate Degree of crisis varies among specialties and from state to state." In a six week study, the newspaper concludes the following:
* Some states have rapidly rising malpractice premiums, especially in obstetrics, neurology and some surgical fields. But, on average, doctors still spend less on malpractice insurance -- 3.2% of their revenue -- than on rent.

* Large jury awards play a limited role in causing premiums to rise, despite allegations that greedy trial lawyers and frivolous claims are to blame. Less than 2% of malpractice claims result in a winning verdict at trial, according to insurance industry estimates.

* Settlement payouts are up, but that has less to do with pain-and-suffering claims than with higher awards for what are called economic damages -- the patient's medical bills, lost wages and other expenses.

* Insurance companies are boosting rates partly to make up for price wars in the 1990s, when competition kept premiums low, and to counter recent declines in their investment incomes. That investment profit had helped offset losses from malpractice damage awards and the artificially low premiums charged to doctors.

* In some states, medical organizations and regulators have failed to weed out bad doctors. That has caused malpractice rates to go up for all.

There's a lot of other good information in the article, including a reference to a 1990 Harvard study suggesting "that only one in eight victims of medical negligence ever files a claim. When they do, it's an uphill fight: Lawyers sometimes have trouble finding a local doctor who will testify to a colleague's mistakes, attorneys say, and jurors often are inclined to give a physician the benefit of the doubt." Also, did you know that

two-thirds of patients who file a claim don't get a dime, the insurance group's statistics show. About 61% of cases are dismissed or dropped; 32% are settled, with average payouts of $300,000, and only 7% go to trial. Patients prevail in only one in five of the cases that are tried -- about 1.3% of all claims.

The tenor of this page 1 lead suggests to me that the wheels are starting to come off the tort reform wagon.

Tuesday, March 04, 2003

Just as a yuck, consider the most underrated member of the Hollywood glitz team: the makeup artists! We can see their value by looking at these mug shots of various star types caught without their eyeliner. Not-to-be-missed: Yasmine Bleeth, Tawny Kitaen, and Kim Delaney. Yeesh!

OK, I admit it; I'm petty enough to get a kick out of these media figures looking [a little too] human.

I haven't blogged anything today, because (1) there's not much out there law related, and (2) my brother is in the throes of gall bladder removal surgery and the aftermath, including an endoscopic procedure called an ECRP, or ERCP. Whatever. I've been over at the hospital half of yesterday and today, and I've got to work in between. By the way, doesn't it gall you [pun intended] that the only treatment for gall stones is surgical removal of the gall bladder? It seems like there ought to be a better, non-surgical way. I say this not only as a brother of a gall bladder patient, but as a former gall bladder patient [had mine removed in 1999].

Monday, March 03, 2003

Juror No. 142: Bill Clinton! I think it would be a gas to try a case to a former President of the United States. However, the judge sounds like she's going to strike him because of the potential media and security circus that would probably follow him.

Actually, on second thought, would I want (1) a lawyer on my jury, potentially second-guessing every move I make; and (2) a former law professor, who might intellectualize my presentation?

Hmmm. I got over 1000 hits on Saturday. I wonder who linked to me?
Ankur Goel writes:
In one of my MBA classes, we're studying the case of Progressive Insurance who have designed their payment process to avoid lawyers as much as possible. It's no secret that a claimant with a lawyer will get more in a settlement or in court
than a claimant without a lawyer. What Progressive does is try to get to the claimant as soon as possible (within a 9 hour target) so that s/he will be happy to have the money in their hands and not worry about getting bad service from their insurance company and trying to find a lawyer. I guess my point is this - who's happier: (a) the claimant who gets served really quickly but gets less money, or (b) the claimant who has to drag out payment from the insurance company, hassle with contentious parties, but gets
2-3 times more money? How much is time worth in this equation?

An interesting question. I used to work for a guy who said that it didn't matter how much you got the client as much as how quickly you got it. Like most other things, it's a case by case question, as well as a question of degree. For instance, if I can settle a case today fo $6,000, but if I wait 6 months I could probably get $8,000, then maybe it's not worth the wait. However, if I wait 6 months with a good chance of getting, say, double the money, then maybe I should wait and play it out a bit longer. Ultimately, it's a question that the client should resolve.

James Lindgren, Professor of Law and Director, Demography of Diversity Project at Northwestern University, writes:
The thing I find odd about some of the blogs that criticize Glenn Reynolds or others whose politics they disagree with is the sneering names and dimunitives they use. I often (actually usually) read people I disagree with, but it becomes tiresome to read people who repeatedly refer to George W. Bush as "Shrub," or Reynolds as "Insty" or "Instacracker," or Tom Daschel as "Dasshole," or Hillary Clinton as "Hitlery," or even Donald Rumsfeld as "Rummy." You can use a cute name affectionately ("the Blogfather") and get away with it, but to use cute names REGULARLY in a mean way leaves anyone who doesn't despise the person being mocked thinking that the writer is unfair, since it becomes ad hominem.

I am not arguing that people shouldn't mock those they disagree with--that is often the most effective method of making a valuable substantive point--but making up or using unfriendly names for the person leaves me cold, at least by the 5th or 6th time I read the same "joke" name.

Somebody thinks Glenn is a [insta] Cracker? If by that perjorative, they mean a redneck no-nothing white trash type, then take it from someone who knows, Glenn Reynolds is as far from that type of person as I, a nice Jewish boy, am from Hitler. Glenn is without a doubt one of the most educated, erudite, rounded and world-wise people I know. Besides, he's paying me to say that....