As legislators discovered during the recent controversy over
skyrocketing medical malpractice insurance rates, attempts to examine
the causes of insurance rate increases, and to find potential remedies,
can open a pandora’s box of conflicting reports and allegations.
So far, the insurance industry and proponents of adopting provisions to
limit lawsuits have been the most vocal, and during the 2003 session,
the Legislature adopted sweeping legislation to limit damages in
medical malpractice lawsuits.
But during a recent interim legislative meeting I attended, we received
a great deal of information from those who question whether taking
further steps to quell lawsuits would actually stem what some people
say are overly high automobile and homeowner insurance rates.
According to information provided to the committee, the national Center
for Justice & Democracy conducted a study of insurance rate changes
in every state from 1985 through 1988, then compared the data between
states that had enacted tort reform and those that had not. The Center
found that tort law limits enacted in response to the insurance crisis
of the mid-1980s have not lowered insurance rates, and that states
which adopted little or no tort law restrictions have experienced the
same level of insurance rates as those which enacted severe
restrictions.
“The ‘liability insurance crisis’ of the mid-1980s was ultimately found
to be caused not by legal system excesses but by the economic cycle of
the insurance industry,” the Center reported.
In West Virginia, the Legislature responded to the outcry over rising
medical malpractice insurance rates – and the reported potential loss
of our physicians – by adopting significant changes to our tort system.
Our new law imposes a general $250,000 cap on non-economic damages. In
cases involving three sets of circumstances – wrongful death; permanent
physical deformity, loss or use of a limb or loss of bodily organ
system; or permanent physical or mental impairment preventing patients
from independent care – the cap is set at $500,000. Trauma care damages
are also capped at $500,000. The Legislature abolished “joint liability
,” a state provision that made any defendant who was at least 25
percent negligent liable for more than their share of damages.
Now, the Center for Justice and Democracy is pointing to a study
conducted by the U.S. General Accounting Office at the request of
Republican congressmen. The study found that in West Virginia, although
health care access problems “reportedly developed because two hospital
obstetrics units closed due to malpractice pressures, officials at both
of these hospitals told (federal officials) that a variety of factors,
including low service volume and physician departures unrelated to
malpractice, contributed to the decisions to close these units.”
The General Accounting Office also noted that the number of physicians
in West Virginia per capita increased slightly between 1997 and 2002.
The General Accounting Office also concluded that “state laws and
regulations unrelated to tort reforms, such as premium rate
regulations, vary widely and can influence premium rates” and that
premium prices are greatly affected by income from investments and
market conditions.
Insurance industry representatives now want the Legislature to enact
greater restrictions on lawsuits. They would like to see the
elimination of West Virginia’s “third-party bad faith” provision.
Through this law, a person suing an insurance policyholder can also sue
the insurance company, alleging that company failed to deal with them
fairly. Insurance companies question why a non-policy holder can sue an
insurer and point to that provision as being a major factor causing
West Virginia to have overly high automobile and homeowner insurance
rates.
Insurance representatives also said that some of our state’s consumer
protection-related laws are stifling the industry. One state law
requires companies to base payouts on the face value of a policy,
rather than the replacement value of the insurance property. The other
limits when insurers can refuse to renew home or automobile policies.
It is a complex question, one that may take a great deal of time to
sift through. While opponents of further tort reform maintain that West
Virginia’s insurance rates are below the national average, lawmakers
have certainly heard many complaints from residents facing rising costs
or having difficulty obtaining policies. As a member of the Joint
Insurance Availability and Medical Malpractice Insurance Committee, I
will continue to study the issue and report on the committee’s progress.
I welcome and appreciate your input on these issues, or any other
legislative matter. Please call me at (304)340-3106 or write to
Delegate Virginia Mahan, 215-E, Capitol Complex, Charleston, WV 25305.