NAII Says Capping Med Mal Damages Key to Stabilizing Market

August 6, 2002

A bill that passed the Nevada Legislature during a special legislative session last week should curb excessive litigation, which will help restrain increases in the cost of medical malpractice insurance and improve the availability of medical care, according to the National Association of Independent Insurers (NAII).

“Significant tort reform must be part of any medical malpractice reform effort, and NAII is encouraged that the Nevada Legislature took action to cap liability in medical malpractice lawsuits,” Sam Sorich, NAII vice president and western regional manager, commented. “By addressing the source of an insurance company’s souring loss costs-including runaway jury awards and frivolous lawsuits-Nevada lawmakers are taking the appropriate, measured steps that NAII hopes will be enough to stabilize the state’s medical malpractice insurance marketplace.”

Gov. Kenny Guinn is expected to sign the measure. If signed, the new law would take effect in October. The bill caps non-economic damages-so-called “pain and suffering” awards against doctors -at $350,000. However, the bill allows a number of exceptions to the cap, including cases involving death, brain damage, and “gross malpractice.” It also encourages more medical errors reporting by offering additional immunity protection from such revelations, among other provisions.

According to an U.S. Department of Health and Human Services study on malpractice litigation released last week, malpractice insurance premiums are more than three times lower in states that impose caps on non-economic damages, such as California.

“Available insurance relies on predictability in claim frequency and severity, and affordable insurance requires controls on the claim size, especially where non-economic losses are concerned,” Sorich added. “Many insurance companies cannot continue to write medical malpractice coverage when they contribute 33 percent beyond every premium dollar they take in. In turn, doctors retire or flee to states where they can afford to practice because they have a limited ability to pass on increased costs and can’t afford to practice.”

NAII research shows that between 1995-2000, liability costs skyrocketed, with the median verdict doubling to $1 million. During the same period, medical liability insurers’ combined ratios (a combination of both claim costs and expenses) increased from 99.7 to 133 percent, meaning that insurers now pay out an average of $1.33 for every dollar collected in malpractice premiums. In Nevada, the average is higher: between 1998 and 2000, Nevada medical malpractice insurers paid out more than $1.50 in claims and expenses per each premium dollar.

Gov. Guinn called the three-day special legislative session that ended early last Thursday after many doctors limited their practices and Nevada’s top trauma center in Las Vegas closed for 10 days in July. The center closed after a majority of the surgeons quit, claiming that they could no longer afford special malpractice insurance. The trauma center was able to reopen only because some of the surgeons agreed to become county government employees for a brief time, capping their liability at $50,000 for non-economic damages if they were sued. In addition to surgeons, access to obstetricians and gynecologists has been threatened.

NAII also supports provisions in the recent Congressional medical malpractice legislation that President Bush endorsed last week.

H.R. 4600 would limit the number of years to three that a plaintiff has to file a lawsuit; allocate damages in proportion to a party’s degree of culpability; impose a $250,000 cap on non-economic damages; and limit punitive damages to $250,000 or twice the amount of economic damages, whichever is greater. Also, the bill allows medical providers to pay judgments in installments rather than in lump sums. It also provides that defendants pay any judgment in proportion to their fault, not on the basis of how deep their pockets may be.

“The end result of Congressional efforts, along with Nevada’s proposed legislation and similar efforts in other states, should be reduced insurance premiums for doctors and more affordable and available heath care for consumers,” Sorich said.

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