BestWeek: Med-Mal Market Hammered by Litigation Costs

OLDWICK, N.J. April 01 (BestWire) - Litigation costs and a tightening market are combining to hammer both medical-liability insurers and the medical professionals they cover, according to the article, "Claims and Pricing Severity Maul Medical-Malpractice Marketplace," in the April 1 issue of BestWeek.

A study by Jury Verdict Research found that the median jury award for medical malpractice grew to $1 million in 2000, from $700,000 in 1999 and $500,000 in 1995. For cases settled before the conclusion of a trial, the median award fell to $500,000 in 2000 from $592,000 in 1999.

"As our statistics show, medical-malpractice plaintiffs do not fare well with juries in the won-lost category," said David Boxold, editor of the study. "However, juries have compensated plaintiffs more generously than in previous years."

"The message is that med-mal liability cannot be priced profitably on a national basis," wrote Alice Schroeder an equity analyst with Morgan Stanley, in a research note that said Jury Verdict Research's numbers "provide some context" for recent posted losses. The most important conclusion from the data is that the trend suggests it is not going to get easier, she wrote.

However, litigation is only one side of the equation for insurers--with underwriting suffering a hangover from the mid-1990s soft market--according to E. Dow Walker Jr., chairman of insurance broker Willis Group's health-care practice, who was more optimistic. "You've got to properly underwrite your business, set the proper limits and charge the right price," he said. Walker said high-profile market exits, such as that of St. Paul, and financial failures, such as Pennsylvania's Phico Insurance Co., aren't very surprising in retrospect.

But the price, driven by high awards, is reaching crisis levels for doctors and hospitals in many states, the doctors say, and Walker said plaintiffs' attorneys have been "quite successful" at turning the legal environment to their favor in medical-liability cases. "They have taken control of the environment," he said. "Many would say the medical community is in desperate need of organizing and getting meaningful tort reform."