Op/Ed: Key to providing lower rates lies with the insurance industry

By Joanne Doroshow and Norm Steenstra

In West Virginia's history, there has probably never been anything like the current threat to the state's civil justice system posed by the present medical liability scam. Insurers and the state's medical association are advancing a brutal legislative agenda to limit their liability for causing injuries, which would make it nearly impossible for many seriously injured patients to hold their offenders financially responsible in court.

Like the national tort reform movement that exploded on the scene in the mid-1980's, West Virginia's current movement has been precipitated by a severe liability insurance crisis. Medical malpractice insurers are dramatically increasing premiums, reducing coverage and arbitrarily canceling policies - and blaming injured patients who sue. They say that enactment of tort law restrictions will cause insurance rates to fall, lobbying lawmakers and bombarding the media with this phony message.

In the 1980s, great pressure was brought to bear on state legislatures around the country to enact tort law restrictions, and many states succumbed, including West Virginia. Legislators were relying on promises by business lobbyists that tort reform would reduce insurance prices. However, these questions have always remained: Does enactment of tort reform lead to lower insurance rates and, specifically, have insurance rates dropped in states that have enacted tort reforms?

Finally, we have an answer to these questions. The answer is unequivocally "no," according to a major study published in 1999 by the Center for Justice & Democracy. Premium Deceit - the Failure of ‘Tort Reform' to Cut Insurance Prices, was the first-ever look at 14 years of property/casualty insurance (including medical malpractice) price trends nationwide. It finds without question that the enactment of laws that restrict injured consumer's rights and access to the courts has not succeeded in lowering insurance costs or rates.

The report's actuarial analysis was done by co-author J. Robert Hunter, an actuary who is director of Insurance for the Consumer Federation of America (CFA), former commissioner of insurance for the state of Texas, and former federal insurance administrator under Presidents Carter and Ford. Hunter called Premium Deceit, "the most extensive review of insurance rate activity in the wake of the ‘liability insurance crisis' of the mid-1980s ever undertaken. It was designed to test the impact on liability insurance rates of ‘tort reforms' enacted in reaction to the liability insurance crisis of the mid-1980s, and in the years since."

Hunter said, "Despite years of claims by insurance companies that rates would go down following enactment of tort reform, we found that tort law limits enacted since the mid-1980s have not lowered insurance rates in the ensuing years. States with little or no tort law restrictions have experienced approximately the same changes in insurance rates as those states that have enacted severe restrictions on victims' rights." In other words, laws that restrict the rights of injured consumers to go to court do not produce lower insurance costs or rates, and insurance companies that claim they do are severely misleading this country's lawmakers.

West Virginia experienced some of this same treatment during the 2001 regular legislative session. Fortunately, an investigative reporter from the Charleston Gazette successfully debunked the inflated statistics then used by insurance lobbyists to push "tort reform" as a solution to insurance industry losses.

Premium Deceit's findings come as no surprise to those familiar with numerous studies done of the "liability insurance crisis" of the mid-1980s, which ultimately found the cause of the "crisis" not to be the legal system but rather mismanaged underwriting by the insurance industry. And don't just take our word for it. Spokespeople for the American Tort Reform Association (ATRA) have agreed with Premium Deceit's conclusions. Both ATRA's president and general counsel said in published statements from the study's release that lawmakers who enact restrictions on consumers' legal rights should not expect insurance rates to drop. These remarks were a surprisingly honest admission by some of the nation's most vocal proponents of tort restrictions.

Consumer groups such as WV Citizen Action have said for years that the largely unregulated and anti-competitive insurance industry is responsible for the premium gouging, which businesses, professionals, and individuals periodically experience. The solutions lie within the insurance industry - not the civil justice system.

Doroshow is executive director of the Center for Justice & Democracy, a national consumer organization based in New York. Steenstra is executive director of WV Citizen Action Group.