Max Kennerly has done it again. Read this post on the Litigation and Trial bog which looks behind the allegation that the American people support medical malpractice reform. Before you do, read the following:
DO YOU AGREE OR DISAGREE WITH THIS STATEMENT: As part of any health care reform plan, Congress needs to change the medical malpractice system so that cases are resolved quicker, and more reliably, on behalf of those who are in the right.
Did you say "Yes?" I did.
I have released three prior posts on the financial condition of State Volunteer Mutual Insurance Company – click here to read them: Part 1, Part 2, Part 3.
The bottom line is that conservative financial management at SVMIC has permitted the company to accumulate a quarter of a billion dollars in net worth, even as the number of policyholders has declined 4% of the last year.
So how is that impacting rates?
This is the third post about State Volunteer Mutual Insurance Company’s 2008 financial results. Click on the links to see Part 1 and Part 2.
New malpractice claims asserted against SVMIC insureds dropped 2.5% in 2008. The company reports that 83% of all cases were resolved in favor of it’s policyholders on a company-wide basis.
(One of the things I frequently address at seminars for young lawyers is the evaluation of potential medical negligence cases. I tell them that the best way to make money on medical malpractice cases is to refuse to represent the next ten people who call asking the lawyer to represent them in a medical malpractice case. Obviously, that is ridiculous, but the fact remains that SVMIC "wins" almost 9 out of 10 cases. A fair number of those cases are filed by lawyers who do not have the experience to recognize a bad case from a good case..)
Our last post discussed State Volunteer Mutual Insurance Company’s $251,321,000 policyholder surplus. This post will discuss other aspects of the company’s finances.
As of December 31, 2008, SVMIC had total assets of $1,324,500,000 assets. (That’s $1.3 Billion). The vast majority of those assets are in government (federal, state and local) and corporate bonds, although the company does have some stock holdings ($53M). The conservative allocation of monies among these investment vehicles resulted in only a very small loss in investments in 2008. The loss on the value of these investments sold was only $1.7M, although the the investments that continued to be held had a decline in value of about $23M.
The total revenues of the company in 2008 were down about $12,000,000 to $246,000,000. It is important to note that the number of policyholders decreased from 16,155 to 15,501, which certainly had an impact on revenue.
SVMIC continues to enjoy wonderful profitability, even as the number of physicians it insures declines.
SVMIC – State Volunteer Mutual Insurance Company – is a physician-owned insurance company that was created over 30 years ago. It has grown from a company with paid-in capital of $7,500,000 to a entity with a policyholder surplus (think: net worth) of $251,321,321.
Let me explain what that means. Policyholder surplus is determined by subtracting reserves for claims payments and claims expenses from assets. Each time a claim is made a reserve is set. The size of the reserve is based on the severity of the claim, the likelihood of payment and the anticipated defense costs. The amount reserved on a claim changes over time, but the idea is that the sum total of reserves should pay all existing claims and all future defense costs. There is also a category of reserves known as IBNR – Incurred But Not Reported. This is for claims that the company "knows" to be out there but have not yet been reported to the company.
Torts Prof lets us know that the elected representatives in Arizona believe that ER doctors should not be held responsible for their negligence unless the patient can prove his case by clear and convincing evidence.
Maxwell Kennerly’s Litigation and Trial blog is a must-read for lawyers who practice civil litigation of almost any type. His posts are timely, thoughtful, and relevant.
Take this post, "’How Other Countries Judge [Medical] Malpractice,’" By A Law Professor Who Doesn’t Know Medical Malpractice Law", in which Maxwell appropriately blasts an editorial by a torts professor who needs a reality check.
The author of the editorial, Richard A. Epstein, has been a law professor since he finished law school at Yale in 1968. He is almost certainly a very bright man. But, based on his understanding of the law, he would have accepted each of the ten or fifteen potential medical malpractice cases I will turn down this week.. And by the Summer of 2011 he would have been broke. Flat broke. Or he would have rejected every case in which he thought the defendant should not be held responsible for her conduct because the defendant would say it was an honest mistake. This mindset would cause him to reject all cases, because that defense is asserted in every case.
"Malpractice Lawsuits Are ‘Red Herring’ in Obama Health Plan" is the title of this article from Bloomberg.
Am excerpt:
While Obama vowed to address physicians’ malpractice worries in a speech yesterday, the annual jury awards and legal settlements involving doctors amounts to “a drop in the bucket” in a country that spends $2.3 trillion annually on health care, said Amitabh Chandra, an economist at Harvard University, in a telephone interview. Chandra estimated the cost at $12 per person in the U.S., or about $3.6 billion, in a 2005 study. Insurer WellPoint Inc. said in a report last month that liability wasn’t driving up health premiums.
Walter Olson at Point of Law shares a study from the Pacific Research Institute on the effect of various tort reforms. The study, was authored by Nicole V. Crain, W. Mark Crain, Lawrence J. McQuillan, and Hovannes Abramyan, and is titled "Tort Law Tally: How State Tort reforms affect Tort Losses and Tort Insurance Premiums".
Here is an excerpt from the executive summary:
Of the 25 tort reforms that we examine, the statistical analysis identifies 18 reforms to state civil-justice systems that significantly reduced tort losses and tort insurance premiums from 1996 through 2006. For some categories of tort cases, specific reforms cut payouts by more than 50 percent. The cumulative effect of reforms across all tort categories is a 47-percent reduction in losses and a 16-percent reduction in insurance premiums for consumers. Some tort reforms are highly effective at reducing costs in certain tort categories, but are ineffective in other tort categories. It is important that reformers pick the right tool for each problem. If we order the tort reforms according to each reform’s ability to reduce aggregate tort losses, the top eight reforms are: attorney-retention sunshine (12 percent), Daubert/Frye (10 percent), frivolous lawsuits (7 percent), jury service (6 percent), appeal-bond caps (4 percent), negligence standard (3 percent), non-economic-damage caps (2 percent), and medical-malpractice damage caps (1 percent).
The requirement of pre-notice and a certificate of good faith (T.C.A. Sec. 29-26-121 and 122) has had a significant effect on filings of medical malpractice cases.
From October 1, 2008 (when the new law came into effect) until April 30, 2009 there were only 111 medical malpractice cases filed in the entire state. During the same seven-month period a year earlier there were 314 filings.
Here is the data for the some of the larger counties in the state:
Day on Torts