Crisis in liability insurance coverage
Paul A. Raslavicus, MD
There is a wonderful scene in the 1965 film, "A Thousand Clowns,"
in which Jason Robards strolls the bustling streets of New York City
and approaches random strangers to declare, "I’m sorry!"
character, unemployed writer Murray Burns, explains that all of
us, at some time in our lives, have suffered an insult or injury
that nobody ever acknowledged. And while it might have been years
ago, and the attendant unhappiness has long since been forgotten,
we might still wish that somebody would offer the courtesy of a
Murray has a point. We can blame many different people (starting
with the trial lawyers) for the constant rise in the cost of medical
malpractice insurance premiums. Some of us who work part time are
wondering whether premium costs will drive us prematurely into full
retirement. A number of us are facing malpractice allegations, which
we feel are, and probably will be found to be, groundless. Some
suddenly find themselves without coverage and are desperately searching
for an insurance carrier. Every one of us is wondering how soon
and how much we’ll be affected. In the end, it’s just a miserable
If you are one of those affected, searching for coverage, wondering
how you will afford the new premium, or sitting through depositions,
I hope you know that you have my sympathy and support. I am sorry.
Through my years of practice, I myself have been in all of those
predicaments, and I know how it feels.
When the St. Paul Company dropped its medical malpractice business
last December, a number of you were affected, and some seriously
inconvenienced. According to the AMA Council on Medical Practice,
this action affected 750 hospitals, 42,000 physicians, 73,000 other
health care professionals, and 5,800 other health care facilities
nationwide. That’s a lot of people waiting for an apology.
Nearly 300 of you were covered by St. Paul through the College-sponsored
group insurance program, and while we were successful in placing
many of you with alternative carriers, for others this was a major
problem. Since that time we have searched earnestly for a replacement
liability insurer that would work with us and JLT Services Corp.,
our program administrator, to provide an association-sponsored program
for pathologists. Despite the diligent work of our Insurance Committee,
our staff, and that of JLT, we have not been successful in our efforts.
Our current plight stems from multiple factors:
Given these constraints, what is the best approach to obtain coverage? Regional
variations suggest that pathologists in search of insurance coverage should contact
a local insurance broker with solid credentials. These people can help investigate
available companies and screen out those that may not survive the current crisis.
Sometimes dealing directly with an insurer is the answer. State programs and state
medical society carriers are a solution for many of our members. As far as group
insurance is concerned, while the CAP will not be endorsing a single medical malpractice
carrier, we do hope to identify a consortium of carriers that will work with us
when the market calms.
- Dramatic increase in the severity of all medical liability claims.
While earlier professional liability crises have been prompted by increased
frequency (more lawsuits), this one is all about severity (higher awards).
An analysis of numbers generated by A.M. Best Company suggests that eight
years from now, when all malpractice claims from 1991 through 2000 have been
resolved, the average payout per every claim filed will have risen 47 percent,
to $42,473, according to the director for insurance at the Consumer Federation
of America, quoted in the June 24 edition of the Wall Street Journal. According
to Jury Verdict Research, the median award has risen 43 percent. And for the
first time in history more than half (52 percent) of trial-by-jury awards
exceed $1 million.
- Pathology-specific liability trends. While pathologists are sued
less often than members of the so-called high-risk specialties, the judgments
tend to be above average in severity. Lawsuits related to gynecologic cytopathology,
malignant melanoma, breast cancer, and prostate cancer are a legal growth
industry. Million-dollar verdicts are not uncommon in Pap test cases, and
melanoma is not that far behind. The perceived increased risk exposure for
pathology has prompted some companies to decline to write insurance for pathologists.
- The cyclical nature of the underwriting cycle. Claims of greater
severity call for greater reserves, which translates to higher premiums. The
bull market of the 1990s boosted insurance company reserves without the need
to raise premiums. The increases in severity of claims began to boost rates
in 1998, and when the stock market stalled, the current "hard market" (when
insurance companies raise premiums and limit availability) began. The medical
liability market underwent a correction in January 2001, when capacity was
reduced and risk managers began to report rate hikes ranging from 25 percent
to 100 percent, according to a May 2002 monograph published by the American
Society for Healthcare Risk Management.
Many of us recall earlier hard markets; estimates vary, but these cycles
generally run three to 10 years. We could see earlier relief if federal
tort reform measures succeed and new insurance alternatives come to light.
State-by-state experience could vary widely and will depend to some degree
on local legislative and regulatory climates.
- The impact of terrorism. The events of Sept. 11 caused the largest
recorded loss in the history of insurance. This will continue to affect the
entire property/casualty reinsurance market, where high-end malpractice claims
are covered. Reinsurers are being hit severely now for last year’s losses.
Most will be cutting back on limits provided, and the premium demanded has
already risen substantially.
There is little that we as individuals can do to influence the
macroeconomic changes that drive the markets and economic cycles.
We must grin and bear the downturns and expect improving climates.
But there is much we can do to limit risk. As organizations we must
seek political solutions addressing tort reform (see, for example,
As individual physicians we must strive for excellence in our personal
performance, improve the systems that lead to error, and get rid
of the culture of culpability that now exists. As pathologists,
as the keepers of the gold standard of medicine, we know something
about ourselves and where we go from here. The going is tough, and
it’s time we got going.