You asked what affect a nationwide cap on non-economic damages in medical malpractice cases would have on medical malpractice insurance premiums in Connecticut.

It is unclear what effect a nationwide cap on non-economic damages would have in Connecticut for the following reasons:

1. The data are inconclusive as to the efficacy of tort reform as a remedy for periodic crises in the cost of malpractice insurance. Previous rounds of tort reform have not prevented such crises and tort reform does not address the issue of patient safety.

In the 1970s and again in the 1980s, many states, including Connecticut passed one or more tort reform measures (damage caps, periodic payment of damages, abolition of the collateral source rule, limiting attorney contingency fees, or abolition of joint and several liability) in response to the medical malpractice insurance crises. (Behind this effort was the American Tort Reform Association (ATRA) which was formed in 1986 by a coalition of businesses, corporations, municipalities, associations, and professional firms, with the mission to bring greater “fairness and predictability to the civil justice system and put an end to law suit abuse” through legislative reform. The position of ATRA and other reform proponents is that any effective medical liability reform measure will include (1) a $ 250,000 limit on non-economic damages; (2) a sliding scale for attorney contingency fees; (3) periodic payment of future costs; and (4) abolition of the collateral source rule. ) (See http: //www. atra. org) These measures were passed in the absence of reliable data about the effectiveness of the proposed reforms to alleviate the crisis. Recent studies that take a retrospective look at the malpractice reforms of the 1970s and 1980s are questioning how well these reforms worked. One study of reforms in Wyoming found that the state did not experience a medical malpractice litigation crisis during the 1970s and 1980s, which could have caused an insurance premium crisis. The same study revealed that Wyoming’s tort reforms have been only minimally effective in reducing either claims frequency or claims severity. (Brain C. Shuck and Susan Martin, “Wyoming Tort Reform and the Medical Malpractice Insurance Crisis: A Second Opinion,” 28 Land and Water Law Review 593, 625 (1993))

2. The data are inconclusive as to the cause of rising medical malpractice insurance premiums.

The statistics on both the extent of litigation and amount of awards are conflicting and difficult to come by. Jury Verdict Research, a firm frequently cited by insurers, claims that the median jury award in medical malpractice cases rose from $ 500,000 in 1995 to $ 1 million in 2000. A U. S. Bureau of Justice Statistics survey cites a figure of $ 285,576 as the median jury award for 1996, about half the amount cited by Jury Verdict Research for the same year.

The Consumer Federation of America, in a study that includes all medical malpractice claims, even those with damage awards of zero, shows that the average payout has risen slightly over the past 10 years, to an average of $ 42, 607 in 2000.

The same statistical discrepancies occur when trying to determine the frequency of claims. While some reports indicate an alarming increase, others maintain that claims frequency has remained steady or even declined slightly. What is not disputed is that the percentage of patients injured by medical negligence who actually bring suit is very small. Estimates range from one-in-eight to one-in-ten. Of those who do sue, only one in three receive any compensation (Harvard Medical Practice Study, Patients, Doctors and Lawyers: Medical Injury, Malpractice Litigation, and Patient Compensation in New York (1990)).

3. Under pricing malpractice premiums throughout the 1990s and the downturn in the stock market contributed to the rise in malpractice premium, and tort reform will not curtail this situation.

Even assuming a growth in frequency of claims and size of awards, the insurance industry may share culpability in the current crisis. A similar pattern can be seen during each of the three malpractice crises that have occurred since 1970. Insurance underwriting practices are cyclical, with periodic adjusting of rates after the fact to reflect actual losses during a given period. The return on invested premiums is factored in as part of a company’s profits and losses. During times of high interest rates or a strong stock market, insurance companies keep their premiums low in order to remain competitive, increase their market share, and acquire revenue to invest. This is possible because their income is augmented from the high rate of return on investments.

After premium increases in the 1970s and 1980s, the medical malpractice market remained stable through the economic boom years of the 1990s. Medical malpractice insurance was one of the most profitable lines in the industry, and new companies entered the market. A price war for new customers prompted many insurers to sell coverage at rates too low to cover the cost of subsequent claims. When the stock market plummeted, many of these companies suffered large losses and either went out of business, drastically raised premiums, or stopped offering coverage. The departure of St. Paul Companies, the nation’s single largest carrier of malpractice insurance, was a serious blow that created an availability crisis that affected many practitioners around the country. (While the insurance industry blames the departure of companies from the marketplace on the malpractice litigation explosion, at least part of the attrition can be attributed to mismanagement, artificially low premiums, and huge losses suffered by many companies after 9/11. See, e. g. , Cy Ryan, “State Doctors’ Insurance Woes Blamed on Eron Fall,” Las Vegas Sun (February 1, 2002 and Deena Beasley, “Obstetricians Call for Liability Insurance Reform,” Reuters (May 6, 2002)).

4. Premiums have continued to rise in states with caps on non-economic damages.

Twenty-six states, including California limit non-economic damages in medical malpractice cases. (Alaska, California, Colorado, Florida, Hawaii, Idaho, Indiana, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, South Dakota, Texas, Virginia, West Virginia and Wisconsin) California, one of the first to do so, places a $ 250,000 cap on non-economic damages (Cal. Civil Code § 3333. 2). Non-economic damages are defined as compensation for pain, suffering, inconvenience, physical impairment, disfigurement, and other non-pecuniary injury.

According to a 2002 U. S. Department of Health and Human services Report, Confronting the New Health Care Crisis, medical malpractice premiums in California have risen much more slowly than in the rest of the country. California rates rose 167% since it enacted the cap in 1975, while rates in the rest of the country rose 505%. Whether this is attributable to the cap on non-economic damages, prior approval of medical malpractice insurance rates, or a combination of both is not clear.

In Table 1, the Medical Liability Monitor reports the difference in the average premium for practitioners in some of the states with non-economic damages caps:

Table 1: Select Malpractice Rates

Indiana, Montana, New Mexico, Utah and Wisconsin saw malpractice premiums increase 15, 21, 13, 5 and 5%, respectively from 2002 to 2003.

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