Third in a series

Insurance companies are collecting higher premiums fromphysicians for malpractice coverage, but insurance officials are inthe same boat with doctors in saying a cure is needed for thestate’s legal ills.

With large verdicts and settlements resulting from the state’slegal climate, insurance companies are pulling out of the state andno longer offering coverage. That has left some doctors searchingfor coverage and those with coverage paying much higherpremiums.

Despite that, representatives at a Brookhaven insurance agencythat deals with malpractice coverage say physician grumbling hasnot been directed at them.

“We’re not getting any complaints because our clients are good,logical people,”said Mike Smith, with Smith Insurance Agency. “Theyunderstand dollars and cents.”

At a March chamber of commerce meeting, state InsuranceCommissioner George Dale said 71 companies had sent him theirnotices of intent to stop offering at least some form of insurancein the state.

“We don’t need that,” Dale said.

Regarding medical malpractice insurance, Dale cited statemedical association statistics showing that through 1999, there hadnot been a $1 million insurance claim. From 1999-2001, there werethree and this year there had been three totaling $15 million.

“Insurance companies are not going to offer insurance in ourstate with the possibility of that kind of judgment,” Dalesaid.

As an example of the state legal climate’s local effect, Smithsaid the Brookhaven agency last year wrote $278,000 in medicalmalpractice policy premiums. In comparison, five claims left thecompany with losses of $1.9 million.

“Is there any wonder why nobody’s wanting to write medicalmalpractice insurance?” Smith asked.

Before 1998, Alvin Smith said the agency would have amalpractice claim about every five years or so and the amountswould be around $10,000-$15,000. Now, claims are more frequent andthe amounts are much greater.

Mike Smith said he was notified Friday of a Hinds County dietdrug-related lawsuit that involves six clients. While commenting onthe insurance situation, he received a call from a physician clientnotifying him of a Jones County lawsuit filed by the same group oflawyers.

Using a drug lawsuit as an example, Smith expressed frustrationover a system that allows class action lawsuit plaintiffs torecover damages with no real proof of injuries from taking anFDA-approved medication.

“Nobody’s hurt or sick. It’s the fact they might get sick,”Smith said.

Smith has concerns over the punitive aspect of jury verdicts. Hesaid insurers and physicians are not against allowing people to suefor injuries and be compensated, but the physicians do not need tobe punished for their error.

“They made a mistake, but they didn’t do it intentionally tomake money,” Smith said. “I don’t think that would ever happen inbusiness here.”

Tort reform proponents say a cap on non-economic damages isneeded. Without a cap, they say it is impossible for insurancecompanies to calculate coverage costs.

“There’s no way for insurance companies to figure out what itwill cost them to insure physicians in the state,” said PhillipGrady, chief executive officer at King’s Daughters MedicalCenter.

Mike Smith expresses similar sentiments in calling for acap.

“The sky’s the limit. Today it’s $10 million, tomorrow it couldbe $50 million,” Smith said.

Dale said 20 states had enacted some form of tort reform. Hementioned California’s having a stable medical malpractice climatebecause it enacted a $250,000 cap on non-economic damage awards in1979.

Dale acknowledged that legal issues were not the only thing thataffect insurance.

Other factors driving insurance costs in the state, Dale said,include underwriting and the number of policies companies write,insurance companies’ own investment activities, and companies’re-insurance for terrorism threats. The commissioner said terrorismis a new component after Sept. 11.

Smith also called for legislation to prevent jury shopping inwhich lawsuits are filed in “liberal counties” in hopes of gettinglarger verdicts. Alvin Smith praised local juries for theirreasonable approach.

“Our juries are very conservative here,” he said.

The Smiths said rising medical insurance rates are just the “tipof the iceberg” and are starting to impact other areas.

Mike Smith said he has not renewed any insurance policy thisyear with less than a 15 percent premium increase. He said that wasmore the exception than the norm, with most increases around 20 to30 percent.

“It’s not just doctors. It’s all businesses,” Alvin Smithadded.

Mike Smith said six companies are no longer offering personalline policies such as homeowner’s insurance or automobileinsurance. That is further evidence that insurance options aregetting more limited.

“We’re getting close to scraping the bottom of the barrel,”Smith said.

Alvin Smith said tort reform legislation would help restore afree enterprise system. He said that, in turn, would bring someinsurance carriers back to the state.

“When the market is allowed to work, it works and it is verycompetitive,” he said.

The Smiths estimated Mississippi’s insurance premiums amount toabout half of 1 percent nationally. They said the companies are notgoing to expose themselves legally for that kind of return.

“They’re not going to put their assets at risk down here,” Smithsaid.

Smith Insurance Agency handles insurance with St. Paul, whichhas announced plans to stop offering malpractice insurancenationally after losses in the $550 million range. Alvin Smith saidremaining state options are virtually “non-existent” with threemedical malpractice coverage providers.

Dr. Spencer Mooney, an eye, ear, nose and throat specialist, hadto change providers about five years ago when his former carrierstopped offering coverage. Mooney saw his premiums more than doublethis year, but some of his colleagues are having to look forinsurance after their companies stopped offering coverage.

“There’s only a few left to even choose from,” Mooney said.”That’s the worst kind of situation.”

Other physicians have stated they are facing premium increasesranging upwards to 200-300 percent, but, surprisingly, many do notblame the insurance industry. Many blame trial lawyers and thecourt system for these hikes.

The Smiths said it was a matter of a small percentage of lawyersruining the reputation of the others. Alvin Smith complimentedlocal attorneys for not being in the smaller percentage.

“In Brookhaven, we don’t have any in the category we’re talkingabout,” Smith said.

Physicians cite the high awards, given in millions, handed downin several malpractice lawsuits in the state for forcing theinsurance companies to raise rates.

Insurance companies are in the business to make money,physicians say, and the awards of several million dollars eachhanded down make it difficult for them to do so.

While discussing tort reform, OB/GYN Dr. Steve Mills cited JuryVerdict Research statistics showing that the median medicalmalpractice award in 2000 was $1 million. That was twice what itwas in 1995.

Also, Mills pointed out a Wall Street Journal report showingMississippi as one of nine states where insurance rates are risingthe fastest.

Mills said he understood insurance companies’ decisions to stopoffering coverage in the state. He said it was logical for them togo elsewhere if the climate is not good.

“The insurance companies are not in the business to lose money,”Mills said.

With limited options, the issue becomes one of availability andpremiums start to rise.

Last year, Smith said, one of the agency’s large commercialclients got a $10 million umbrella liability policy for $16,000.This year, a $5 million umbrella policy is going for $29,000.

“We’re hitting people where it hurts: in the pocketbook,” Smithsaid. “You’re going to see not only doctors screaming, but thewhole business community screaming.”

Editor’s note: Wednesday’s story will take a look at how theinsurance structure for doctors may be adding to theproblem.