KUFM Commentaries - 2003
Return To All Commentaries
(Links to all titles coming soon)

Tort Reforms Protect The Powerful (January 28, 2003)

Corporate Secrets v. Montanan's Lives (February 25, 2003)

Medical Malpractice (March 25, 2003)

Legilsature Bails Out Northwestern (April 22, 2003)

Supremes Gut Punitive Damages (May 20, 2003)

Insurance Industry Scams Public (June 17, 2003)

Class Action Reform - Fair Only For Corporations (July 15, 2003)

Simplify Work Comp? (August 12, 2003)

Class Actions Good For Public (September 9, 2003)

Mandatory Arbitration Bad For Public (October 7, 2003)

HMO Immunity & Impunity (November 4, 2003)

Holiday Safety (December 2, 2003)

Medical Malpractice - Insurance Reform Needed (December 30, 2003)





 KUFM Commentary
 August 12, 2003

It's hot and smoky, and the 2003 legislature seems to have been so long ago, and the 2005 session seems so far away.  But work has already begun, through interim legislative committees, on studies and bills for the 2005 session.  One of those studies, SJ 17, sponsored by Senator Jon Tester, is currently under consideration.  SJ 17 is a study of the workers' compensation system with a goal of simplifying the system.

Workers' compensation, pretty boring stuff, until you need its benefits.  So, this is for all you workers out there – from desk jockeys, to teens flipping burgers, to firefighters – and for you employers who want the best for your workers.  What do you do if you are injured on the job and are unable to work for several weeks, months or years?  How will you keep a roof over your head, make your car payments, buy clothes for your kids or put food on the table?  If you are like most Montanans, you would have to rely upon the Workers' Compensation system.  While most of us do not expect to be injured on the job, we should be aware of what protections the work comp system provides if we are injured.  Unfortunately, if you are severely injured on the job, the chances are good that the current work comp system will leave you and your family devastated.

The Work Comp system was developed to meet two needs:  first, and foremost it seems, the need of employers to protect themselves from lawsuits brought by injured workers; and, second, the need of injured workers to obtain prompt, fair and full medical treatment, rehabilitation and compensation for work place injuries. The system, while not perfect, worked reasonably well for decades.  Workers generally received what they bargained for.

Enacted in 1915, the Workers' Compensation system has been amended, sometimes in small steps and other times in massive overhauls, in virtually every legislative session since then.  The result today is a system that is supposed to be so simple and straightforward that an injured worker shouldn't even need a lawyer, but the reality is a system so complex that lawyers have a hard time understanding it.  Why the dichotomy?

In the 1980's the system experienced problems, chiefly medical and rehabilitation costs started rising rapidly, and, the state bureaucratic system was increasingly inefficient.  To cover increased costs, employer insurance rates rose.

Responding to employers, the legislature made a political not a business response.  It lowered rates, but it did not adequately address the costs and inefficiencies that had led to the problems that caused higher rates in the first place.  Soon, contrary to good fiscal practices – insurers, primarily the State Fund, were not bringing in enough rate revenue to cover the benefits and costs of the system.

Needed changes were made and the system began to operate more efficiently, and, all of us paid to bail out the Old Fund liability.  Unfortunately, money quickly became the bottom line: how much could employer rates be cut; and, how much profit could be made by insurers.  The well-being of injured workers quickly took a back seat to this fiscal bottom line.  Not satisfied with the savings from a more efficient system, the legislature a series of cuts in benefits for injured workers. 

Trial lawyers have fought for workers as benefits have eroded.  Unfortunately, legal action can only help so much.  And, legal gains that help injured workers are usually taken away in the next legislative session.  Additionally, legislation has specifically limited an injured worker's ability to obtain legal representation.  Why?  Well legal fees are a not large percentage of the cost of the system, but injured workers represented by attorneys receive all the compensation and other benefits to which they are entitled.  Workers who are not represented can be more easily denied the compensation and benefits they are entitled to, thereby keeping costs down.

You have probably seen news stories and advertisements by workers compensation insurance companies, touting their payment to Montana employers of premium dividends.  A safer workplace, however, is just part of the reason for lower work comp premiums and the payment of premium dividends.  The more significant cause is that less is being paid to workers injured on the job.  Whether the reduced benefits are due to legislative cuts, employer encouragement not to report accidents, industry owned physicians who minimize or deny the injuries of workers, or delay or denial by insurers of benefits rightfully due injured workers – the bottom line is that it is injured workers and their families who are paying for premium dividends and insurance executive bonuses.

So why isn't the Workers' Compensation system simple and straightforward like it is supposed to be?  Well, in my opinion it's because the more complex the system is, the easier it is to deny workers the benefits they are entitled to, especially if it is also cost prohibitive for lawyers to help injured workers.

SJ 17 isn't likely to be the vehicle to restore the balance between employer costs and reasonable benefits for workers - it will specifically not look at benefit levels.  It might, however, be a first step towards truly simplifying the workers' compensation system.  Hopefully, SJ 17 will get legislators to consider whether the well being of injured workers is the true bottom line of a simple and straightforward workers' compensation system.  If you have had to try and navigate the work comp system, and have ideas on how to simplify the system, please contact your legislator or the Montana legislative Council.  Without your voice, the system's bottom line will remain weighted towards ever lower premiums, insurance executive bonuses and premium dividends.
This is Al Smith for the Montana Trial Lawyers.

 KUFM Commentary
 September 9, 2003


Monsanto hid 40 years worth of dumping PCB's, lead, and mustard gas in Anniston, Alabama – harming the land, plants, animals and people in the area. Nothing was done until residents filed a state class action suit.

A state class action stopped deceptive business practices by Beech-Nut Nutrition Corp. and its parent company Nestle. They were selling sugar-water labeled as pure apple juice for infants.

A state class action suit forced Ford Motor Company to replace defective ignition systems in millions of cars that could stall -- often on highways, across railroad tracks and in other dangerous situations.

As a result of state class actions Blue Cross and Blue Shield of Iowa and Louisiana stopped fraudulent billing practices. Blue Cross was charging their insureds inflated co-payments - amounts that in some cases were higher than the actual bill that Blue Cross received from the hospital.

Twenty state class actions suits were filed against three of the country's largest manufacturers of baby formula alleging price fixing. In Salt Lake, a one-month supply of formula cost about $18, but the same formula cost about $75 in some Eastern States.  The baby formula makers agreed to a $230 million settlement for the cases, and the end of collusion after one state case brought down the price of formula across the country.

The largest operator of funeral homes in the United States is the defendant in a state class action in Florida. This class action accuses the company of breaking open burial vaults and dumping the remains in a wooded area, crushing vaults to make room for others, mixing body parts from different individuals, and digging up and reburying remains in locations other than the plots purchased.

Here in Montana, a state class action seeks protection and reimbursement for Montanans who were charged illegal loan fees on first and second mortgages by an out of state corporation.

What do all these cases have in common?  They are all types of cases that would be affected, adversely for citizens and consumers, if S. 274, the so-called Class Action Fairness Act is passed by the U.S. Senate.  It is part of a concerted effort by lobbyists from giant corporations to prevent consumers from using class action litigation to hold those corporations legally accountable. Want to know how important this bill is to large corporations?  Just count their lobbyists - more than 100 major companies and  business associations have been paying for at least 475 lobbyists since 2000 to promote their class-action agenda - nearly five  lobbyists for every senator.

Class actions are an important  tool for remedying and deterring fraudulent practices where the  damages to an individual consumer are minimal, but the number of  consumers affected is large. The low damages makes the hiring of   an attorney by an individual citizen or consumer financially impossible, but  when there are enough people for a class action, it becomes  financially feasible to hire an attorney.  Class actions provide access to justice for thousands of American consumers and small businesses that would otherwise have no realistic means of taking their case to court.

Class action reform is unnecessary and unfair. Although proponents of new restrictions on class actions like to point to rare and atypical anecdotes to justify "class action reform," the truth is that the overwhelming majority of class actions are meritorious. And while proponents are quick to decry a "tidal wave" of class action filings, there is no statistical evidence to support this claim.  There is no statistical evidence of a class action crisis. In fact, the federal and state judiciaries have consistently opposed efforts to "federalize" class actions - knowing that state courts are perfectly capable of handling their own matters without interference from the feds.

Federalizing class actions will further clog federal courts and deny injured consumers access to justice. Federalizing class actions will exponentially delay the judicial process for injured consumers and other class action "reform" plaintiffs. Instead of banning class actions outright - a policy goal that would never pass – proponents try to get in through the back door. By making plaintiffs jump through multiple hurdles to bring class actions, "reform" proponents accomplish their policy goal at the expense of consumers who have been harmed by corporate wrongdoers

The so-called "reforms" are a procedural nightmare for injured consumers. "Reform" proposals would allow any defendant or class member to remove a state case to federal court at any time prior to final judgment. The plaintiffs may go through the expense and time commitment of a state court trial only to find that the case is removed to federal court at the eleventh hour. And thereafter, it can become a series of jumps from federal court, back to state court and back to federal court again.  And, each jump is more time and expense for citizens and consumers.  The end result will be fewer class action cases, fewer protections for citizens and consumers – and less accountability and more corporate wrongdoing.

Have our Senators already forgotten Enron, WorldCom and all their ilk?  The Enron scandal demonstrates the need for more, not less, accountability. When daily headlines around the country are revealing fraud, deception, and worse by companies such as Enron, now is not the time to shield the conduct of corporate wrongdoers. At a time when it's important for irresponsible businesses to be held accountable, class action reform sends the wrong message. Congress should protect us citizens – consumers, workers, and retirees, not corporate wrongdoers.

This is Al Smith for the Montana Trial Lawyers.

KUFM Commentary
October 7, 2003

 

The Wall Street Journal recently ran a story on the increased use of mandatory arbitration, terming it as [quote] "a tough choice, give up your legal rights – or forget about joining a gym, getting a cellphone or even seeing your doctor." [end quote] What is arbitration, and why should you care about it?

Arbitration is a legal process to resolve disputes between parties without using the court system.  Provisions for arbitration are usually contained in a contract between two parties.  Those contract provisions set out the rules for the arbitration, including what parts of the contract will be subject to arbitration, how an arbitrator will be chosen, which of the parties will pay for the arbitration services, and where the arbitration proceeding will take place.

Congress passed the Federal Arbitration Act 75 years ago as a means to enforce arbitration provisions in contracts between large corporations.  At the time that made sense - corporations would be on roughly equal footing, having the business and legal expertise to knowingly enter into an agreement that waived the right to take disputes over contracts to court.

Pretty boring stuff for most of us, so how does arbitration affect those of us that aren't owners or executives of corporations?   Well, over the past 75 years arbitration provisions have steadily crept into consumer contracts to the point now where you would be hard pressed to find a single consumer, whether they know it or not, who is not subject to a mandatory arbitration clause in a consumer contract.

If you have ever purchased or rented an appliance, a car, a house, a tractor, fertilizer, a computer, computer software or even the radio you're listening to, you probably have unknowingly waived your right to take to court a dispute about that product and agreed to mandatory binding arbitration.  The same goes for services, chances are your credit cards, bank accounts, retirement accounts, cell phones, video rentals and other services have a mandatory arbitration clause that waives your right to pursue a remedy in court - usually buried in the small print or sent out as an addendum in a mailing that most of us just toss as junk mail.

When Congress passed the Arbitration Act, it was assumed that the parties to arbitration contracts would be on roughly equal footing - with both sides having the business and legal knowledge to decide whether an arbitration provision was a good idea.  There is no equal footing when it comes to consumer arbitration clauses - an individual consumer, even one that is an attorney, is not on an equal footing with giant corporations when it comes to mandatory arbitration provisions.  And, most importantly, even if you have the legal knowledge to refuse to agree to a mandatory arbitration provision in a consumer contract, you simply have no choice if you need or want the product or service - there is no negotiation between consumers and corporations, either you accept the mandatory arbitration or you don't get the product or service.

You may be thinking that our state consumer protection laws would protect you from oppressive arbitration provisions.  Unfortunately, the U. S. Supreme Court has consistently ruled that the federal arbitration act preempts and voids state laws that are aimed at protecting consumers from arbitration provisions.  Montana enacted a statute that merely required that any contract that contained an arbitration provision must state so on the first page of the contract - it didn't prohibit arbitration clauses, it just required an up front warning to consumers that buried somewhere in the small print of the contract was a mandatory arbitration requirement.  Our Montana Supreme Court, in an opinion by former Justice Trieweiler, said the statute was a valid protection for consumers.  The U. S. Supreme Court said no, federal law trumps state law and you cannot provide such a protection for Montana's consumers.

Now, arbitration itself is not necessarily a bad deal for consumers.  Arbitration can be an easy, low cost way to resolve disputes over products and services that parties can agree to once a problem arises.  The problem is that when agreement to arbitration is mandatory and required before any dispute arises, the consumer is almost always at a disadvantage.  Mandatory, pre-dispute arbitration clauses can never be fair, when the parties do not have equal bargaining power, equal experience in arbitration, equal ability to understand the consequences of contract language, particularly the ramifications of the rights being waived, and an equal ability to insist on clauses being included or excluded in the contract.

While arbitration is often touted as cost effective, many consumer claims are for modest damages that will be exceeded by the arbitration filing and hearing fees, making arbitration a losing proposition. This serves as a disincentive for consumers to pursue a claim. Because class action suits are usually prohibited by arbitration, large groups of consumers who have been harmed for only a few dollars are prevented from forming a class, further allowing companies to escape accountability for wrongful actions.

This spring legislation, HR 1887, was introduced in Congress to ban mandatory arbitration provisions from consumer contracts. The bill treats mandatory arbitration clauses that are unilaterally imposed on consumers as an unfair and deceptive trade practice and prohibit their use in consumer transactions.  The bill would restore consumers to an equal footing - they could voluntarily choose arbitration if they felt it was beneficial, or they could exercise their right to use the courts if they felt that was their best option. 

The bill, however, was sent to a subcommittee in May and is likely doomed.  Why?  In my opinion, because the powerful business lobby opposes it and members of Congress all too often side with the business lobby and against the interests of consumers.  For all of us, I hope I'm proven wrong.

This is Al Smith for the Montana Trial Lawyers Association.


KUFM Commentary
November 4, 2003


Yesterday the U. S. Supreme Court agreed to hear appeals of two cases involving health maintenance organizations - HMO's - being sued for negligence.  The question before the Supreme Court is not whether the HMOs were negligent, but more simply - can a patient even sue an HMO?  Why is that even a question?

Well, patients' rights to hold HMOs legally accountable were taken away in 1974 when Congress enacted ERISA. State liability laws that would ordinarily hold HMOs accountable for injuries or deaths that they cause were preempted by this federal law.  Granted immunity, some HMOs have acted with impunity in delaying, denying and terminating health insurance benefits.

But if ERISA preempts state laws, taking away a patients' right to hold an HMO legally responsible for its decisions, why are these cases in front of the court?  Well, you may remember that during the campaign and during one of the presidential debates, Bush was positively gushing over the Patient Bill of Rights he got through in Texas, and he promised the same for all of America.  Of course Bush did not mention that he fought against and then vetoed the first Patient Rights Bill sent to him as governor.  Nor did he mention that he again fought the same bill the next legislative session, and the bill became law without his signature or support, because the Texas legislature's vote for the bill was overwhelming - and veto proof.  Both of these cases came from Texas under their Patient Bill of Rights.

One case involves a lawsuit by Juan Davila, who was covered by an Aetna HMO paid for by his employer.  In 2000, he visited his primary care physician, who prescribed the pain-killer "Vioxx" for arthritis. Before filling the prescription, Aetna required Davila to try two other less-expensive medications.  After three weeks on the cheaper pain reliever, Davila was rushed to the emergency room, suffering from bleeding ulcers, a side effect of the cheaper medication.  Davila sued, claiming Aetna's decision not to cover Vioxx from the beginning was negligent.

The other case involves Ruby Calad, who was discharged from the hospital one day after a hysterectomy. The Cigna HMO nurse decided the standard one-day hospital stay would be sufficient, although Calad's treating doctor recommended a longer stay.  After her release, Calad suffered complications. She sued, claiming Cigna acted negligently in deciding the HMO knew better than her treating doctor and that more time in the hospital was not medically necessary.

Over the past seven years Congress has been debating a Patient Bill of Rights. The sticking point has been over whether patients will be able to hold HMOs legally accountable and responsible for the harm they cause.  The health insurance industry early on labeled any Patient Rights bill as a trial lawyer bill, and the Bush administration, contrary to his campaign promise, has eagerly continued that characterization. 

The industry opposition comes from their knowledge that without meaningful legal accountability HMOs will be able to continue to callously put profits over patients.  If they keep their legal immunity HMOs will be able to continue to deny and delay health care with impunity.  Unfortunately, some health insurers interfere with the physician-patient relationship and dictate what care a physician can or cannot provide.  Americans want their doctors to make medical decisions -- not managed care bureaucrats trying to increase their bonuses.

By removing the legal immunity, the special treatment, enjoyed by HMOs, patients will be given the care they need, deserve and paid for – up front – without a need to resort to the courts.  However, for those health insurers who still refuse to play by the rules, injured patients would be able to hold the responsible managed care company legally accountable in state court.  HMOs would only be held to the same standard as every other business and every other person in America, because they could be held legally accountable for the injury they cause.

With a repeal of ERISA premption paralyzed in Congress by the big money lobbying efforts of the insurance industry some forty states, including Montana, passed laws that require and set forth guidelines for internal and independent external reviews of HMO decisions.  The Supreme Court has upheld those laws.

The experience in states which have enacted laws to hold managed care insurers legally accountable is instructive.  Fact is patient care has improved, there have been only a handful of lawsuits, and, insurance rates have not skyrocketed in those states.  These laws allowing patients to sue HMOs for injuries caused by the wrongful denial or delay of health care have done their jobs – they have made HMOs that might be inclined to wrongfully deny or delay care stop and think about legal consequences, not just profits.

Now, the legality of these laws – passed by ten states, but not Montana – that allow HMOs to be held legally accountable for the harm they cause is before the Supreme Court in these two Texas cases.  The question is whether the Court will uphold HMO legal accountability imposed by states or whether it will uphold the immunity the insurance industry purchased in 1974 with ERISA.  Legal accountability of HMOs is not about trial lawyers, it is simply part of the answer to this question - do we as a society value HMO profits more than we do the health and lives of American citizens? 

Finally, there has been some interesting news for those of you that purchase insurance for your homes, cars and businesses.  Seems the insurance industry is having a great year - an increase in net income of over 30% among the top 13 companies.  Industry analysts are raving about the industry's profitability.  My favorite was from a Merrill Lynch analyst predicting continued income growth "because price increases have been exceeding claims inflation."  Do you think all of us who have been paying higher insurance premiums will now get rebates from our insurance companies?  Or, maybe our rates will go down?  More likely this just means more money for the insurance industry to lobby Congress and legislatures to take away more of your rights.

This is Al Smith for the Montana Trial Lawyers Association.


KUFM Commentary
 December 2, 2003

It's the holiday season, and that means new toys will arrive soon in homes across Montana.  But are all of these toys safe?  Too often, families come to trial lawyers because a child has been seriously injured or killed by a seemingly safe toy. And, all too often trial lawyers find out that the manufacturer, the distributor, the retailer or the government knew the toy posed an unreasonable safety hazard, yet the toy was still on the market.  Fortunately, over the years, through government and industry regulation, and through litigation by trial lawyers, toys have become safer.


We have laws to protect children from toys that create hazards because of toxic substances, and from toys that present electrical, mechanical or heat risks.  Choking hazard warning labels are required on packaging for small balls, balloons, marbles and certain toys and games that have small parts and are intended for use by children ages 3 to 6.  Toys intended for use by children under age 3 that may pose a choking, aspiration or ingestion hazard, are banned by law.  We also have labels that give age range and safety recommendations for toys. 


With all that has been done, there is still a risk that a child's joy, a new toy, can become a family's tragedy.  Consumers shouldn't be lulled into complacency.  There are unscrupulous manufacturers who fail to put the required safety warnings on packages.  There are others who manufacture and distribute toys that they know present an unacceptable level of risk to young children.  Currently there are over 500 toys listed on the U.S. Consumer Product Safety Commission's (CPSC)website that have been recalled for various safety reasons.


While warnings help, parents and family members have to be careful in selecting toys that bring joy, not heart break.  Every year children die and hundreds of thousands of children are treated in hospital emergency rooms for toy-related injuries. Children ages 4 and under are at especially high risk. 


Riding toys, including bikes, unpowered scooters and roller blades, are always popular.  Unfortunately, they are also the source of many injuries.  Many riding injuries are preventable. If you do buy items such as a scooter, bicycle, or in-line skates, please purchase the safety gear, especially a helmet, your child will need to use the toy safely and include it as part of the gift.


Choking is a leading cause of toy-related deaths, especially for younger children.  Children easily choke on small toy balls, balloons, marbles, small building blocks, or small pieces that were pulled off of a toy.  And, unfortunately, there are manufacturers who fail to put proper choke hazard warnings on their toys.  One of the best ways for parents to test whether toy parts pose a hazard to young children is to try and put the parts through the opening of a roll of bathroom tissue.  If the part of the toy fits into that opening, don't buy the toy.


Protecting children from unsafe toys is the responsibility of everyone, from manufacturers, to government, to parents and other family members.  Selecting toys with an eye on safety and proper supervision of children at play are the best ways to protect children from toy-related injuries.


On dark December evenings, with holiday celebrations approaching, we are drawn to the warm comfort of a fireplace, the glow of candles, or the illumination of holiday lights. Creating a warm, festive look in the home is a part of the holiday tradition for many Montana families. 


Please take steps to ensure that holiday festivities don't turn into family tragedies. According to the National Fire Protection Association, December is the peak month for candle fires, with nearly twice the average number of fires.  Candle fires alone result in, thousands of injuries, tens of millions in property damage, and hundreds of deaths each year. 


If candles in your home are part of your holidays, make sure that you always use non-flammable holders; keep them away from fabric, dangling holiday decorations, and wrapping paper; place them in low-traffic areas, so that people will not knock them over or get burned; and never use lighted candles on a tree, wreath, or other combustible decorations.


Each year approximately 7,000 people are treated in emergency rooms for injuries related to holiday lights, decorations and Christmas trees. Some holiday lighting safety tips include: checking all lights, old and new, for broken or cracked sockets, frayed wires and loose connections, and throwing away damaged lights; fastening outdoor lights securely so they are protected from wind damage; using no more than three standard-size light sets per single extension cord; and, turning off all lights on trees and other decorations before going to bed or leaving the home.


If you have a fireplace, remember to remove all greens, boughs, papers, and other decorations from the area immediately surrounding the fireplace, and make sure your chimney has been cleaned since last year. A screen should be placed in front of the fireplace opening at all times when the fire is burning.


We have provided links on our web site, www.monttla.com, to agencies and organizations where you can obtain more information on toy and holiday safety.  If you do not have access to a computer, you can make a quick phone call to the Consumer Product Safety Commission at (800) 6 3 8 - 2 7 7 2 and request guides or fact sheets on shopping for toys and on holiday safety.


Finally, during this holiday season, please take the time to install smoke detectors, or new batteries in the ones you have, and TEST them.  Have a happy and safe holiday season.

This is Al Smith for the Montana Trial Lawyers Association.

KUFM Commentary - December 30, 2003

As the new year begins, many of you can look back over the past year and remember receiving notices of higher premiums for your insurance - whether it was for your health insurance, auto insurance, home insurance or, for professionals like doctors and lawyers, malpractice insurance - rates were going up.  An interim legislative committee is now looking at health care malpractice insurance in Montana.


A committee hearing was held in Billings in November.  Doctors and hospital administrators from across Montana testified about their rising malpractice premiums.  Rates were going up for everybody, except the Billings Deaconess Hospital - their rates went down last year and they expected a decrease again this year.  Why did their rates go down - because they got out of the insurance industry's market gyrations by joining with other hospitals to essentially self insure.  And, everybody seemed to want some kind of so-called "tort reform" - limitations on the rights of injured people to hold negligent health care providers legally responsible.


One other thing was testified to by just about everyone - most had never been sued or they had only been sued a couple of times in the past ten years.  How can that be - how can you never be sued, yet your rates go up?  Obviously, if insurance rates are going up but lawsuits are not, then lawsuits are not the problem.


Doctors want rights limitations on patients because they think their malpractice insurance rates will come down.  Unfortunately, similar so-called insurance "crisis" in the mid-1980s and 1990's taught us that the only winners of tort reforms are the insurance companies.  Despite enactment of tort reforms across the country, insurance costs did not go down.  Laws that restrict injured consumer's rights to go to court have not lowered insurance costs or rates.  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. 


Insurers want malpractice reforms because it lowers the amounts that they have to pay out, with no corresponding mandate that insurance rates go down.  Same money coming in in premiums, less money going out in damages, a real nice profit tool.


Montana already has some of the most far reaching medical malpractice tort reforms in the country.  We have a cap on non-economic damages - for things like loss of sight, loss of limbs, loss of the ability to conceive, scarring, lifetime disability, and a lifetime of pain, a cap that most severely impacts those that do not have classic economic damages of lost wages, like children, mothers who chose to stay at home and the elderly.  We have a medical legal panel that screens all medical malpractice cases before they are filed in court.  We have confidentiality for peer review of medical errors, so that such errors can be reviewed without fear that the review itself will become part of a court case.  Despite those reforms malpractice rates in Montana continue to rise significantly.  The reason tort reforms do not lower insurance premiums is that all the so-called insurance crises are the result of insurance industry practices. 


The industry makes its money by investing premium dollars in the market.  When the market is strong they attract premium dollars for investment by charging rates that are lower than what is needed to cover their losses, making up the difference with their stock market gains.  Companies engage in cutthroat pricing wars to get more premium dollars to invest - making, for a time, profits that are distributed to shareholders.  Sooner or later the market bubble bursts, as it has in the past 3 years, and insurers dramatically increase their premium rates to cover their losses.  As a result, consumers see not a gradual increase in rates to reflect inflation costs, but dramatic increases.


Medical malpractice premiums are a case in point.  During most of the 1990's, malpractice insurance was a lucrative market.  Many companies jumped in, with many charging premiums that did not reflect actual loss ratios, but rather the profits that could be made in the booming market.  While overall health care costs were rising 75%, and doctors' salaries were increasing 42%, malpractice premiums were rising only 6%.  Now that the market bubble has burst, malpractice premiums are skyrocketing. 


One of the main problems in Montana is that one of the largest insurers, St. Pauls, decided to get out of the malpractice insurance business.  Doctors and hospitals across Montana have been forced to find new carriers, but those new carriers want big premium increases, with approximately 30% of the premiums being the result solely of switching companies.  And what of the money St. Pauls took in?  Well, they took hundreds of millions of dollars that they had in surplus premiums - they charged more for premiums than they paid out in claims in the 1990's - and declared it as profit, distributing it to stockholders as dividends and to executives as bonuses.


Will the tort reforms accomplish their two main goals - decrease both malpractice rates and health care costs?  No, they won't.  The insurance costs will not be lowered, and no insurance companies will say that they will be.  Nevada enacted draconian tort reforms last year, when doctors asked the insurers when their rate reductions would kick in, insurers responded cavalierly with "we never said rates would go down." Health care costs will not be lowered either - nationally, medical malpractice insurance amounts to just about 1% of total health care costs, eliminating all malpractice claims would not even make a dent in overall health care costs.


We've tried tort reform in Montana, what we need is insurance reform.  If the health care industry truly wants to see stability in malpractice insurance premiums, then reforms should include a mandatory rollback in premiums and a prior justification for any rate increases.  Finally, the insurance industry's profits are up 30% this past year -has anyone out there received a rate decrease or a rebate?


This is Al Smith for the Montana Trial Lawyers, wishing you and yours a happy and safe New Year.