Liability premiums did not drop after “tort reform” enacted during the insurance crisis of the 1980s. – (1994)

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FTCR – 1994

After the fusillade of restrictions on the rights of victims took effect, of course, the “insurance crisis” of the 1980s rapidly dissipated. But the promised savings never materialized.

Take, for example, restrictions on the right to sue doctors, hospitals and HMOs for medical mistakes and negligence. Data reported to state agencies by insurance companies, show that, as would be expected under laws limiting the legal rights of malpractice victims, the amounts insurance companies reported they would pay out to medical malpractice victims dropped by 45 percent between 1985 and 1991.(1)

Insurance companies did not cut their malpractice premiums accordingly, however. Numerous studies have since verified the predictions of those who warned that the restrictions on the legal rights of malpractice victims would not reduce the price of malpractice liability insurance purchased by doctors and hospitals.

Ironically, it was a law sponsored by the insurance industry itself, which first exposed the deceit of its promise to lower rates in exchange for changes in the civil justice system.

Legislation enacted in Florida in the spring of 1986 at the behest of a coalition of insurance companies and corporations contained dramatic restrictions on victims’ rights. But it also required insurers to reduce their insurance rates concomitantly, unless they could demonstrate to state insurance regulators that the limitations on consumers’ rights would not reduce their costs.

Six months after the law was enacted, two of the nation’s largest insurance companies told the Florida Insurance Department that limiting compensation to injury victims would not reduce insurance rates.(2) St. Paul Fire and Marine Insurance Company, the nation’s largest medical malpractice insurer, and Aetna Casualty & Surety Co., provided an extensive “actuarial analysis” of five specific limitations on victim’s rights that the insurance industry had promised would reduce premiums. Overall, the Aetna report concluded that one provision of the law would reduce rates by a maximum of 4/10 of 1 percent, while all the other tort restrictions would have “no impact” on rates.(3) In fact, Aetna asked for a 17 percent rate increase based on its analysis of the impact of the law. The St. Paul study concluded that the restrictions “will produce little or no savings to the tort system as it pertains to medical malpractice.”(4)

Another damaging indictment of the industry’s campaign to limit consumer rights came a few months later. In April, 1987, the insurance industry’s rate-making agency, the Insurance Services Office (ISO), released the results of a study intended to respond to repeated demands from policymakers and legislators across the country that the industry provide empirical data to support its claims that changes in the tort law system would alleviate the nation’s insurance crisis.(5)

The study examined the responses of 1262 insurance adjusters from nine property-casualty insurance companies and two independent adjusting firms located in 24 states. The adjusters were asked to determine the impact of actual restrictions in the tort laws of 15 of the states on six hypothetical injury cases. In addition, they were asked to judge the impact of similar proposals, which did not become law in the remaining nine states.

Much to the chagrin of the insurance industry, the study failed to support years of insurance industry propaganda. Instead, it disclaimed any impact upon rates. One insurance industry official was quoted as saying, “Some state legislators are going to be shaking their heads after hearing us tell them for months how important tort reform is, and now we come out with a study that says the legislation they passed was meaningless.” (6)



(1) The University of the State of New York, State Education Department, Bureau of Post Secondary Research and Information, “Physician Supply and Characteristics in New York State 1980-1990,” The University of the State of New York, State Education Department, Bureau of Postsecondary Research and Information, (Albany, N.Y.: State Education Department, December 1991), p. 36.

(2) National Insurance Consumer Organization, Medical Malpractice Insurance: 1985-1991 Calendar Year Experience (Alexandria, Va.: National Insurance Consumer Organization, March 1993), accompanying News Release, p. 1.

(3) National Insurance Consumer Organization, Tort Reform a Fraud, Insurers Admit, News Release, October 20, 1986 (Alexandria, Va.: National Insurance Consumer Organization, 1986).

(4) Letter from Thomas L. Rudd, Superintendent of Insurance Department Affairs, Commercial Lines, Aetna Casualty and Surety Company, to Florida Insurance Commissioner Bill Gunter and Charlie Gray, Chief of Bureau of Policy and Contract Review for the Florida Department of Insurance, August 8, 1986, enclosing “Bodily Injury Claim Cost Impact of Florida Tort Law,” Aetna Casualty and Surety Company. “Addendum of St. Paul Fire and Marine Insurance Company,” undated 1986 filing before the Office of the Insurance Commissioner of Florida. To read these filings, click here for a .pdf file.

(5) Claim Evaluation Project: National Overview (Los Angeles, Ca.: Hamilton, Rabinovitz and Alschuler, Inc., April, 1987), p. 7. To read excerpts from this report, click here for a .pdf file.

(6) Robert Finlayson, “Insurers Fear Reform Foes to Capitalize on ISO Study,” Business Insurance, May 18, 1987, p. 2. To read news clips on the ISO report, click here for a .pdf file.


From: Harvey Rosenfield, Silent Violence, Silent Death: The Hidden Epidemic of Medical Malpractice (published by Essential Books, 1994).


Upload Version: 8/21/02

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