The first maxim in insurance coverage is: Your policy covers everything except what happened to you. The second maxim is: We'll pay more in litigation bills to defend against your claim than your claim is actually worth.
Indulge me in a story: my first job as an attorney was working in an insurance defense firm. In other words, the firm got most its work from insurance companies looking defend against claims. These claims, for our firm anyway, ranged from the average slip and fall to major medical malpractice claims to wrongful death claims due to asbestos exposure.
First thing I learned, right off, was that insurance companies don't like to pay out anything. And I mean ANYTHING. That included our bills for legal work. I made less than a government lawyer and worked more hours for the firm's hand to mouth existence, partly due low billable hour rates charged to the client, partly due to some insurance companies paying for only some work and not other work (like those pesky things called "pleadings" in the litigation world...)
So, did it surprise me in the slightest when I read
this bit o' news in the Washington Post's business section today? Nope...
The insurance industry has long argued that huge losses from malpractice suits -- now running more than $7 billion a year -- have forced it to hike malpractice premiums, which more than doubled last year in some cities and for some specialties.
But a new study by a consumer group shows that losses reported to state regulators -- the figures often cited by the industry -- were much larger than losses actually paid during a nine-year period.
The study, by the Foundation for Taxpayer and Consumer Rights, a Santa Monica, Calif., advocacy group, found that from 1986 to 1994 the industry reported to regulators losses of $39.6 billion but actually paid only $26.7 billion, 31 percent less. The losses were overstated in each of the nine years.
Surprise, surprise. The tort reform mantle grabbed onto by Dubya to ride to victory in the 1994 Texas Governor's Race is based on, well, a lie.
Now, how does this little, teensy-weensy, little lie of approximately $14 billion shape the debate around health care in the country?
Here's how:
- Insurance companies claim their costs are rising due to increased payout of claims, which they overstate by approximately 31%. (But hey, what's $14 billion amonst friends?)
- Official government types, like the Congressional Budget Office start to buy the lie:
The available evidence suggests that premiums have risen both because insurance companies have faced increased costs to pay claims (from growth in malpractice awards)...
- That sends people like this guy into a tizzy about how those damn medical malpractice lawsuits are ruining our health care system and the country as a whole. (It couldn't be because he received over $3 million from insurance companies for his reelection bid in '04, could it? Nah...)
- Pretty soon, everybody's in the act, including doctors around the country demanding lower malpractice premiums because it is costing them more to practice medicine.
- Meanwhile, nobody's looking at the fact that, according to the Consumer Federation of America, med mal insurers have made a profit of about 12% in the past decade, or in the decade they were overstating their losses.
- Finally, health care costs are soaring due to high premiums for overstated malpractice claims. Guess who gets to pay for it? That's right: you, the health care "consumer" (if you're lucky enough to have insurance, that is).
Is this a gross oversimplification of the health-care crisis in this country? You bet.
But does it debunk the idea that the reason health-care costs are going up is due to malpractice claims? I think so.
Perhaps we should be taking a closer look at those nice fat insurance company profits before looking at those so-called huge, overstated malpractice claims...
Greedy trial lawyers make a good scapegoat.
But so do greedy insurance company executives. Turns out to be the truth, too.