funny way for a court to open up a dissenting opinion.
The other interesting factor is that the majority held out an open invitation to pass tort reform again with anything except damage caps. A few years ago the last time we had tort reform in Illinois there was a decision called Best versus Taylor Machine Works. It had two rationales for striking down damage caps. One was that it was special legislation instead of general legislation because it affected different kinds of plaintiffs differently. Second, that it violated the separation of powers because it was really a form of legislative remittitur whereas a remittitur is supposed to be a judicial remedy.
This time around the court only used the second theory, which meant that it only applies to damage caps. It had to strike down the whole bill because there was an inseverability clause. The court came right out and said: General Assembly, if you want to give us another bill and this time include other items that were in the first bill, those won’t fall under this decision and may well be acceptable.
So something like abolition of joint liability could be in the cards in Illinois, at least as far as this decision is concerned.
McDONALD: We’ll be getting back to some of the legal issues. While we’re on the topic let’s turn to Larry Downs who is with New Jersey. He’s counsel there. Larry, what’s been the experience in New Jersey at this point?
DOWNS: Well certainly the decision in Illinois last week did not help our chances if we had any kind of meaningful tort reforms in New Jersey. We’re still, I think by most observers, would be considered a very plaintiff friendly jurisdiction. We continually try to move some meaningful tort reform, everything from better statutes of limitations for cases to noneconomic damage caps, without much success at all.
Recently we’ve had a Republican elected to our governorship. However our legislature is still very Democratic and is very adverse to meaningful reform in that arena. I think our experience has been, any hope that we had certainly the Illinois decision is making the rounds within the political gossip columns in New Jersey and certainly makes it very difficult now for any efforts to instill damage caps in this jurisdiction.
McDONALD: Because of your environment you’ve been tracking closely your doctor population. What are you seeing there?
DOWNS: We look at the tort environment, the malpractice environment and we take a look at the physicians, particularly the OB/Gyns and other high-risk specialists. They graduate from our state medical school and interestingly enough, none of the residents – there were 13 or 14 OB/Gyn residents at the University of Medicine and Dentistry in the last year that graduated. None decided to remain in New Jersey to start their practice. Every single one had gone to a different jurisdiction, notably Texas. I guess a lot of our residents and certainly we feel one of the contributing factors is better tort reforms in those states, Texas, California. They’ve instituted it and makes it a much more friendly environment in which to practice. So if you’re a resident looking around the country, certainly we think that if you have the same kinds of startup costs for your practice, which are not insignificant, in New Jersey we’re a fairly expensive state for a lot of businesses. On top of that we don’t really compare with jurisdictions with the minimal kinds of tort reforms that we have in place. It’s pretty easy decision for a young physician to make to leave our state and go somewhere where they practice in a more friendly environment. We’ve seen that.
McDONALD: At this point we’d like to turn it over to our actual practitioners on the company side. Dr. Anderson, you’re in a multistate environment. What are you seeing as far as competition and the whole environment? What strikes you as the factors that are affecting your company the most?
DR. ANDERSON: I think the previous discussions have really touched on the high points and that they’ve generalized pretty well around the country. We’ve just gone through a period, a period by the way which we seem to repeat even in the largest national and international macroeconomic cycles, of the bursting of a major bubble. We’re always shocked and horrified when it occurs. We try to figure out what could we have seen in retrospect that might have allowed us to avert that.
Of course the more specific challenge in general is looking prospectively and trying to predict the inflection point on any curve. Where is the inflection point going to be? I think here in the med mal market we have what I believe is a real luxury in that it’s quite obvious that we are in the middle of an inflection point, that the hard market, the true hard market that began around 2002 with the demise of St. Paul as a med mal carrier and ended in 2005, 2006, is transitioning to what almost surely will be a true soft market. We’re right in the middle of that transition point now. What does that mean? It means that rates are softening everywhere around the country. It means that doctors who were formerly appropriately rated as substandard physicians in terms of insurability are now drifting back into the standard market. It means that competition for large custom accounts is heating up and that cash flow underwriting is looking more attractive. People are looking for large premium volumes in a single gulp, even if that premium doesn’t Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9