this is the complete and utter disarray in America’s health care system. Whether or not we get major reform coming from Washington, the health care system in its present form is in disarray. It’s highly dysfunctional. Physicians are angry and dispirited. Physicians who can leave practice do leave practice. Physicians who can constrain their practice do constrain their practice. It’s really not a pretty picture. It’s going to do nothing but get worse, at least for quite a while.
It is hard to know how the economic pressures facing physicians today, and the hostile environment in which medicine is increasingly being practiced, will affect the future of liability litigation in the United States. But it is unlikely to be pretty.
McDONALD: Paul Turner, You just came back from London. You also work a lot at the larger company level, some of the higher limits and some of the higher-level writers. What are you seeing there in terms of appetite and what are they reporting they’re seeing in terms of things like severity and their approach to the market at the higher layers there?
TURNER: Yes, I spent last week in London mostly talking to Lloyd’s underwriters and companies based there that write excess and liability insurance and reinsurance here. On the issue of whether there’s going to be a turnaround in the market anytime soon, there was universal opinion there I think that we haven’t seen the bottom yet and it will keep getting softer for a while. Nobody commented much on seeing any return of higher frequency. It seems to most like a plateau in frequency. They saw it in some places. They were seeing some higher severity and I’ve got to admit I haven’t seen much of that anywhere I go when it’s stratified to the large cases. I’m not sure what’s happening with the first $1 million but in Cook County for example, we’re not seeing an increase in the number of $10 million verdicts or we’re not seeing an increase in the size of the verdicts or settlements over $10 million. Although there are some exceptions, I would say as I travel around I’m mostly seeing similar sizes and similar frequencies in the big cases.
If there’s going to be a change in frequency it may be on the factor of whether we’ve actually seen a permanent change in the level of patient safety and the kind of risk management and quality assurance changes over the last 10 years.
I kept asking people that I was talking to whether they thought that entry of new participants into the medical malpractice liability market constituted a bet that doctors and hospitals were actually going to have fewer claims because they were actually committing fewer acts that brought claims. Nobody seemed to think that. They thought everybody was being brought in simply by the high level of profitability in the last few years.
McDONALD: Stan Starnes, are you seeing in the reinsurers that you deal with, are they taking any noticeably changed positions in terms of reinsuring this line?
STARNES: I think they’re becoming more cautious about issuing reinsurance to the startups and the smaller players simply because the environment that they’re operating in today is challenging and it’s growing more challenging. The reinsurers realize that the investment returns available to the primary underwriters is going to be far less than the historical norms have been. The reinsurers realize that most people do not expect frequency to continue to fall. Most people say that it is low but nobody that I hear says that it’s continuing to fall.
So all of these things work together to create difficulties if the reinsurers are standing behind somebody that does not have considerable financial strength and I expect them to continue to show improvements in that regard. I also think that the reinsurers think for the most part we probably can’t expect a great deal more meaningful tort reform on the state level. That seems to have played out to a great extent. As somebody who practiced law for 35 years I’ve tried to explain this to a number of reinsurers, that the important thing about tort reform in the United States is not whether a plaintiff collects less or a defendant pays more or an insurance company pays less or more. The important thing about tort reform for our society is that we must create an environment in which physicians feel that they will be treated appropriately and fairly, thereby assuring our society of access to health care. That’s the real goal of tort reform. It’s not about money. It’s about something much more important than money. It’s about access to care. That’s why tort reform is so important. But I think most reinsurers feel that probably we have experienced the majority of that that we’re going to experience in the near term. It will be interesting to see what the courts do with the cases that presently are before them.
McDONALD: Chad Karls, what happens in med mal is in some way tied to larger issues, particularly economic and social. Can you elaborate on that please?
KARLS: One of the areas of concern that the industry has is specific to their industry, they’re seeing rate pressures, they’re seeing possible frequency increases in certain places. But beyond the factors specific to the industry there are other issues at play in the broader economy that some have mentioned as additional points of concern. Clearly we’ve gone through a period of time with some extended difficulties, if you will, in the broader economy. In particular, we haven’t seen Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9