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The Wall Street Journal
Oct 28, 2004


Malpractice Insurer Sees Little Savings in Award Caps

One of the nation's largest medical-malpractice insurance companies told regulators that recently enacted caps on noneconomic damages in Texas would save it little money.

In a filing with the Texas Department of Insurance seeking a rate increase, Medical Protective Co., an arm of General Electric Co., said the caps would lower payouts by just 1%.

Last year, after a pitched political battle, Texans voted to amend their state constitution to allow caps on awards for noneconomic damages, such as pain and suffering, in medical-malpractice cases. In most cases, that cap is $250,000.

Medical Protective's filing was made public by the Foundation for Taxpayer & Consumer Rights, a Santa Monica, Calif., consumer group that has opposed such caps. The foundation has also opposed rate increases by Medical Protective and others in the state of California.

"When the largest malpractice insurer in the nation tells a regulator that caps on damages don't work, every legislator, regulator and voter in the nation should listen," said the foundation's executive director, Douglas Heller.

Jay Thompson, an attorney representing Medical Protective, said the statements referred to by Mr. Heller's group were "one small part of the filing," and had been taken out of context. "It completely ignores the realities of the litigation arena," Mr. Thompson said.

He said Medical Protective favors caps on noneconomic damages and was a member of a group, the Texas Alliance for Patient Access, that was a primary supporter of the legislation.

The question of capping awards for noneconomic damages has triggered debates at state and national levels, with President Bush a strong proponent of such restrictions.

The filing in question was made to the Texas Department of Insurance last year as part of Medical Protective's request for a 19% rate increase. The state agency rejected that request and the case is before an administrative judge in Texas, said Mike Geeslin, deputy commissioner for policy at the Department of Insurance.

Mr. Geeslin cautioned that the information in the filing should not be applied to the rest of the industry. "You're looking at information submitted in a rate filing that is obviously slanted toward trying to justify some sort of rate action," Mr. Geeslin said.

In the filing, Medical Protective said, "Noneconomic damages are a small percentage of total losses paid. Capping noneconomic damages will show loss savings of 1.0%." Mr. Thompson said he couldn't say what percentage of total losses paid came from noneconomic damages.

But a white paper dated March 2004 and posted on Medical Protective's Web site states that capping noneconomic damages is a "critical element [of tort reform] because in recent years we have seen noneconomic damages spiraling out of control."

One of the leading advocates for the passage of the caps was the Texas Medical Association. The association, which represents the interests of doctor members, contends that the caps have already resulted in lower insurance rates for doctors. It says that after the legislation passed, the Texas Medical Liability Trust, which provides malpractice insurance, cut premiums 17%. Medical Protective insures about 6,500 doctors in Texas, making it the No. 2 insurer behind the Trust.
Write to Joseph T. Hallinan at joe.hallinan@wsj.com1 and Rachel Zimmerman at rachel.zimmerman@wsj.com2

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