Nevada Testimony
February 27, 2002
Ms. Alice A. Molasky-Arman
Commissioner of Insurance
State of Nevada
Division of Insurance
788 Fairview Drive, Suite 300
Carson City, Nevada 89701-5491
Commissioner Molasky-Arman:
Per your request, listed below is The Doctors Company’s “pre-filed testimony” for the March 4th, 2002, hearing:
1. What is your impression of the adequacy of the medical malpractice market in Nevada? What changes would you recommend to make it more effective?
The medical malpractice market in Nevada is unable to meet the needs of Nevada physicians. Several carriers have withdrawn from the Nevada marketplace, leaving a shortfall in market capacity that is not being filled by other medical malpractice carriers. The reason that other medical malpractice carriers are not filling the void left by the withdrawing carriers is that the tort environment of Nevada, particularly southern Nevada, is extremely unpredictable. Sound underwriting and pricing practices are futile in an environment of uncontrolled volatility. In such an environment, medical malpractice carriers are certain to sustain losses far beyond premiums written, and to jeopardize their financial stability. Over the last ten years, The Doctors Company has operated at a loss in Nevada. The Doctors Company’s combined ratio for the last ten years in Clark County is 178%.
Physicians have a right to expect stability from the insurance companies they entrust with their medical careers. In the best of worlds, the market forces operating in Nevada would foster that stability. With a stable marketplace, insurance companies would be competing in Nevada, not withdrawing.
Instead, Nevada experiences both higher frequency of claims and high verdicts. With no real tort laws in Nevada, insurance companies and doctors are forced to live in a high-risk environment.
If the Nevada legislature tolerates high verdicts and high risks, Nevada doctors will pay high rates. If insurance companies face high risks and high defense costs, they will only stay in Nevada if the rates are commensurate with those risks.
Compare $34,249 for an OB in San Francisco, California, to $112,628 for an OB in Clark County, Nevada. Compare $36,150 for a neurosurgeon in San Francisco, California, to $113,911 for a neurosurgeon in Clark County, Nevada. Compare $6,050 for an internist in San Francisco, California, to $19,967 for an internist in Clark County, Nevada.
If the Nevada legislature wants similar premiums for their physicians, they must enact similar tort reform state statutes.
The solution is tort reform—specifically a cap on noneconomic damages with additional components addressing: sliding scale limits on attorney’s fees; mandated annuity payments for future damages and introduction of evidence of collateral sources.
2. Please provide a brief overview of your market intentions for Clark County and the remainder of state.
We intend to continue to serve our insureds both in Clark County and the rest of the state. However, we need to maintain actuarially sound rates. With regard to writing new business in Nevada, we will do so only with extreme caution.
3. Are you targeting or avoiding any particular classes of medical providers? Is this true in all parts of the state?
We write all physician specialties with the exception of emergency medicine in both Clark County and northern Nevada.
4. Are you nonrenewing any classes of providers? Is this true in all parts of the state? When a provider is nonrenewed, are there any restrictions with regard to the offer of tail coverage?
The Doctors Company will not nonrenew any classes of providers in Nevada (statewide). If a physician is nonrenewed due to loss experience or other underwriting issues, there are no additional restrictions with regard to the offer of tail coverage, other than the ones enumerated in our policy.
5. What is your underwriting criteria for new and renewal business? Do you consider “incidents” in an adverse manner?
Our underwriting criteria for both new and renewal business includes but is not limited to the following:
- Frequency of claims as compared to the average for the specialty;
- Severity of claims as compared to the average for the specialty;
- Practice profile and exposures;
- Physician’s personal profile, including but not limited to training; medical board/Medicare/Medicaid/governmental or regulatory agency history; possible impairment (physical/mental illness/alcoholism/narcotics addiction); professional liability insurance history; criminal record.
“Incidents” are treated as a report of a claim and are evaluated to determine potential liability. It is exceptional to reserve an incident and for such reserve to impact the underwriting process.
6. Please comment on the price and availability of reinsurance.
The Doctors Company currently cedes limits excess of $1M for its standard physician’s book. At present we have no restrictions as to states or territories; however, reinsurers have identified Nevada, Clark County specifically, as a very poor environment for excess limits, on par with the poorest tort environments in the United States, such as New York, Florida, Texas, West Virginia and Illinois. Our reinsurance rates for these territories ($1M xs $1M) are 40% higher, on an ILF basis, than the rates paid in more attractive venues, such as California and Colorado.
7. How many claims actually went to trial in the last two years? (2000 & 2001)? Excluding the “incident reports,” what proportion of the total claims does this represent? What were the damages awarded in each? What was the make-up in terms of economic v. noneconomic damages? Were there any bad-faith judgments against your company?
| Year 2000 | ||
| 21 | cases tried | |
| 15 | defense verdicts | |
| 3 | hung jury | |
| 1 | settled during trial | |
| 2 | plaintiff verdicts | a) $205,000–all economic damages b) $250,000–all noneconomic |
Year 2001 |
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| 13 | cases tried | |
| 9 | defense verdicts | |
| 4 | plaintiff verdicts | a) $6,000,000 - $1,000,000 non-economic, $5,000,000 economic b) $1,500,000 - $1,050,000 non-economic, $450,000 economic c) $9,009, 155-$151,181 non-economic, $8,857,974 economic d) $1,255,000-$1,250,000 non-economic, $5,000 economic |
Open claims in Nevada year-end 2000 – 201 open |
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| Open claims in Nevada year-end 2001 – 178 open | ||
The Doctors Company had no bad faith judgments in 2000 or 2001. |
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8. What is your evaluation of the screening panel and claim settlement process? How could it be improved?
There are several things that need to be “fixed” in regards to the screening panel in Nevada. First of all the makeup of the screening panel favors the plaintiffs as most, if not all of the attorneys, on the panel are plaintiff attorneys. In northern Nevada, once the complaint, response, and reply are submitted, it takes approximately 6–9 months for a decision. In southern Nevada, it takes approximately 9–12 months and, if there are numerous respondents, it may take 12–14 months.
Plaintiff attorneys are taking advantage of this situation by filing the District Court Complaint at the same time as the Panel Complaint. They know that the District Court Complaint will be stayed while the case is pending with the Panel; but then they will have an extra 1-1_ years of interest running that gets added to any verdict when the District Court Complaint is ultimately tried. As you know, the Panel can reach one of three decisions, “probability of malpractice,” “no probability of malpractice,” and “unable to decide.” Approximately one case in three receives a finding of “unable to decide.” 96% of the “unable to decide” findings proceed to a lawsuit. This finding is unacceptable and should not be allowed, as it offers no incentives to the plaintiff to either refrain from filing a District Court Complaint or to dismiss the one that has already been filed. Of the “no probability of malpractice” findings, over 50% of those proceed to trial. We have to come to the conclusion that if a finding of “unable to decide” were dropped, then a number of those would result in a finding of “no probability of negligence” and not proceed to a lawsuit.
As to the claims settlement process following a panel finding, we have only settled two cases in northern Nevada at the time of the court mandated settlement conference. For the most part there has been no discovery completed at that time and, therefore, we do not have enough information to make a decision regarding the exposure. As our policy requires written consent from the insured, they are usually hesitant to give consent without additional discovery being done. Also, the judge places a value on the case, which is usually high, and then it becomes very difficult to settle the case for anything less, even after discovery is completed.
In conclusion, The Doctors Company believes that the panel does not make a significant difference in the number of cases filed in District Court nor does it cut down on frivolous claims. The makeup of the panel is biased and it takes much too long to receive a decision. In addition, it adds on an average $10,000 to the cost of the case as we are paying $6,500 flat rate in fees for all panel cases and then additional money for costs including expert review and affidavits. It is our recommendation that unless these issues can be resolved, the panel be eliminated; however, if it is to continue, then the above issues need to be addressed and remedied.
A. When the screening panel finds no malpractice, what percentage proceed to court anyway? What percentage of claims are settled with a payment after such a finding?
| No malpractice | 60 | |
| Proceeds to court | 31 | 52% |
| Settled with a payment-prior to trial | 7 | 12% |
B. When the screening panel fails to make a determination, what percentage proceed to court anyway? What percentage claims are settled with a payment after such a finding?
| Undecided | 45 | ||
| Proceeds to court | 43 | 96% | |
| Settled with a payment-prior to trial | 19 | 42% | |
| Settled with payment-during trial | 1 | 2% | |
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| Total settled | 20 | 44% | |
C. When the screening panel determines that there was “malpractice,” what percentage proceed to court? What percentage are settled with a payment prior to a verdict?
| Malpractice | 19 | ||
| Proceeds to court | 19 | 100% | |
| Settled with a payment-prior to trial | 13 | 68% | |
| Settled with a payment-after verdict | 2 | 11% | |
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| Total settled | 15 | 79% | |
9. If the Commissioner finds it necessary to invoke the Essential Insurance Act (NRS 686B.180), what are your recommendations and preferences?
The Doctors Company respectfully submits that it is being asked to answer the wrong question. The premise of the question is that invocation of the Essential Insurance Act can solve the insurance availability/affordability crisis facing this state. The Doctors Company does not believe this crisis is at its core an insurance problem; it is a tort problem—the litigation environment, particularly in Clark County, is unpredictable and volatile. Until this problem is addressed it will be very difficult to develop a competitive insurance marketplace for medical malpractice insurance. However, in the 1970s when California was in the midst of its own medical malpractice crisis, few would have believed that today we would have a number of “A rated” companies competing for medical malpractice business in that market.
In Nevada, as in other states experiencing affordability/availability problems, the first question that needs to be addressed is what is driving out carriers and driving rates up. The answer virtually always is an unpredictable and volatile tort environment. Recent market “solutions” to the availability/affordability problem have failed in other states such as Pennsylvania. Recent similar efforts in other states such as West Virginia appear likely to fail absent substantive tort reform. In sum, The Doctors Company’s recommendation and preference would be to work with the Department, the Legislature and the Governor to develop comprehensive, equitable tort reform to help restore Nevada to a competitive and strong insurance market.
Regards,
J. A. Meyer for
Bruce L. Crile
Executive Vice President, Operations
