Interesting Evaluation

September 9, 2007

THE CALIFORNIA EXPERIENCE

 

Thirteen years after the state’s severe $250,000 cap on damages was enacted (MICRA, passed in 1975), “doctors’ premiums had increased by 450 percent and reached an all-time high in California.” But in 1988 California voters passed a stringent insurance regulatory law, Proposition 103, which “reduced California doctors’ premiums by 20 per within three years,” and stabilized rates.

 

In the thirteen years after MICRA, but before the insurance reforms of Prop. 103, California medical malpractice premiums rose faster than the national average. In the twelve years after Prop. 103 (1988-2000), malpractice premiums dropped 8 percent in California, while nationally they were up 25 percent.  Moreover, the law has led to public hearings on recent rate requests by medical malpractice insurers in California, which resulted in rate hikes being lowered three times.

 

The “liability insurance crisis” of the mid-1980s was ultimately found to be caused not by legal system excesses but by the economic cycle of the insurance industry.

Just as the liability insurance crisis was found to be driven by this cycle and not a tort law cost explosion as many insurance companies and others had claimed, the “tort reform” remedy pushed by these advocates failed. It has failed again.

 

Read more interesting facts about Tort Deform (.pdf) 

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