State doctors’ insurance woes blamed on Enron fall

Friday, Feb. 1, 2002 | 10 a.m.

CARSON CITY -- St. Paul Cos., which is leaving Nevada's medical malpractice market, has manufactured the crisis facing doctors to cover stock market losses, a prominent trial attorney says.

Bill Bradley, past president and a current member of the board of directors of the Nevada Trial Lawyers Association, pointed out the Minnesota company suffered heavy losses on Enron stock last year.

St. Paul reported it lost $71.6 million from investments in the past three months of last year, $10 million of it on Enron. That compared with investment gains of $56.9 million in the same quarter the previous year.

"Physicians are caught in the middle of a greedy insurance company and the recession," Bradley said. "The stock market crashed and our people are paying for it."

Andrea Wood, senior communications specialist for St. Paul, rejected Bradley's analysis.

"We made the decision to exit medical malpractice because of the huge losses we have incurred in this line over the past number of years on a national basis," she said.

Last year the company lost nearly $1 billion on medical malpractice insurance nationwide, $33 million on claims in Nevada in the first 11 months of the year, she said.

Losses in the state have totaled $216 million since 1996.

"No company can be expected to continue to sustain this level of unprofitability," Wood said Thursday.

The company, which covers about 1,100 doctors in Nevada, will start sending out non-renewal notices this month for policies that expire at the end April or the beginning of May.

Policies now in effect will remain in force until they expire, Wood said.

Doctors who are losing their coverage by St. Paul say they are facing premiums that range up to 500 percent higher to secure other malpractice policies. Some are talking about moving to other states or retiring because of the crisis, Larry Matheis, executive director of the Nevada State Medical Association, said.

State Insurance Commissioner Alice Molasky-Arman has scheduled hearings for March 4 on what she calls the worst medical crisis in a decade. Meanwhile, doctors are talking about forming their own insurance company.

Some doctors have complained that the crisis has been driven up by frivolous lawsuits.

They talk about putting a cap on medical malpractice judgments, a move that the trial lawyers have successfully fought off for three decades.

The state medical association is preparing legislation for the 2003 Legislature, patterning it after a California law that limits damages for pain and suffering to $250,000, Matheis said. They may even ask for a special session of the Legislature to act.

Rates have fallen one-third in California since its law passed, Matheis said.

The trial lawyers association has been working with the governor's office to try to keep physicians from fleeing the state or giving up their practices, hoping to avoid a special session or award limits.

"We're working hard on this manufactured crisis," Bradley said. "I think calmer minds will prevail and people will realize Nevada is still a good place to live and practice medicine."

Putting a limit on malpractice awards "is an insult to the people of the state of Nevada and saying that juries are not capable of determining fair awards," he said.

Bradley said St. Paul is to blame for high judgments against it, because took cases to trial that could have been settled for less.

He also accused the company of breaking a commitment it made to Nevada six years ago, when it purchased Nevada Medical Liability, an insurer created by doctors during a similar crisis in the 1970s.

St. Paul testified during hearings it planned to stay in Nevada for the long term, Molasky-Arman and Bradley recalled.

The company is running after a turn of bad luck, Bradley said. "They made a selfish callous decision to break the promises made in the early '90s to protect physicians. They have left the state and citizens and physicians holding the bag."

The losses from the malpractice coverage came too fast too quickly for St. Paul, Wood said.

"Insurance is a competitive business and our loss trends in the 1990s increased faster than we could respond," she said. "We had difficulty accurately predicting the losses we incurred during this time period.

"We don't see any near-term solutions to the trends that are driving these losses."

The losses did not come for a lack of rate increases.

St. Paul Cos. was allowed to raise rates 70 percent in the past six months, Molasky-Arman said, though it had asked for an 83 percent increase.

Another major insurer, CNA, was granted a 52 percent increase in premiums recently.

The Doctors Co., which also handles malpractice policies, has requested a 51 percent increase for physicians in Clark County and 12.2 percent in the rest of the state.