State Volunteer Mutual Insurance Company (SVMIC), Tennessee’s bedpan mutual, has been around almost forty years. Started by doctors for doctors, it writes more medical malpractice insurance coverage for doctors and their extenders than any other professional liability insurer in Tennessee.
The company is insuring a decreasing number of doctors in Tennessee, in part (my guess) because of aggressive marketing and rating-setting by other insurers and an increasing number of doctors joining groups. The number of SVMiC-insured doctors in 2012 was 14,268, down from 15,501 five years ago.
The company now has $1.169 billion in assets, having broken the billion dollar barrier in 2009. The company has reserved $560 million to pay claims and claim expenses. What does this mean? It means that if the company was able to settle or resolve every case for the reserved amount, and pay predicted expenses for defense counsel and such, the company would have $464 million to return to its policyholders. In fact, the surplus is probably much greater than that. History has demonstrated that the company tends to over-estimate its future loss payments and claim expenses, a conservative approach and one which I do not suggest is inappropriate in any way.
SVMIC had $157 million in premium income last year, down about $90 million from five years earlier. What’s going on? Several things. First, the number of insureds has dropped about 8%. More importantly, premiums have dropped substantially in the last five years and in fact held flat in 2012.
Another reason for the decline in premiums – dividends. In a mutual company, dividends to the owners of the company (the policyholders) are returned in the form of premium credits. In the last five years, premiums have been reduced a total of $65 million because of these dividends.
Therefore, notwithstanding the fact that premium income is down 40% in the last five years, net income has staying the same – about $26 million.
A couple more points. First, SVMIC paid only 99 claims in Tennessee in 2012. Just 99. The total payments on these 99 claims was $33.8 million, for an average of $338,000 per claim. SVMIC had 1,134 claims pending in Tennessee as of the end of 2012, and has reversed $228.5 million to pay these claims.
Note that the average payment on paid claims is just that – an average payment on paid claims. It does not take into account the total number of claims closed – a calculation that would include lots of zero payments. Rather, the number tells us that of all the payments made on behalf of all the paid claims in 2012, the average payment is about $338,000.
The number of paid claims is dropping and the average value of each settlement is staying remarkably similar, despite a huge increase in the cost of medical care (a significant component of medical malpractice damage awards). In 2007 the company paid a total of 152 claims in the entire state of Tennessee. The payments totaled 62,833,000. The average payment per claim was $413, 375. In 2006, the company paid out money to plaintiffs in 158 cases. The total amount paid was $56,660,652. The average payment per claim that year was $358,611.
One last point. Many of us who represent plaintiffs in Tennessee medical malpractice cases have "felt" that medical malpractice insurers are fighting cases harder than ever. More depositions. Longer depositions. More stupid deposition questions that have little to do with the case. More motions. More experts. More experts that say the same thing as other experts. And on and on.
The SVMIC report demonstrates that defense is fighting harder than ever. The company’s defense costs have doubled in the last five years. Doubled. Even though the number of claims is dropping.
Now, I assume (and hope) that the hourly rate for defense lawyers have gone up some amount in the last five years. But I doubt it has gone up much, mainly because the decreasing number of claims have tended to put downward pressure on rates as defense lawyers compete for a piece for a smaller pie.
No, those of who represent plaintiffs who "feel" that the defense is fighting harder and paying less to resolve valid are probably right. Between efforts to pass anti-patient laws and defend cases more aggressively, SVMIC and others are using their political and economic power to limit the number of claims that are filed and the value and profitability of the claims that find their way to the courthouse.
And it is working.
Those of us who represent plaintiffs in medical malpractice cases must continue to improve our skills and work these cases even more efficiently and effectively than we already do. We must continue to share information with our brother and sister plaintiff’s lawyers – a rising tide truly lifts all boats. And we continue the battle in the Legislature – sooner or later, someone will pay attention to the facts and realize that the law has become unfairly anti-patient.