Ark. Insurers To Examine Impact Of Tort Reform
By Michael Ha
NU Online News Service, July 11, 4:10 p.m. EDT?Arkansas Insurance Commissioner Mike Pickens said he is urging insurers to consider the state's new tort reform act when submitting rate fillings to his insurance department.
In a bulletin released this week, Commissioner Pickens spelled out what regulators are expecting from insurers regarding his state's Civil Justice Reform Act of 2003, which went into effect this past March.
The tort reform law, among other things, puts a cap on punitive damage awards. The maximum amount allowed under the new law is $250,000, or three-times the economic loss if that figure turns out to be greater. In either case, the final amount cannot exceed $1 million.
The Act also eliminates joint-and-several liabilities for most nursing home medical directors in Arkansas. Additionally, the law gives 30 days for plaintiffs filing medical malpractice suits to submit an expert affidavit, which attests to their lawsuits' legitimacy. Plaintiffs who fail to provide such an affidavit will see their cases get dismissed.
Furthermore, medical malpractice suits must now be filed in the county where the alleged medical injury occurred. This requirement can limit attorneys' ability to search for favorable jurisdictions.
The law also gives the courts discretion in prescribing payment of future damage awards, and either plaintiffs or defendants can ask for periodic payments for awards that exceed $100,000.
To better understand what impact these new requirements are having on insurers' bottom lines, Commissioner Pickens is asking insurers to offer their analysis when filing rates with his department.
He noted that in future filings, insurers will be expected to submit an analysis on the impact of the act "based on actuarial principles and standards of practice," and to tell regulators how the Act is influencing their underwriting. Afterwards, insurers will be required to implement any potential rate reduction to be consistent with their analysis.
"This department remains concerned about the availability and affordability of professional liability insurance, especially in the medical malpractice and nursing home liability markets," Commissioner Pickens said.
John Hartnedy, deputy insurance commissioner at Arkansas, also told National Underwriter, "The average loss ratio for medical malpractice insurers in our state is $1.60 for each dollar of premium they bring in."
He added: "The situation is very serious here. Our rates are so much out of line."
So given the dire circumstance, rates are not likely to decrease, Mr. Hartnedy said, "But will this act help? Absolutely, I firmly believe it will help in at least slowing the pace of rate increase."
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.