Insurance Companies and Their Lobbyists Admit It:
Caps on Damages Won’t Lower Insurance Premiums

Caps on damages for pain and suffering will significantly lower the awards paid to catastrophically injured patients. But because such truly severe cases make up a small percentage of medical malpractice claims, and because the portion of the medical liability premium dollar that pays for compensation is dwarfed by the portion that pays for defense lawyer fees, caps do not lead to lower premiums. Insurance companies and their lobbyists understand this – so don’t take our word for it, take theirs.

Premium on the Truth:

"Insurers never promised that tort reform would achieve specific savings." – American Insurance Association1 

"We wouldn’t tell you or anyone that the reason to pass tort reform would be to reduce insurance rates." – Sherman Joyce, president of the American Tort Reform Association2

"Many tort reform advocates do not contend that restricting litigation will lower insurance rates, and I’ve never said that in 30 years." – Victor Schwartz, general counsel to the American Tort Reform Association3


"I don’t like to hear insurance-company executives say it’s the tort [injury- law] system – it’s self-inflicted," – Donald J. Zuk, chief executive of Scpie Holdings Inc., a leading malpractice insurer in California4


"No responsible insurer can cut its rates after a bill (that caps damages at $250,000) passes." – Bob White, president of First Professionals Insurance Co. (formerly Florida Physicians Insurance Company, Inc). The company is the largest medical malpractice insurer in Florida and has close ties to the Florida Medical Association.5


"Regardless of what may result from the ongoing tort reform debate, please remember that such proposed public policy changes are critical for the long-term, but do not provide a magical ‘silver-bullet’ that will immediately affect medical malpractice insurance rates … The 2003 rate change [a 45 percent increase] would happen regardless of the special session outcome." – Medical Assurance Company of Mississippi6


"The primary insurer for Las Vegas obstetricians, American Physicians Assurance, has no plans to lower premiums for several years, if ever, said broker Dennis Coffin." – Coffin is the Account Representative for SCW Agency Group – Nevada, which represents the American Physicians Assurance Corp.7

"[John Cotton of the Nevada Physicians’ Task Force] noted that even if the bill reflected a cap of $5, there would not be an immediate impact on premiums." – Minutes of the Nevada Assembly Committee on Medical Malpractice Issues8

New Jersey

During a hearing on medical malpractice issues, New Jersey Assemblyman Paul D’Amato asked Patricia Costante, Chairwoman and CEO of MIIX Group of Companies, "[A]re you telling the insured physicians in New Jersey that if this State Legislature passes caps that you’ll guarantee that you won’t raise your premiums, in fact, you’ll reduce them?" Costante replied: "No, I’m not telling you [or them] that."9

The New Jersey Medical Society commissioned Tillinghast-Towers Perrin, a leading actuarial firm, to analyze the effects of a $250,000 cap on pain and suffering damages. The findings: "We would expect that a $250,000 cap on non-economic damages will produce some savings, perhaps in the 5 percent to 7 percent range for physicians." – Letter from Tillinghast-Towers analysts James Hurley and Gail Tverberg10


"In the short run, we may even see prices go up another 20 percent, and people will say, ‘Gee, what happened, I thought we addressed this?"’ – Ray Mazzotta, president of Columbus-based Ohio Hospital Insurance Co.11

"The stroke of the governor’s pen [enacting caps on damages] will not result in immediate lowering of rates by responsible companies." – Frank O’Neil, spokesman for Birmingham, Ala.-based Medical Assurance12


During a hearing on medical malpractice insurance issues, Bruce Crile of the Doctors’ Company and Melissa Dennison of OHIC Insurance Company testified that insurance rates would not drop if caps on damages were imposed. "Both the Doctors’ Company and OHIC’s actuaries say a cap of $500,000 is meaningless for purposes of ratemaking. Even with caps enacted premiums will still increase, but with predictability of the risk there will be a moderating of rate increases." – Minutes of the Wyoming Legislature’s Joint Labor, Health and Social Services Interim Committee13

1 "AIA Cites Fatal Flaws In Critic’s Report On Tort Reform," American Insurance Association press release, March 13, 2002.

2 "Study Finds No Link Between Tort Reforms And Insurance Rates," Liability Week, July 19, 1999.

3 Michael Prince, "Tort Reforms Don’t Cut Liability Rates, Study Says," Business Insurance, July 19, 1999

4 Rachel Zimmerman and Christopher Oster, "Assigning Liability: Insurers’ Missteps Helped Provoke Malpractice ‘Crisis’; Lawsuits Alone Didn’t Cause Premiums to Skyrocket; Earlier Price War a Factor," The Wall Street Journal, June 24, 2002.

5 Phil Galewitz, "Underwriter Gives Doctors Dose of Reality," The Palm Beach Post, January 29, 2003 and Mike Salinero, "Insurers Tied To Florida Doctors," The Tampa Tribune, March 22, 2003.

6 Julie Goodman, "Premiums Rise by 45 Percent; Insurance Group’s Hike Comes as Doctors Seek Relief," Clarion-Ledger (Jackson, Miss.), September 22, 2002.

7 Joelle Babula, "Obstetricians Say Problems Remain," The Las Vegas Review-Journal, October 1, 2002.

8 "Testimony on Assembly Bill 1: To Make Various Changes Related to Medical and Dental Malpractice," Nevada Assembly Committee on Medical Malpractice Issues, July 30, 2002.

9 "Testimony Concerning the Affordability of Medical Malpractice Insurance for Physicians Practicing in New Jersey," Public Hearing Before the Assembly Health and Human Services Committee and Banking and Insurance Committee, June 3, 2002.

10 Letter to Ray Cantor, Director of Governmental Affairs for the State Medical Society of New Jersey, from Tillinghast-Towers analysts James Hurley and Gail Tverberg, January 7, 2003.

11 "No Drop in Malpractice Rates Pending," The Associated Press, January 10, 2003.

12 "No Drop in Malpractice Rates Pending," The Associated Press, January 10, 2003.

13 Testimony at the Wyoming Legislature’s Joint Labor, Health and Social Services Interim Committee, December 4-6, 2002.