New Jersey - Volume XIII, Number 11 - November, 2004

MEDICAL MALPRACTICE INSURANCE REFORM RULES PUBLISHED AS JURY AWARDS RECORD $75 MILLION MALPRACTICE VERDICT Last week an Essex County jury awarded $75 million, including $50 million in “pain and suffering” in a case involving a brain damaged child. The verdict is believed to be the largest in State history and highlights, yet again, the need for drastic tort reform. No amount of money can compensate for a brain injury to a child. What parent would trade any amount of money for a child’s health? Huge money awards which cripple our healthcare system do not fix a problem, they simply make the problem worse.

While this case was pending the State Department of Banking & Insurance (“DOBI”), avoiding the real work of tort reform, published a set of rules to implement the New Jersey Medical Care Access and Responsibility and Patients First Act (“Act”). The Act offers only modest relief to the medical malpractice liability insurance crisis.

The rule would prohibit increases in premium renewals based upon claims filed against the insured where the insured is dismissed at an early stage without payment being made. Thus, it is vital that a physician, faced with a frivolous malpractice claim, demand that everything be done to have the case dismissed as soon as possible. Any claim dismissed within 180 days cannot be used as a basis to increase a premium.

Another part of the proposed rules would require insurers who offer policies that include a provision giving insureds the right to consent to the settlement of malpractice claims to also offer an endorsement affording the insured the option to waive that right. If selected, the option will result in a premium reduction. However, the waiver of that right eliminates the physician’s right to object to the settlement of a defensible case. An insurer may well decide that it is far less expensive to settle a defensible case than to pay the cost of defending it. But, after the case is settled, the physician’s premium increases dramatically!

The rules would also require medical malpractice liability insurers to offer policies with deductibles, at the option of the insured, ranging from at least $5,000 per claim on all policies, and up to $1 million per claim on policies with limits of at least $1,000,000/$3,000,000. The rules would further require every insurer to offer an installment premium payment option which would include: 1) a minimum initial deposit, which shall be no more than 50% of the estimated total premium; 2) a schedule for the payment of premiums on an installment basis; 3) no interest charges; 4) an installment charge of the lesser of 1% of the total premium or $25 per installment; and 5) a payment plan. The payment plan differs based on whether the annual premium exceeds $80,000. Insureds could pay the premium in full at any time without penalty.

Medical malpractice insurers would be required to mail or deliver a notice of renewal or nonrenewal not less than 60 days prior to the expiration of a policy, advising whether the policy will be renewed and if there will be any changes in premium or terms. This should allow physicians whose policies will not be renewed to have sufficient time to obtain a replacement policy. The insured must state the reason for nonrenewal. Insurers must also report to DOBI (in addition to reporting to the State Board of Medical Examiners) information related to any medical malpractice claim settlement, judgment or arbitration award involving any practitioner.

Comments on the proposed rules will be accepted by DOBI through December 31, 2004, including e-mail comments addressed to Douglas Wheeler, Assistant Commissioner, Legislative & Regulatory Affairs, DOBI, at Legsregs@dobi.state.nj.us or by fax to 609-292-0896.

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