Tort Insurance Research Articles

Improve Medical Malpractice Law by Letting Health Care Insurers Take Charge

This essay discusses unlimited insurance subrogation (UIS) as a means of improving the deterrence and compensation results of medical malpractice law. Under UIS, health care insureds could assign their entire potential medical malpractice claims to their first-party commercial and government insurers. UIS should improve deterrence by establishing first-party insurers as plaintiffs to confront liability insurers on the defense side, leading to more effective prosecution of meritorious claims and reducing meritless and unnecessary litigation. UIS should improve compensation outcomes by converting litigation cost- and risk- laden "tort insurance" into cheaper and enhanced first-party insurance. UIS also promises dynamic benefits through further reforms by contract between the first-party and liability insurers that would take charge of system. No UIS-related costs are apparent that would outweigh these benefits.

Unlimited Subrogation: Improving Medical Malpractice Liability by Allowing Insurers to Take Charge

This article proposes unlimited insurance subrogation (UIS) to improve the insurance and deterrence results of medical malpractice liability. Unlimited insurance subrogation enables patients to assign their entire potential medical malpractice claims to their first‐party insurers without limitation as to the amount the insurers pay out in benefits or recover in tort damages. Unlimited insurance subrogation should improve insurance outcomes by converting suboptimal tort insurance into more optimal first‐party insurance. Establishing first‐party insurers as plaintiffs to confront liability insurers on the defense side should improve deterrence through more effective prosecution of meritorious claims and by harnessing the insurers’ incentives for cooperation to reduce meritless and unnecessary litigation. In addition, UIS should encourage further reforms by contract between the first‐party and liability insurers who would take charge of the system. This article shows that loss of patient cooperation, insurer gaming, and other possible problems with UIS are unlikely to arise or are readily solvable.

Improving Medical Malpractice Liability By Allowing Insurers to Take Charge

This paper proposes a solution to many of the basic problems with the current system of medical malpractice liability. By all accounts, despite consuming more than $20 billion annually, this system has proven ineffective and probably counterproductive as a means of deterrence and source of insurance. High litigation cost precludes or suppresses vigorous prosecution of most meritorious claims, while it motivates filing of unmeritorious claims for nuisance value payoffs. Patients are compelled to buy that not only doubles the coverage for economic loss they already have and can cheaply supplement from commercial and governmental suppliers of first-party insurance, but also mandates coverage for non-pecuniary harm that no one wants if they have to pay higher premiums and taxes to get it. The solution is simply to change the law of insurance subrogation as it applies to insurers acquiring their insureds' tort claims. Currently the rule limits subrogation to the amount an insurer paid in covering its insured's loss. The proposed change would allow insurers to acquire their insureds' potential malpractice claims without limitation, including recovery of all damages, non-pecuniary as well as economic. In short, the paper proposes unlimited insurance subrogation (UIS) as a natural and efficient vehicle for patients to assign their entire potential malpractice claims to their first-party insurers. UIS will thereby improve both deterrence and insurance results of medical malpractice liability. By making first-party insurers plaintiffs and placing them on the same footing as their defense-side counterparts, liability insurers, UIS should increase the rate at and effectiveness with which meritorious claims are prosecuted and also reduce meritless litigation, as these large-scale, longterm repeat players will possess the needed means of mutual deterrence and motive for mutual cooperation. At the same time, as first-party insurers lower premiums (and taxes) in anticipation of subrogated claim recoveries, UIS will operate to convert expensive, risky, dilatory, and to a large extent unwanted tort insurance into a greater amount of more optimal first-party insurance. In addition to these direct benefits, UIS should encourage first-party and liability insurers to establish by contract a private system for more efficaciously resolving medical malpractice claims. The paper addresses possible costs of UIS, notably loss of patient cooperation in subrogation suits and jury sympathy for plaintiffs; none is found to pose a substantial problem.

The Influence of Motor Vehicle Legislation on Injury Claim Incidence

Although there have been numerous strategies to prevent motor vehicle collisions and their subsequent injuries, few have been effective in preventing motor vehicle injury claims. In this paper, we examine the role of legislation and compensation system in altering injury claim incidence. The population base for our natural experiment was all Saskatchewan, Manitoba, British Columbia and Quebec residents who submitted personal injury claims to their respective motor vehicle insurance provider from 1990 to 1999. The provinces of Saskatchewan and Manitoba switched from Tort to pure No-Fault insurance on January 1, 1995 and on March 1, 1994 respectively. British Columbia maintained tort insurance and Quebec maintained pure no-fault insurance throughout the entire 10-year period. The conversion from tort insurance to pure no-fault motor vehicle insurance resulted in a five-year 31% (RR = 0.69; 95% CI 0.68-0.70) reduction in total injury claims per 100,000 residents in Saskatchewan and a five-year 43% (RR = 0.57; 95% CI 0.56-0.58) reduction in Manitoba. At the same time, the province of British Columbia retained tort insurance and had a five-year 5% reduction (RR = 0.95; 95% CI 0.94-0.99). Quebec, which retained pure no-fault throughout the entire 10-year period, had less than one third of the injury claims per 100,000 residents than the tort province of British Columbia. The conversion from tort to pure no-fault legislation has a large influence in reducing motor vehicle injury claim incidence in Canada. Legislative system and injury compensation scheme have an observable impact on injury claim incidence and can therefore have significant impact on the health care system.

Having the Right Insurance

Most of the case law addressing environmental and mass tort insurance issues concerns the insured party's general liability policies. Recent developments demonstrate that this focus is often too na...

Deregulating Insurance Subrogation: Towards an Ex Ante Market in Tort Claims

This essay analyzes the benefits of a system in which commercial and governmental first-party insurers acquire complete ownership and control over the prosecution and proceeds of their insureds' prospective claims. Under the regime of unlimited subrogation (US), insurers would treat tortious injury like any other covered risk thus paying an insured only for pecuniary loss (e.g., medical costs, lost income, etc.) according to standard policy (or program) terms. In return, insureds would receive payment in the form of reduced premiums (or taxes) or other financial benefits, equaling the aggregate average amount the insurer expects to recover in damages. US would replace the governing common law and statutory bars against insurers taking a subrogation or assignment interest beyond the amount that would reimburse them for payments made or promised the inured. In particular, US would allow subrogation of personal injury claims in full, including the potential recovery of non-pecuniary, punitive, and other damages in excess of the benefits received by the insured. Allowing insureds to transfer ownership of potential claims to first-party insurers will directly improve insureds' welfare on three dimensions: 1. Insurance: Reducing premiums not only makes risk averse individuals wealthier in their uninjured condition, but also negates the compulsory premium (pass-through) they pay to prospective defendants through adjusted product- and labor-prices for unwanted tort insurance against non-pecuniary harm. 2. Deterrence: Tort liability promotes deterrence goals, including through price effects, without need for compromising goals; indeed, law enforcement will be enhanced by harnessing the litigation advantages of first-party insurers: risk-neutrality, scale economies, and the investment incentives of outright ownership of claims. 3. Administrative Productivity: Processing of claims would be streamlined - with insurers also serving as mass class action representatives - reducing costs not only on plaintiffs' side but also for defendants and the courts. In the long-term, there is the promise of three broader benefits. First, first-party insurer ownership of potential claims could catalyze an ex ante claims-market, in which consortia of lawyers and other investors would compete against insurers to purchase and prosecute prospective claims. Competitive ex ante claims markets (including secondary markets for claim re-sale and aggregation) provide the most efficient and effective means of achieving the deterrence ends of liability and generating the highest clearing price for sellers of potential claims. Second, the emergent ex ante claims market would establish both incentives and framework for first-party and liability insurers (joined by potential business defendants) to effect substantive and procedural reforms by contract. Finally, by rendering the system more efficient, the ex ante claims market would set the stage for legislatures to enact discretely targeted, theoretically sound reforms.