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Robert Bork Files Law Suit

Did State Farm Fire Engineers Who Attributed Hurricane Damage to Wind?

What Should Mississippi Do About the Wind Pool Insurance Problem?

Allstate Made More in Profit in 9 Months Than Mississippi's Entire Budget

Ask Your Legislator if They Support This Bill

Here Is Why Insurance Companies Think They Can Get Away With Denying Your Hurricane Claim

Allstate Falsifies Engineering Reports

Think Insurance Companies Lose Money? Think Again.

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Trucking Accidents and Truck Drivers Sleep Apnea Dangers

Truck Accidents and Truck Drivers Sleep Apnea Dangers: Testing Proposed


By Jay Foster, Trucking Accident Attorney

The Medical Review Board of the Federal Motor Carrier Safety Administration has recommended that CDL holders with a body mass index of 30 or higher be referred for sleep apnea testing.

Can you breath deep while sleeping?  Some of us may not be able to do so as sleep apnea is a serious medical condition that interferes with our ability to breath during sleep.  It can cause a number of medical conditions but the most important for the public and truck drivers is it can cause sleeplessness, fatigue, and other health problems.  Some of us are overweight and may be more susceptible to sleep apnea as a result.  However, you can have sleep apnea and not be overweight.  There is evidence that if you have a body mass index of of 30 or greater, which means 220 pounds for a six foot tall person, this puts you in the high risk category for sleep apnea.

Based on the trucking accident and trucking wreck cases that I have handled I think sleep apnea is a serious danger in the trucking industry and a significant number of drivers may have the risk factors associated with sleep apnea which might cause them to be motivated to avoid the medical check-ups needed to diagnosis and treat this problem due to the potential lost wages.

At our offices, we hope that requiring sleep apnea testing for truck drivers will be done as we believe it is a step in the right direction for our safety, that is, safety of the drivers on the road and for the health and safety of the truck drivers.

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Robert Bork Files Law Suit

http://www.jayfosterlaw.com/library/robert-bork-files-sui.cfm

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Did State Farm Fire Engineers Who Attributed Hurricane Damage to Wind?

E-mails criticized State Farm

Internal communications at engineering firm questioned ethics of insurer's actions

By Chris Joyner
chris.joyner@jackson.gannett.com


An attorney for Mississippi Gulf Coast residents who lost homes to Hurricane Katrina said Tuesday that e-mail between executives in a North Carolina firm shows how insurance companies pressured disaster engineers to attribute the destruction to flooding.

Homeowner policies did not cover flooding.

In the e-mail, Randy Down, vice president of engineering for Forensic Analysis and Engineering Corp., expressed "serious concern about the ethics" of demands from State Farm Fire and Casualty that a property be reinspected after an engineer with the company found high winds were the primary cause of the home's destruction.

"I really question the ethics of someone who wants to fire us simply because our conclusions don't match hers," Down said in the Oct. 18, 2005, e-mail to Forensic CEO Bob Kochan.

Down wrote State Farm "would love to see every report come through as water damage so that they can make the minimum settlement."

"I now see why the attorney general's office is already involved down there," he wrote. "She needs to be careful about what she is doing and saying," he said, referring to the State Farm official.

When contacted Tuesday about the e-mail, Down and Kochan said State Farm never directly asked them to change a report to financially benefit the company.

"The basic reason for that e-mail is Randy and I both felt it would have been improper for State Farm or any other company to specifically change a report to benefit them," Kochan said.

State Farm spokesman Phil Supple denied the company rigged the outcome of reports to deny claims. "Our State Farm employees are committed to conducting themselves in an ethical and appropriate manner. Any suggestions to the contrary are simply wrong," he said.

In recent months, attorneys for homeowners in Mississippi and Louisiana have seized on multiple drafts of engineering reports as proof insurance companies gamed the system to deny claims and push homeowners to file with the National Flood Insurance Program, a federal plan partially funded with tax money.

Chip Merlin of Florida is an attorney for several homeowners in claims of altered engineering reports, none of which involve Forensic. Merlin said the e-mail shows the insurance industry's attempt to force "outcome-oriented opinions" from the independent engineering firms that perform initial inspections before a claim is paid.

"It underscores and shows what our allegations have been, that there is a culture and mentality of ... stacking the deck for the insurance companies," he said.

One report that got Forensic in trouble with State Farm appears to be an Oct. 12, 2005, inspection of a Gulfport home damaged in the storm. In that report, the engineer, Brian Ford, concluded damage was "due to wind." Shortly after that report was filed, State Farm fired Forensic.

In an Oct. 17, 2005, e-mail, Kochan wrote he had "managed to get us back on the roles with SF but we need to have a very frank conversation with the boys down south to be sure that we don't fall in the same trap," he wrote.

In the e-mail, Kochan said State Farm believed the engineer relied too much on eyewitnesses to the home's destruction. Kochan wrote State Farm catastrophe coordinator Lecky King had expressed her concerns about using local engineers to conduct the inspections.

"In her words ... they are all too emotionally involved and are all working very hard to find justifications to call it wind damage when the facts only show water induced damage," he wrote.

Three days later, Forensic filed a second report on the Gulfport home, using another engineer, and found the damage "appears to be predominantly caused by rising water from the storm surge and waves."

Kochan said Tuesday he agreed to reinspect the homes as a condition to continue working with State Farm. The new conclusions were "based on additional evidence that was provided."

"She didn't necessarily feel that the conclusions that we reached were accurate," he said. "I didn't accept her disagreement but I said, 'You're the boss, and we're going to re-look at it and, if we were in error, we will correct.' "

Citing pending litigation, Supple would not comment specifically on the e-mail but provided a transcript of a deposition in which Kochan said King's only objection with the reports was "the information we supplied with our report didn't technically justify the conclusions."

Down said in his e-mail response to Kochan he was "raising a flag" about possible problems.

"All of the sudden we get told we're fired by State Farm," he said. "Had I become aware of deliberate efforts by the insurance company to alter conclusions, you would have seen a lot more e-mails than that one, and they would have been a lot more strongly worded than that."

Kochan said Forensic pulled out of Mississippi not long after that because the company was not getting enough work. He said there was some suspicion work was going to engineering firms that had been more cooperative with the insurance companies.

Immediately following the storm, Kochan said State Farm had told Forensic 10,000 engineering reports likely would be needed to determine claims made on the Coast and that work would be divided among 10 companies. But Forensic got only about 150, he said.

"Quite frankly, with the investment we made, I brought my people home," he said.

The insurance industry's response to Katrina continues to be closely examined. Mississippi Attorney General Jim Hood is scheduled to testify at a hearing today before the Senate Commerce Committee.

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What Should Mississippi Do About the Wind Pool Insurance Problem?

Mississippi Needs to Amend a Bill in the Insurance Committe Concerning the Wind Pool

by Jay Foster, Attorney

Read More About What Should Mississippi Do About the Wind Pool Insurance Problem?...

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Allstate Made More in Profit in 9 Months Than Mississippi's Entire Budget

Posted on Sat, Jan. 06, 2007

Insurance crisis answers are not yet on the table

By DEAN STARKMAN
A SUN HERALD FORUM

How does Mississippi solve its insurance crisis?

It doesn't - not until the conversation starts to broaden considerably.

Right now, the insurance discussion centers on ways to entice insurers to sell their products through various reinsurance subsidies and/or off-loading the worst risks into state-run wind pools and the like.

(Left out of the discussion, sadly, is how to get insurers to pay on current policies. But we'll get to that.)

I happen to like the insurance industry, but it needs a subsidy like my funder and favorite Hungarian billionaire, George Soros, needs a new FEMA trailer. In 2005 - the worst-ever disaster year in the history of insurance - the insurance industry posted its best-ever net income, $43 billion, since modern insurance was invented in Edward Llody's coffee house on London's docks in the 17th century. That is, it was its best year until this year's expected $60 billion.

I'm all for profit and for financially strong insurers - some of my best professional friends are insurance executives - but subsidies? From Mississippi?

My friends at Allstate Insurance Co., the most-exposed, least-reinsured insurer on the Gulf, posted net income of $1.8 billion in 2005. Sure, it was down from 2004 and what is expected for 2006 (don't ask; you'll wish you had bought the stock). But profits being merely down in the worst-ever year isn't a bad outcome. It's good. Why pretend otherwise? You're an i-n-s-u-r-a-n-c-e company. It's supposed to be risky - for insurers, I mean, once in a while, right? My old company, Dow Jones & Co., had a lot a bad years. It happens.

I don't mind talking about subsidies. After all, Mississippi's needs a decent insurance market in the here and now. But is that all there is?

My blog, http://insurancetransparen- cyproject.com, is committed to broadening the discussion about insu- rance to include many different types of people, insurers and insureds, policymakers, academics, regulators, media-types like me, lawyers who defend insurers and lawyers who sue them, and mostly, people who live in the Gulf states who are at the center of a very important - albeit difficult - moment not only in the history of their region, but in the history of the U.S. insurance industry.

So, let the broadening begin.

Am I the only one who thinks the insurance market in Mississippi seems "far-from-equilibrium" - economist-talk for "wildly out of whack"? It seems to me that insurance buyers need first to get on a reasonably equal footing with insur- ance sellers. That means two things:

• Buyers must be numerous enough to create meaningful leverage with carriers.

• They must have information about insurers that approaches what insurers have about them.

On the first point, it is painfully obvious by now that Mississippi needs the insurance industry a lot more than the insurance industry needs Mississippi.

Mississippi's insurance market, $3.6 billion and its tiny homeowners' market, $600 million or so, is basically a rounding error to an industry that wrote $417 billion in premiums in 2005. Allstate's earnings in the first nine months of this year, $3.7 billion, nearly eclipsed Mississippi's state budget ($4 billion).

In contrast, the departure of players such as Allstate, State Farm or Travelers can freeze a state's economy like a box of frozen corn.

Nonetheless, Mississippi is grappling alone with its crisis of insurance supply, while Louisiana, Florida and other states do the same with their own crises, and New Jersey, Maryland, even Brooklyn, where I live, are facing - separately - shrinking supply problems.

Why insurance markets are broken up by states' political boundaries is a column for another day, but, trust me, it was not decreed by the Great Insurer of Us All.

Insurers, meanwhile, see the U.S. for what it is: one big, rich insurance market that spreads risks widely, efficiently, and, in recent years, very profitably. Insurers very prudently offset risks in Mississippi with risks in Brooklyn, where (almost) nothing bad ever happens. It also offsets Mississippi homeowners' risk with the Mississippi auto market, and even with the very lucrative Oregon auto market.

If I'm Insurance Commissioner George Dale, a very experienced regulator (I kid that he may have been Jefferson Davis's insurance commissioner), I get in the Mississippi DOI-mobile, put a siren on top, and head west on I-10 to Baton Rouge, pick up Louisiana Insurance Commissioner Jim Donelon, execute a three-point turn, drive back east to Tallahassee, stopping in Montgomery for Alabama's commissioner, Walter Bell, then get Texas's commissioner, Mike Geeslin, on a conference call, and while I'm at it, conference in Steve Goldman in Trenton and Eliot Spitzer's new commissioner-appointee, Eric Dinallo, in Albany.

Now at least you are talking about a market. If any insurers want to leave (or not pay claims), you now have their attention.

Step two brings us to my favorite hobby horse: Transparency.

Right now, insurers have nearly unlimited information about their customers' financial and credit profiles.

Insurance buyers, by contrast, don't know the first thing about their insurance carriers, namely: who pays claims and who doesn't? Would you buy a mutual fund without knowing about past performance?

What do we know, really, about how well insurers have performed post-Katrina?

Many of your neighbors have unkind things to say about insurers, and several thousand of them have gone to court. Your attorney general, Jim Hood, has launched a criminal probe. Congressman Gene Taylor, who is leading insurance reform efforts, colorfully likened insurers to "child molesters." Commissioner Dale, hardly a radical, has also expressed strong misgivings about insurer conduct.

But wait. Allstate and State Farm say that upwards of 98 percent of all claims are settled. The Insurance Information Institute say its independent survey found an overwhelming majority of survey respondents were satisfied with the service they received. Insurers say they are paying $45 billion in losses from Katrina. That's a big number.

On the third hand, Swiss Re, an important source of industry data, says Katrina's total economic damage was $135 billion, leaving a $90 billion gap. That's an even bigger number.

Hmm.

How do you reform something if you don't know anything? If I'm Commissioner Dale, I get some information. I ask each insurer: How much did you pay on average per policy, by county? How many claims did you deny outright per total number of claims? How much did you earn in premiums not just last year, but over the last 10 years? And what about auto? Then I post it so people can read it. Those are just the basics.

And here's where I get controversial: I draw up a rule that requires policy- holders to sign an affidavit attesting to how much they think they were owed and compare it how much they got paid. Many of us have spoken to people who feel they were paid some small fraction of the real value of their claim.

Let's find out which insurer has the better - what shall we call it? - ITP* Pay-Out Ratio.

How reliable is that number? Not very, I suppose. But, how reliable are insurer estimates of what they owe? Both sides have opposing interests: policyholder want as much as possible; insurers want to pay as little. Both sides face legal sanctions for lying. At least we could see the size of the gap between expectations and performance.

At that point, the market can begin to work its magic: rewarding good actors and punishing the bad. And who knows? After adding up all the data, the industry's assertions about its performance might prove to be correct.

Don't like those ideas? That's OK. But out of this crisis at least should come a serious discussion about insurance. This is bigger than the Gulf, and it goes way beyond homeowners' insurance. And Mississippi and its neighbors are in a position to lead the way.

----------------------------------------------------------------
Dean Starkman is a former Wall Street Journal staff writer. He is founder of The Insurance Transparency Project* http://insurancetransparencyproject.com, an insurance blog and information clearinghouse. He is a Katrina Media Fellow with the Open Society Institute, founded and chaired by philanthropist financier George Soros. Neither OSI nor Soros are responsible for these opinions.

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Ask Your Legislator if They Support This Bill

MOVING MOUNTAINS

Homeowner tackles insurance bill of rights

By ANITA LEE

JACKSON - A homeowner denied insurance coverage for his Hurricane Katrina damage grew angry, but then he did something about it.

Long Beach resident Kevin Buckel's work is expected to result in an Insurance Bill of Rights for Mississippi policyholders. The bill's strength is yet to be determined, but Buckel plans to see through the grassroots campaign he started a month after the hurricane in September 2005.

"It's remarkable," said state Rep. Diane Peranich, D-Pass Christian. "Already, he's moved a mountain because George Dale himself has come forward with a bill of rights. I certainly credit Mr. Buckel with that move forward."

Mississippi Insurance Commissioner Dale, a friend of the industry who has been dismayed by its response to Katrina, announced Thursday that he has finalized a Policyholders Bill of Rights that he plans to put into effect through state regulation. A public hearing on the bill is scheduled Jan. 26 in Jackson.

"We continue to try to find ways to see that what happened after Katrina doesn't happen again," Dale said.

A key feature of Dale's bill of rights mandates that insurance companies provide an outline of coverage to homeowners before or when the policy is issued. The insurance companies also have to indicate in a checklist where crucial items are located in the policy, such as exclusions for flood coverage.

The bill also lists 14 policyholder rights. Most already apply under the law, but the bill spells them out in one place.

Dale said his office studied insurance bills of rights in Texas and Florida to draft one for Mississippi.

Buckel also has researched bills of rights. He drafted one that he presented to Peranich and other Coast legislators. He hopes to see the Legislature pass a bill of rights with key provisions Dale did not have.

For example, Peranich and Buckel believe an insurance bill of rights should prevent insurance companies from contributing to the campaigns of state insurance commissioner candidates.

Dale, the longest-serving insurance commissioner in the nation, said that would be fine as long as the same rule applies to other offices and the constituencies they oversee or regulate.

Buckel also says insurance companies should be required to treat policyholders equally. In waterfront neighborhoods across the Coast, some homeowners were denied coverage for wind damage while others received compensation from the same company.

Insurers maintain that they investigate damage to each property and pay what is owed under their policies.

Most important, Buckel believes, consumers deserve to know an insurance company's record on claim payments. While Dale's office regularly releases figures on the number and amount of claims paid, information is not available on the number and amount denied.

State Rep. Mark Formby, R-Picayune, chairman of the House Insurance Committee, said several insurance bills of rights are being drafted. Once they are filed, his committee will hold a hearing to discuss them.

Buckel is one of the people expected to speak at the hearing.

"My big push all along has been that George Dale should be required to disclose how these insurance companies perform," said Buckel, who started his grassroots campaign when Dale refused to provide complete claims numbers. "There's no law on the books requiring him to do it and he's not doing it after Katrina because he knows the insurance companies' numbers are horrible."

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Insurance bills of rights

A public hearing is scheduled on a Policyholders Bill of Rights proposed by Mississippi Insurance Commissioner George Dale. Dale said suggestions at the hearing could result in revisions before a final bill is added to state regulations. No legislation is required for Dale's bill.

The hearing will be held at 9 a.m., Jan. 26 in the Public Service Commission Courtroom, Woolfolk State Office Building, 501 N. West St., Jackson. To review the bill, go to www.doi.state.ms.us, click on Industry Info, then select Regulations from the list.

To learn more about Kevin Buckel's grassroots campaign for a legislative bill of rights and read his proposed bill, go to www.msbillofrights.com. Once an insurance bill of rights is introduced in the Legislature, Buckel said he will keep a legislative scorecard on the Web site to show who supports and opposes it.

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Here Is Why Insurance Companies Think They Can Get Away With Denying Your Hurricane Claim

Senator brags on state legal reforms


By Sam Knowlton

[7/6/06]

Limits on civil lawsuits are working in Mississippi, said Sen. Charlie Ross, R-Brandon, who championed legal reforms adopted in the Legislature - adding he plans to run for lieutenant governor in 2007.

Ross recapped changes to lawsuit rules enacted by the Legislature in 2004 for members of the Vicksburg Lions Club on Wednesday.

“We addressed where you could be sued; we addressed who could be sued; and we addressed what you could be sued for,” Ross said.

Lt. Gov. Amy Tuck, in her second four-year term, is term-limited and cannot seek a third.

Ross is chairman of the Senate's Judiciary, Division A, Committee and has recently been named chairman of the American Legislative Exchange Council's Civil Justice Task Force.

He said he was honored to draft the tort-reform legislation and “lead the fight on the Senate side.

“And because I was in that position I get invited all over the country now to tell other states what we did and how we did it,” Ross said, adding that he'd been to Texas; Georgia; Washington, D.C.; and Idaho and said he plans to go to California this summer.

“Everybody wants to know what we did and how we did it,” he said.

Ross, a Jackson attorney who served as a fighter pilot in the first Gulf War, said he's convinced the bill “did not overreach.” He'd seen first hand that courts in some Mississippi counties had gotten “out-of-kilter,” he added.

“It was time to get it back to a level playing field, not only because of things like jobs and economic development but also for the sake of the system itself, to establish the rule of law and to put predictability back into the system,” Ross said.

The wide-ranging limits, passed in special session, narrowed rules on out-of-state claimants using Mississippi courts and, among other things, set a ceiling of $500,000 in noneconomic damages plaintiffs can receive. Ross attributed the changes to voters' decisions in the 2003 elections, which also put Gov. Haley Barbour, a Republican and an advocate for the limits, in office.

“It was a major issue in the statewide races,” he said of tort reform. “It was a major issue in the legislative races. The people of Mississippi overwhelmingly said we want it done, and they did it by electing people who were in favor of it.”

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Allstate Falsifies Engineering Reports

FBI RAIDS ALLSTATE

Based on a report from The Wall Street Journal -- Internet Edition

The Federal Bureau of Investigation has executed search warrants as part of a investigation by the U.S. attorney from the central district of California at three offices of Allstate Insurance Co., seeking documents related to allegations the company falsified engineering reports in order to minimize claims after the 1994 Northridge earthquake. Offices searched include one in Santa Fe Springs; the company's Northbrook, Ill., headquarters; and a data warehouse in the Dallas suburbs. An Allstate spokesperson said the company has been cooperating fully with the investigation, but denies the allegations.

FBI RAIDS ALLSTATE IN QUAKE PROBE

By Greg Burns and Vincent Schodolski Chicago Tribune Staff Writers May 5, 1998

Federal investigators armed with search warrants have descended on Allstate Insurance Co. offices in three states, including its Northbrook headquarters, in a criminal probe related to the 1994 California earthquake, the company confirmed Monday.

Allstate is being investigated for allegedly altering engineering reports systematically to reduce the amount of claims it owed after the Northridge quake, which did more than $20 billion in damage to the Los Angeles area, sources familiar with the investigation said.

The company said it did nothing improper. "We strenuously deny the allegations," spokesman Peter Debreceny said. The allegations were aired in a civil lawsuit filed last year by a consumer-advocacy group and a former Allstate employee, described as "whistleblower," who had worked on the team that processed earthquake claims.

"It's fraud to attempt to rip off the policyholders," said Harvey Rosenfield, director of the Proposition 103 Enforcement Project, which brought the suit. "People got squeezed by the `good hands,' " he said, referring to an Allstate ad slogan.

The company apparently came under criminal investigation early this year, when officials from the U.S. attorney's office in Los Angeles began asking questions. Company officials have met with the U.S. attorney's office on four separate occasions, Debreceny said.

On April 24, federal prosecutors and FBI agents raided an Allstate claims office in Santa Fe Springs, Calif., that had been the nerve center of the company's earthquake response efforts, according to Debreceny. Some documents were seized, he said, though he didn't know how many.

On Wednesday, teams of about 15 investigators arrived unannounced at Allstate's Northbrook headquarters

On Wednesday, teams of about 15 investigators arrived unannounced at Allstate's Northbrook headquarters and at a Dallas records warehouse, where they examined and impounded documents. A couple of investigators also searched an Allstate office in Barrington, though no documents were taken away, Debreceny said. Though Debreceny said he could not quantify the number of documents seized, other sources said "thousands" were carried out in the raids.

Federal investigators served a subpoena indicating they may seek additional documents from the company, he said. "We are cooperating," Debreceny said. California insurance officials said they, too, are participating in the investigation. Though no charges have been filed, the probe represents a black eye for the company, one of the nation's largest property-casualty insurers.

"The accusations are highly unusual for such a large, well-capitalized insurer, said Frederick Townsend, an insurance consultant. "That's the type of thing you might see in a smaller company, or one in shaky financial condition," he said.

Meantime, the company said it is proud of its performance in the aftermath of the quake. "The efforts of Allstate personnel throughout this period reflected very well on the company and its ability to meet its customers' needs in an unprecedented catastrophe," Debreceny said.

The quake in the early morning hours of Jan. 17, 1994, already has cost Allstate plenty. The firm, one of California's largest insurers, has incurred more than $1.7 billion in claims. Of the 46,034 property claims related to the temblor, 120 remain open, Debreceny said.

The civil suit alleges that Allstate told its engineers to alter draft reports so that covered losses would be minimized.

At issue are Allstate's efforts to assess damage from the quake. It had more than 650 adjusters on the scene within a week, among them independent engineers who recommended steps needed to repair damaged buildings and to prop up the shaky soil beneath them. The civil suit alleges that Allstate told its engineers to alter draft reports so that covered losses would be minimized. That reduced Allstate's payments to the insured, the suit claims.

The former Allstate employee who joined in the lawsuit, Jo Ann Lowe, said altering reports was a standard practice, "not isolated occurrences," according to a statement published last year by the Los Angeles Times. Lowe, a 25-year Allstate employee, said she complained about the alleged practice to company officials, who later denied that it had occurred, according to the statement.

Similar allegations were raised in a separate lawsuit brought by a group calling itself Homeowners Policy Holders. Debreceny said the company never tried to influence the judgments of the engineers it hired. Damage from the quake "was repaired in accordance with (the) insurance policies as quickly as possible, so that families were able to resume their normal lives," he said.

Although other insurers working in California have had civil suits brought against them for alleged underpayment of claims related to the quake, sources said that Allstate was the only one to come under federal investigation thus far.

The sources said that the investigation was likely to continue for at least six months.

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Think Insurance Companies Lose Money? Think Again.

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Our Veterans Deserve Better

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A National Disgrace

Article by Peter King of Sports Illustrated

I know you come to this column to read about football, sports and other things. I'll get to the regular Tuesday fare, your e-mails, in a few paragraphs. First, there's something a little more significant to discuss.

I sense that we in this country have Katrina fatigue. The New York Times reported as much recently, saying that people in some of the areas that welcomed Katrina evacuees last September are sick of hearing about the hurricane, the flooding and the aftermath.

Well, my wife and I were in a car last Wednesday that toured the hardest-hit area of New Orleans, the Lower Ninth Ward. We worked a day at a nearby Habitat for Humanity site on Thursday, and we toured the Biloxi/Gulfport/Long Beach/Pass Christian gulf shore area last Friday. And let me just say this: I can absolutely guarantee you that if you'd been in the car with us, no matter how much you'd been hit over the head with the effects of this disaster, you would not have Katrina fatigue.

What I saw was a national disgrace. An inexcusable, irresponsible, borderline criminal national disgrace. I am ashamed of this country for the inaction I saw everywhere.

I mentioned my outrage to the mayor of New Orleans, Ray Nagin, on Thursday. He shook his head and said, "Tell me about it.' Disgust dripped from his voice.

What are we doing in this country?

"It's been eight months since Katrina,' said Jack Bowers, my New Jersey friend and Habitat for Humanity guide through the Lower Ninth Ward, as he took us through deserted streets where nothing, absolutely nothing, was being done about the wasteland that this place is.

"Eight months!" he said. "And look at it. When people talk to me about New Orleans, they say, 'Well, things are getting back to normal down there, aren't they?' I tell them things are a long, long way from normal, and it's going to be a long time before it's ever normal. And I tell them they've never seen anything like this.'

Our Mississippi guide, Josh Norman of the Biloxi Sun-Herald, put it this way: "People outside of here are tired of hearing about it. They've moved on to the next news cycle.'

How can we let an area like the Lower Ninth Ward sit there, on the eve of another hurricane season, with nothing being done to either bulldoze the place and start over, or rebuild? How can Congress sit on billions of looming aid and not release it for this area?

I can't help but think that if this were Los Angeles or New York, that 500 percent more money -- and concern -- would have flooded into this place. And I can't help but think that if the idiots who let the levees down here go to seed had simply been doing their jobs, we'd never have been in this mess in the first place -- in New Orleans, at least. Other than former FEMA director Michael Brown, are you telling me that no others are paying for this with their jobs? Whatever happened to responsibility?

Am I ticked off? Damn right I'm ticked off. If you're breathing, you should be morally outraged. Katrina fatigue? Hah! More Katrina news! Give me more! Give it to me every day on the front page! Every day until Washington realizes there's a disaster here every bit as urgent as anything happening in this world today -- fighting terrorism, combating the nuclear threat in Iran. I'm not in any way a political animal, but all you have to be is an occasionally thinking American to be sickened by the conditions I saw.

The Lower Ninth Ward is a 1.5-by-2-mile area a couple of miles from the center of New Orleans. It is a poor area. I should say it was a poor area. Before the storm, 20,000 people lived there. Fats Domino lived there. So, formerly, did Marshall Faulk. And now you drive through it and see nothing being done to fix it or tear it down, or to do anything.

In Mississippi, we drove through one formerly thriving beach town that has two structures left. We drove past concrete pads with litter and shards of wood around them. Former houses. The houses, quite literally, have been eviscerated. Hundreds of them. This is what nuclear winter must look like, I thought.

I'm a sportswriter. It's not my job to figure how to fix what ails the Gulf Coast. But the leaders of this society are responsible. And they're not doing their jobs. I could ignore everything I saw and go back to my nice New Jersey cocoon, forgetting I saw it. And I know you don't read me to hear my worldviews. But I couldn't sleep at night if I didn't say something.

On Saturday, at the Saints' headquarters for the draft, I watched the day unfold with a friend of the team, New Orleans businessman and president Michael Whelan. I told him what I'd seen, and asked him what he thought.

"We spend all this money on the war in Iraq and we can't take care of our own cities?" he said. "You get out of downtown, and it's like a war zone in a lot of neighborhoods still. The government has been a huge letdown. I've heard billions of dollars are going to be sent here. Where are they? Nothing is taking place. I certainly think that now it's back-page news; the government is sweeping it under the rug.

Read More About A National Disgrace...

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National Highway Traffic and Safety Administration Releases Annual Crash Predictions

The NHTSA has released its annual projections for crashes and fatalities on our nation's highways.

Traffic fatalitites are expected to increase by 1%, while injuries caused by crashes are expected to decline by 4%.

To view the entire report, please follow the link below.

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For $850.00 Trucking Companies Can Save Lives

Tired truckers have a pal

Fatigue warning devices raise privacy concern

By MICHAEL COWDEN
THE ASSOCIATED PRESS

PITTSBURGH - A new fatigue-warning device could help truckers avoid accidents by tracking how often they blink and how long their eyes stay shut, even as it raises privacy questions concerning what may happen to that data.

The device is about the size and shape of a Web cam. It is mounted on the dashboard, draws power from the truck's cigarette lighter and uses infrared technology to monitor blinking.

The more a driver blinks and the longer the driver's eyes are closed, the more the device beeps - one beep per second the eye is closed. With enough beeping, the trucker knows it's time to pull over.

"Once a person gets drowsy behind the wheel, there's nothing you can do about it but stop and get rest," said its designer, former Carnegie Mellon University professor Richard Grace. "A nap and a cup of coffee can do wonders."

Fatigue plays a role in 13 percent of all truck-related crashes, according to a March report by the Federal Motor Carrier Safety Administration. The government estimates about 15,000 people are killed each year in fatigue-related accidents involving cars, trucks or other motor vehicles.

Other driver-fatigue monitors are already on the market. SleepWatch, developed by the Walter Reed Army Institute of Research, is strapped to a driver's wrist like a watch, monitoring rest and activity patterns. Another, called SafeTRAC from AssistWare Technology Inc., detects whether the truck is staying within its lane.

But Grace said truckers don't like to wear monitoring devices. He also believes his machine can detect fatigue more quickly than most lane-tracking devices because eyes tend to close before a driver starts swerving.

Nonetheless, some truckers have found driver monitors like Grace's and SleepWatch too invasive because they track the drivers, not their trucks, said David Dinges, a University of Pennsylvania sleep researcher who studied Grace's unit and other warning devices for the federal government.

The technology is good but lane trackers are more reliable and give fewer false alerts when, for example, drivers look away from the road to fix their mirrors, Dinges said.

Dinges also said some drivers have concerns about who owns the data collected by fatigue-monitoring devices, an issue important in matters of litigation and discipline.

"There are unresolved legal issues about who has access to such data," he said. "The police? The company? Just the driver? We need to have a wider cultural debate."

The American Trucking Association, a trade group representing trucking firms, believes fatigue-monitoring devices might be a good idea, within limits.

"If these devices help keep drivers alert, they're welcome," said Mike Russell, a spokesman for the group. "But if they're mandatory, that's another question."

Russell said no amount of equipment can make a bad driver good.

Grace's basic warning device costs $850, and one that also records data sells for $1,000. It is currently sold only directly from his company, Attention Technologies Inc.

Current models are effective only at night and aimed primarily at customers in the trucking industry. Grace said he hopes to eventually develop a version that is effective during the day and available to the general public.

Several North American trucking companies, including Pitt Ohio Express LLC, as well as some South African mining companies, including the De Beers Group, are evaluating the devices for purchase, Grace said.

Sean Flynn, a hazardous materials trucker for Coraopolis-based MC Tank Transport Inc., said he once did a series of runs that left him without sleep for almost 32 hours.

"I was awake, but I was not functioning particularly well," he said.

Flynn said drivers might use a device like Grace's, but only if they could be sure the data it recorded wasn't turned over to their employers.

"It boils down to, 'Do you want to have that in your vehicle?"' he said. "For some guys, it's an invasion of privacy."

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Judge Tells State Farm to Produce Hurricane Documents

Judge rebuffs State Farm

Insurer had wanted AG's role reduced

By ANITA LEE
calee@sunherald.com

GULFPORT - Attorney General Jim Hood remains active in an investigation of insurance fraud in South Mississippi, despite State Farm Fire and Casualty Co.'s attempt to have his role restricted.

State Farm attorneys tried to show in Circuit Court on Tuesday that Hood had leaked information about the secret investigation and should not be allowed to review company records a grand jury subpoenaed. Circuit Judge Stephen B. Simpson denied the request, finding no direct evidence to support the claim.

State Farm attorney Robert Galloway said the company is concerned Hood will use information from the criminal probe in a civil lawsuit. Hood has sued State Farm and other major insurers over their refusal to pay Hurricane Katrina claims that involved tidal surge.

Insurers say they are paying what is owed under their policies for wind damage, but the hurricane's tidal surge is excluded from coverage.

In the criminal probe, investigators for Hood and local District Attorney Cono Caranna are pursuing allegations that insurers are using altered engineering reports to minimize wind damage.

State Farm is concerned that Hood will share grand jury records with Richard "Dickie" Scruggs and other attorneys pursuing their own civil cases, Galloway said.

Scruggs, reached at his Moss Point office Tuesday afternoon, said Hood is not giving him information. Instead, he said, he is passing along records to investigators.

"There's not been a two-way street between the investigators and me," he said. "I wish there were. It's been a one-way street."

Scruggs said he has a high-level source at State Farm's corporate headquarters in Bloomington, Ill.

He said State Farm's own records, which the source provided, show "a long pattern and practice of unfair dealings with disaster-type claims." He also said the company is working to move records from the Coast to Texas and other places where they will be out of reach.

But Galloway told Simpson the company is fully cooperating with the grand jury investigation. He said six boxes filled with 18,000 pages are ready to turn over. State Farm estimates the company will produce a total of 35 boxes containing 100,000 pages.

The records were subpoenaed from State Farm's Biloxi catastrophe office and an unknown location in Gulfport.

Hood indicated during the hearing that a handwriting analyst and other experts will be called before the grand jury. Simpson decided those witnesses will have to sign paperwork acknowledging the proceedings are to be kept secret.

Hood told the judge Tuesday morning, "I'm going to be personally involved in this grand jury investigation because I want to make sure it's done right, that people are treated fairly."

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It Is Not Always the Lawyer's Fault

Engineer: Reports altered, name forged

'They took out whole exhibits'

By ANITA LEE, calee@sunherald.com

Professional engineer James K. "Ken" Overstreet said his assessments of property damaged by Hurricane Katrina were altered without his permission and, in several cases, his signature was forged on documents insurance companies used to minimize or deny policyholder claims.

Overstreet worked as a contractor for S&B Infrastructure. In turn, S&B contracted with Rimkus Consulting Group Inc. to supply damage assessments to insurance companies. S&B, he said, parroted orders from Rimkus.

"If they could get by with changing the wind to surge, they would do it," said Overstreet, who has talked with the state Attorney General's Office in connection with a Hurricane Katrina insurance-fraud investigation. "If you had affidavits in there where people saw houses blowing down, sometimes they'd just take those out entirely. They took out whole exhibits."

The Sun Herald obtained copies of altered reports from the Merlin Law Group, which has subpoenaed the records for several lawsuits filed in Harrison County against Houston-based Rimkus, Rimkus employees managing Hurricane Katrina work, State Farm Fire & Casualty Co., Clarendon National Insurance Co. and the company adjusting Clarendon claims, CIG Group Inc.

Because of state Attorney General Jim Hood's ongoing investigation, representatives of S&B and State Farm said the companies will not comment on the allegations.

Rimkus attorney David Ward said the company has not been presented with any lawsuits or documentation about the lawsuits. "We have no specific information from anybody that says there was anything improper done on a specific file. Once we have that, we'll be happy to respond in particular."

Ward, who has represented Rimkus about 15 years, said the company follows detailed policies and procedures to produce its reports and other documents.

Because of Hurricane Katrina's unprecedented storm surge, insurance companies have engaged engineering firms to separate wind damage, which they are obligated to pay, from destruction by water, which they are not.

Chip Merlin, a Florida lawyer who has specialized in lawsuits again insurance companies since the 1980s, said he is not surprised by the altered reports his firm has seen.

"Many times, engineers themselves are involved with doctoring the report," said Merlin, whose previous cases in other states did not involve Rimkus.

"In this case, you have an innocent engineer writing his own opinion and then somebody, for some reason, changing that person's opinion on paper. That's why it's pretty unique."

From state to state, disaster to disaster, Merlin sees an overriding theme: "Time after time, we find the insurance company, instead of looking for ways to pay the full amount, deviously engineering ways to pay less than what's owed under the policy after the loss happens."

For their part, insurance companies maintain they investigate each claim and pay customers what is owed under their policies.

Overstreet said the engineering firms changed his reports without consulting him, even removing his references to tornadoes when he found evidence of them.

State regulations require that an engineer prepare, review in depth or directly supervise the work he signs and affixes with his professional seal. Overstreet said Rimkus engineers whose signatures and seals are affixed to several of his reports were not involved in the damage assessments and didn't review the work with him.

Overstreet said his signature was forged on the altered reports.

"I don't think there was any restriction on the extent to which they could change the report," Overstreet said. "I was told we didn't have any control over how the reports got changed. It was like it was almost none of my business how they got changed."

Overstreet said he saw a pattern to the damage investigations: when winds and surge battered property, blame the surge.

Such was the case with a Rimkus report on the Long Beach home of James "Bud" Ray, who thought that he was fully covered for hurricane losses when he secured a National Flood Insurance policy and a homeowners policy for wind damage.

His flood claim was paid through the National Flood Insurance Program, but he's still fighting for full reimbursement from Clarendon for wind damage. Clarendon contracted with CGI to adjust its claims.

In September, CGI wrote Ray, saying he might not be entitled to coverage because early reports indicated the storm surge flooded or washed away many homes, but the company would investigate the claim.

Overstreet completed a report on the Ray property in December. He concluded: "The home had been destroyed by a combination of wind gusts, tornadoes and wind-driven storm surge."

He added: "Due to the high incidence of snapped and uprooted trees, and according to eyewitness accounts, winds much higher than those considered to be "sustained" likely contributed to the structural damage to Mr. Ray's house."

A second Rimkus report in February omitted Overstreet's conclusions and instead said, "The storm surge associated with Hurricane Katrina destroyed the portion of the residence above the concrete foundation slab."

Ray had collected sworn eyewitness accounts of the devastation.

Overstreet's report included the eyewitness accounts and a map showing where each lived, along with a photo of Ray and one of the eyewitnesses. Those items were not included in the February report. Overstreet said his name was forged on the report as a consultant, with another engineer's signature and seal affixed.

Meanwhile, Ray spent $15,000 of his own savings on weather, engineering and other professional reports to buttress his claim that wind tore up his waterfront home before the water arrived. He kept CGI representatives abreast of his expert information, eventually securing $500,000 on a policy valued at more than $900,000.

After learning about the altered reports, he decided a lawsuit was his only recourse. His attorneys argue that his policy limits should be paid, and punitive damages levied against Clarendon and CGI for acting in bad faith.

Clarendon representatives did not return calls to comment, while a CGI spokesman said the company had not seen the lawsuit.

Overstreet summed up the situation:

"You're not supposed to get somebody else to figure it out and do all the work and then stamp it.

"The person doing the stamping ought to be the person that saw the documents and did the work.

"I hate to say that about a company I was employed by, but its devastating for people who rely on it as an honest opinion."

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Mississippi Attorney General Investigates Fraud By Insurance Companies

Some residents skeptical of insurance numbers

By ANITA LEE, calee@sunherald.com

Insurance companies reported they have closed the vast majority of their Hurricane Katrina claims, but some Sun Herald readers say they haven't received a dime.

"Claims may be closed, but they are closed because insurance companies like ours, State Farm, are closing them without payment on our policy of any kind," wrote Diamondhead resident Debbie Hussey, who lived in one of 250 houses destroyed south of Interstate 10.

Residents have banded together to push for payment in South Diamondhead and in the Jourdan River Estates/Bay Cove area of Hancock County.

Many were insured by State Farm, which writes more than 30 percent of the state's homeowner insurance policies. But others had coverage through Farm Bureau Insurance Co., USAA or Allstate.Private homeowner policies cover wind; federal flood insurance covers tidal surge.

In Sun Herald coverage published last week, State Farm maintained it had closed 94 percent of its claims by Feb. 13. The company reported paying a total of $519,842,120 on about 35,000 claims in the six South Mississippi counties. Our readers did the math, showing the average payment from State Farm to be about $15,000.

However, State Farm maintains it is paying for wind damage. Spokesman Richard Luedke said, "If the loss was caused by wind or wind-driven rain, that is covered under the homeowner's policy." Although State Farm homeowner policies do not cover tidal surge, Luedke said the company covers wind damage to property in areas also hit by water.

State Insurance Commissioner George Dale said insurers must prove water caused damage before denying coverage, but in many cases homeowners are shouldering the burden of proof. Despite evidence of tornados, sworn eyewitness accounts, engineering reports that document wind damage and other evidence, they say, insurers are still refusing to pay or offering less than is owed.


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Attorney general's investigation

A source familiar with state Attorney General Jim Hood's investigation of property-insurance companies says State Farm has filed a motion in an attempt to avoid producing engineering reports and other documents related to policyholders' Hurricane Katrina claims.

However, State Farm spokesman Phil Supple said the company intends to cooperate with Hood's investigation.

Supple said the company has filed a motion to address procedural issues, with sworn statements attached. He said the motion does not attempt to avoid producing records.

Hood has declined to discuss the grand jury investigation, other than to say it involves possible fraud by insurance companies.

Court records indicate a grand jury has subpoenaed records from State Farm employee Rick Moore, who works in the company's Biloxi catastrophe center.

The grand jury file in the investigation has been sealed at State Farm's request, according to court records, but grand jury proceedings are generally kept secret. The court order indicates the file will be available to the attorney general and his investigators, along with personnel in the office of District Attorney Cono Caranna.

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Trent Lott's Lawyer Says Engineering Report Altered

Lott's lawyer: State Farm is destroying fraud evidence

By MICHAEL KUNZELMAN

THE ASSOCIATED PRESS

BILOXI - A lawyer for U.S. Sen. Trent Lott said Monday that State Farm Insurance Co. is destroying documents that could show the insurer has fraudulently denied thousands of claims by Lott and other policyholders whose homes were destroyed by Hurricane Katrina.

Zach Scruggs, one of Lott's attorneys, says Lott has a "good faith belief" that several State Farm employees in Biloxi are destroying engineering reports that gave conflicting conclusions about whether wind or water was responsible for storm damage.

Like thousands of Gulf Coast homeowners, Lott's claim was denied because State Farm concluded that Katrina's floodwater demolished his beachfront Pascagoula home. State Farm says its policies do not cover damage from rising water, including wind-driven water.

But lawyers for the Mississippi Republican claim Bloomington, Ill.-based State Farm has routinely pressured its engineers to alter "favorable" reports that initially blamed damage on the hurricane's wind, which the company's policies cover.

A State Farm spokesman said Monday he couldn't immediately comment on Scruggs' allegations.

Lott's allegations come on the heels of a lawsuit filed by a Kiln couple who claimed they had obtained copies of conflicting reports prepared by State Farm's engineers on what damaged their home. They said one report traced the destruction to Katrina's winds while a later report said flooding was the culprit.

In response, State Farm spokesman Phil Supple had said the second report was the only one the engineering firm sent to State Farm's claims office.

In an interview Monday, Scruggs said corporate "whistle-blowers" who are cooperating with Lott's attorneys have provided evidence that State Farm employees are destroying or moving those "initial favorable" engineering reports.

"We believe that this is a systematic practice," said Scruggs, who is Lott's nephew by marriage.

Mississippi Attorney General Jim Hood also says he is investigating allegations that State Farm manipulated engineering reports to deny claims after the Aug. 29 hurricane.

A judge ordered State Farm to turn over copies of its Katrina engineering reports to Hood's office. The judge also ordered Hood's office to set up a "Chinese wall" that would keep the documents out of the hands of lawyers with civil cases against State Farm.

Because Hood also has filed a civil case on behalf of the state against State Farm and other insurance companies, State Farm is asking the judge to bar Hood himself from seeing the records.

State Farm denied Lott's claim in December based on a report prepared by Jade Engineering & Construction Inc. that concluded that the house was "probably damaged by storm surge/flooding and not by wind."

Scruggs is asking a federal judge to order State Farm to turn over Lott's entire case file as well as records for other policyholders' claims.

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Mississippi Lawyers Work For Free

A Proud History of Generosity

By JOY LAMBERT PHILLIPS

Mississippi's poor and Katrina victims benefit from thousands of hours of free legal services

A SUN HERALD FORUM

I am writing in response to the April 5 editorial titled "For $10 an hour, lawyers can escape helping the poor." As noted in the editorial, providing free legal assistance to those unable to afford a lawyer is a hallmark of the legal profession.

Contrary to the implication in the editorial and its title, Mississippi lawyers, individually and through the organized efforts of The Mississippi Bar, generously donate time and resources to assist the poor in Mississippi. Below are just some of the examples of the commitment of Mississippi lawyers to pro bono publico legal services.

• In 1982 the Bar established the Mississippi Pro Bono Project (now the Mississippi Volunteer Lawyers Project). It was the first statewide pro bono project in America and the Bar was recognized for its commitment by being awarded the ABA Harrison Tweed Award. Since its inception Mississippi lawyers have donated over $40 million in free legal services on behalf of indigent Mississippians.

• After Hurricane Katrina, when FEMA opened its first disaster recovery center on Sept. 6, 2005, in Ocean Springs, volunteer lawyers were there. Through the efforts of the Mississippi Bar's Young Lawyers Division, 566 Mississippi lawyers donated over 4,000 hours in free legal assistance, either in person at over 30 recovery centers or by telephone. By the end of January 2006, over 6,600 Katrina victims had received free legal assistance.

• Legal Line, a public service of the Mississippi Volunteer Lawyers Project, provides callers with free legal information. The project arranges for attorneys to man the lines Monday through Friday from noon until 2 p.m. Basic legal information is provided to callers and, if actual representation is needed, callers are urged to contact a private attorney for representation. If the caller is unable to afford an attorney, they are referred to the appropriate Legal Services office for assistance.

• A Homeless Legal Clinic has been organized by the Mississippi Volunteer Lawyers Project. Volunteer attorneys in Jackson spend their lunch hour each Tuesday providing free legal counsel to the poor, elderly, and disabled seeking counsel on issues surrounding many topics, including veterans and Social Security benefits, heirship and real estate foreclosure, among others.

• Not only do lawyers individually and through organizations like the Bar's Mississippi Volunteer Lawyers Project donate countless hours of pro-bono services, but the Mississippi Bar has also been very active in lobbying our congressional delegation and state Legislature for funding for civil legal services for the poor. These programs provide much-needed civil legal assistance to indigent Mississippians.

In 2003, The Mississippi Bar led the legislative efforts to enact the Mississippi Civil Legal Assistance Fund. This fund was established to accept private and public monies and distribute the funds to assist providers of legal services throughout the state.

To date there has been no state funding of these services, however, this past legislative session, the Bar was instrumental in getting House Bill 961 passed to provide some state funding for Mississippi civil legal service providers. The bill has been forwarded to the governor for consideration.

To commit time and/or funds, regardless of the amount, is a generous contribution on the part of practicing attorneys. The 20 hours or $200 are suggested minimums, not standards for service. Most attorneys provide more than 20 hours of pro bono work each year.

For those lawyers who simply cannot or do not contribute the time, the minimum suggested financial contribution will help hire additional legal services staff to provide direct legal assistance to indigent Mississippians. The legal profession is one of the few, if not only, professions expected to provide pro bono services, which they do over and over again.

It is unfortunate that you don't have the stories of all of the attorneys who slept in cars or tents to provide free legal assistance to the victims of Hurricane Katrina, some in spite of the fact that they also had damaged homes and offices.

We should applaud lawyers for their generosity and remember that they do not bear the sole responsibility for seeing that our less fortunate citizens have equal access to justice. The attorneys are glad to help, but each and every citizen of this state shares that responsibility.

We encourage all Mississippians to join the Bar in urging their congressmen and state legislators to adequately fund legal services for the poor. In the meantime, there will always be many committed lawyers who quietly volunteer their legal services to assist those unable to pay for those services.

----------------------------
Joy Lambert Phillips of Gulfport is president of The Mississippi Bar. by Joy Lambert Phillips

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Jay Foster's Community Involvement and Free Legal Help

I am committed to assisting our community by volunteering my time to assist people not only with legal matters but other issues which affect them. I also have what I think may be the most comprehesive website regarding free legal help and other free help for Mississippians on the internet. Please visit our frequently asked questions page and resources page for further information about this.

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Mississippi Attorney General versus Insurance Companies

AG Hood Says Insurance Case Headed Back to State
Court

SHELIA BYRD, Associated Press

JACKSON, Miss. - Mississippi's lawsuit over insurance companies' refusal to pay certain Hurricane Katrina claims is back in state court.

Attorney General Jim Hood on Monday said a decision could come within weeks now that the case has been remanded from federal court to Hinds County Chancery Court, where it was originally filed.

"We never anticipated they would be successful in dragging this out for six months," Hood said during a news conference at his office. Hood's lawsuit contends a standard homeowner's policy should cover hurricane damage, whether the loss is from wind or wind-driven water, a storm surge.

Insurance companies said homeowners should have bought additional flood protection. If Hood's suit is successful, it could mean billions of dollars to the industry and result in a reduction in the availability of homeowners' policies and higher premiums, said Robert Hartwig, chief economist and senior vice president of the Insurance Information Institute, an industry trade association.

Hartwig said language pertaining to exclusions in the homeowners' policies is ironclad as evidenced by the fact that more than 40,000 Mississippians had separate flood coverage under the National Flood Insurance Program in 2005.

"It's a very telling fact that not a single regulator of insurance in the entire United States nor the NFIP supports Mr. Hood's position," Hartwig said Monday.
Hood has estimated the storm surge damage could be from $2 billion to $4 billion. He said the insurance industry was sued over the same issue after Hurricane Camille struck the Gulf Coast in 1969.

"Yet they did not change their policies at all," Hood said. "They kept them the same knowing that they have problems and have begun to make those changes after the fact."

Hood said immediately after Katrina, companies began giving customers a form that included the storm surge provision.

Mike Siemienas, a spokesman for Allstate, said homeowners' policies do not cover flood damage.
"We still stand firm that those are claims that are covered under the National Flood Insurance Program, and it's been well-known and the policy language has been approved by the Mississippi Department of Insurance that we use," he said.

Hood also said his office was investigating whether insurance companies were denying claims from homeowners who were not in the storm surge area.
Nearly 220,000 Katrina-related insurance claims have been filed in the state's six coastal counties, according to the state Department of Insurance.

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Enormous Profits for Insurance Companies in Florida After All Hurricanes

State Sen. Ron Klein, D-Delray Beach, represents District 30. He wrote this article for The Palm Beach Post.

Elect commissioner to ensure fairness, By by Sen. Ron Klein

Sunday, March 05, 2006

When the state Legislature convenes Tuesday for the 2006 legislative session, the question of what to do about homeowners insurance will be on everyone's mind. As responsible elected officials, we need to think about insurance reform from the perspective of the homeowner.

In the 14 years since Hurricane Andrew, the insurance industry has been allowed to dictate insurance law in Tallahassee. The insurance industry threat of "give us what we want or we're leaving" has led to routine, annual double-digit premium increases and unwarranted or random policy cancellations. Insurance companies have been allowed to set up separate subsidiaries to insulate the parent company from liability and losses. The effectiveness of our insurance regulation system has been watered down through unclear accountability and an arbitration panel that seems to be little more than a rubber-stamp for premium increases. Finally, Citizens Insurance, once a short-term fix, has become a long-term failure. It has been allowed to continue its freefall with Florida homeowners picking up the tab for too long. After 14 years of having their way, many insurance companies still are posting record profits, and yet the average homeowner's premiums are skyrocketing.

For the average Florida homeowner, the sting of premium increases is matched only by the fear of having their policy canceled. I have heard from too many of my constituents who regularly paid their premiums on time, year after year, without a claim. Yet, in the wake of Hurricane Wilma, they opted against filing a claim because they feared that their policy would be canceled. Their fears are warranted. I have even heard from homeowners who were told that their policy cancellations simply were "the luck of the draw."

There is little disagreement that the homeowners insurance market in Florida is in a state of crisis. Given this, I strongly believe that it is time that Florida, for once, approached the situation from the standpoint of homeowners.

I have filed the Homeowners Defense Act (SB 780). It takes the consumer's interest into account while providing common-sense insurance reform. For starters, this bill would establish a loyalty clause which provides that no homeowner who has faithfully maintained his or her policy for three years can be canceled for any reason other than fraud. No homeowner ever should be afraid to make a claim.

Second, my legislation eliminates the system known as "Use and File" whereby insurance companies are able to raise premiums before gaining approval from the Office of Insurance Regulation. Fairness and common sense dictate that a company must be willing to make a reasoned and legitimate case for an increase before it can start charging homeowners higher premiums.

My legislation would reform the arbitration panel that gives insurance companies another chance to win rate-hike approval after being denied by the Office of Insurance Regulation. Again, an insurance company should present a reasonable case for a rate increase the first time it requests an increase. If it fails to do so, it should not get a rate increase through the back door. While consistently approving increases, the arbitration panel further waters down accountability at a time when what we need is more accountability. These are just three of the key provisions that seek to level the playing field between the insurance industry and the consumer and restore some openness and accountability to the regulation process.

In order to bring further openness and accountability to the process, I have proposed a resolution (SJR 2132) that would change the appointed insurance commissioner to an elected position.

A directly elected insurance commissioner would be accountable to homeowners. My resolution would also prohibit candidates for the insurance commissioner position from taking campaign contributions from the insurance industry. This is to ensure that this official keeps homeowners first and foremost when making decisions. A directly elected insurance commissioner should be vested with the authority to hold the insurance industry accountable.

We need to approach our insurance crisis with common sense. With the passage of these proposals, I am confident that we can restore some fairness and trust to our system of insurance regulation. I ask your help in this by contacting your legislators and other legislators throughout the state in support of these reforms.

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NTSB concludes poor track maintenance caused Flora, Miss. train wreck

The track, owned by CN — formerly Canadian National —had been repaired in January 2004. But, because cold weather had shrunk the track, a replacement piece that was 13 feet, 2 inches was about 2 inches longer than the track it replaced. When the replacement "plug" expanded in the heat on the day of the derailment, April 6, 2004, the track buckled, the NTSB concluded.

The April 6th, 2004 Amtrak train accident killed 1 and injured 46. - 7/27, Jackson Clarion-Ledger

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Feds lease oil drilling rights three miles from MS Gulf Coast

Members of the 12 Miles South Coalition and the Mississippi Chapter of the Sierra Club say they fear more gas or oil platforms any closer would clutter the horizon, compromise the national parks and jeopardize the Coast's chance to be a tier I tourist destination. - The Sun Herald - 7/17

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Mississippi to distribute free gunlocks to reduce firearms accidents

Thousands of free gun locks should be handed out to Mississippi residents by the end of the year as part of a national program sponsored by the National Shooting Sports Foundation. The 2004 program, funded by a $50 million grant from the Department of Justice, gave out 20 million gun locks nationwide. Funding for 2005 was cut by $15 million, and 13 million locks will be distributed nationwide. Sun Herald, 7/17

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Doctors Gouged By Insurance Companies Again

FALLING CLAIMS AND RISING PREMIUMS IN THE
MEDICAL MALPRACTICE INSURANCE INDUSTRY
by
Jay Angoff
Of Counsel
Roger Brown & Associates
216 East McCarty Street
Jefferson City, MO 65101
Commissioned by: Center for Justice & Democracy
Released by:
Alliance for Justice
Center for Justice & Democracy
Consumer Federation of America
Public Citizen
USAction
U.S. PIRG
July 2005
i
Executive Summary
This Report analyzes the 2000-2004 performance of each of the 15 largest medical malpractice
insurers in the United States rated by A.M. Best, the principal rating service for the insurance industry.
The Report is based primarily on data from the carriers’ 2004 Annual Statements filed with state
insurance departments.
The Report finds the following:
* Over the last five years the amount the major medical malpractice insurers have collected in
premiums has more than doubled, while their claims payouts have remained essentially flat.
* Some malpractice insurers substantially increased their premiums while both their claims
payments and their projected future claims payments were decreasing.
* Malpractice insurers accumulated record amounts of surplus over the last three years.
Taken together, the malpractice carriers analyzed increased their net premiums by 120.2% during
the period 2000-2004, although their net claims payments rose by only 5.7%. Thus, they increased their
premiums by 21 times (120.2/5.7 = 21.09) the increase in their claims payments.
As a result of these two dramatically different trends, the ratio between these insurers’ claims
payments and premiums fell by more than half between 2000 and 2004: it declined from 69.9% to
33.6% on a net basis, and from 68.8% to 32.1% on a gross basis. Put another way, in 2004 the leading
medical malpractice insurers took in approximately three times as much in premiums as they paid out in
claims.
Moreover, several insurers substantially increased their premiums even though their claims
payments actually fell--and fell substantially. For example:
ii
* Healthcare Indemnity, Inc. (HCI), an affiliate of HCA corporation, increased its premiums by
million, or 88%, while its claims payments fell by $74 million, or 32%. As a result, in 2004 it paid
out only 43 cents in claims for each premium dollar it collected.
* ProNational, an affiliate of ProAssurance Corporation, increased its premiums by $87 million,
or 79%, while its claims payments fell by $43 million, or 63%. As a result, in 2004 it paid out only 13
cents in claims for each premium dollar it collected.
* Medical Assurance, another ProAssurance affiliate, increased its premiums by $151 million,
or 89%, while its claims payments fell by a third. As a result, in 2004 it paid out only 10 cents in claims
for each premium dollar it collected.
In addition, Lexington Insurance Company, an affiliate of AIG, reported that its net written
premiums increased from $21.1 million in 2000 to 483.0 million in 2004—an increase of $461.9
million, or 2200%--while its net paid losses increased by only $52.9 million. As a result, in 2004 it paid
out only 14 cents in claims for each premium dollar it collected.
Finally, even the ratio between the amount the leading malpractice insurers estimated they would
pay out in the future and the premiums they earn--what insurers somewhat counter-intuitively call their
“incurred loss” ratio--declined by almost 25% between 2000 and 2004. Due to this decline--which is in
addition to the decline in the amounts these insurers have actually been paying out--they estimated in
2004 that they would ultimately pay out in claims only 51.4 cents of each premium dollar they earned.
Perhaps most striking, in 2004 these 15 insurers taken together increased their earned premium by 9.3%,
even though their incurred losses--the amount they estimated they would pay out in the future--declined
by 21.1%.
Because of the overall surge in malpractice premiums with no corresponding surge in claims
payments during the last five years, the leading malpractice insurers have increased their surplus by
more than a third in only three years, and they are now charging more for malpractice insurance than
iii
either their actual payments in malpractice cases or their estimated future payments in malpractice cases
would justify.
TABLE OF CONTENTS
Executive Summary……………………………………………………………………………………….i
I. Introduction…………………..………………………………………………………………………..1
II. Methodology…………………………………………………………………………………………...2
A. Written premiums vs. paid losses………………………………………………………….2
B. Earned premiums vs. projected losses……………………………………………………..3
C. Surplus analysis……………………………………………………………………………4
III. Findings……………………………………………………………………………………………4
A. Written premiums vs. paid losses……………………………………………………….…4
B. Earned premiums vs. projected losses……………………………………………………13
C. Surplus analysis…………………………………………………………………………..17
D. A note about medical malpractice insurance stock performance……………………...…19
IV. Conclusion………………………………………………………………………………………..20
Appendix………………………………………………………………………………………………….21
1
I. Introduction
This Report analyzes the 2000-2004 performance of the 15 largest A.M. Best-rated1
medical malpractice insurance companies in the United States based primarily on data from their
2004 Annual Statements filed with state insurance departments. The insurers analyzed include
both investor-owned stock companies, such as AIG-affiliate Lexington Insurance Company, and
doctor-owned mutual companies, such as ISMIE Mutual Insurance Company in Illinois.
The Report analyzes the performance of these insurers, who account for the majority of
the medical malpractice business written in the United States, in three different ways:
• it compares the amount they have collected in premiums in each of the last five years to
the amount they have paid out in claims in each of those years;
• it compares the premiums they have earned in each of those years to the amount they
projected they would ultimately pay out on policies in effect in each of those years; and
• it analyzes the growth during the past three years in each insurer’s surplus--the extra
cushion the insurer holds in addition to the amount it has set aside to pay projected future
claims.
The Report finds the following:
• Over the last five years the amount the major medical malpractice insurers have collected
in premiums has more than doubled, while their claims payouts have remained essentially
flat.
• Some malpractice insurers substantially increased their premiums even while both their
actual claims payments and their estimated future claims payments decreased.
1 A.M. Best, headquartered in Oldwick, New Jersey, is the principal rating agency for the insurance industry. All 15 insurers are rated at
least B+ (Very Good) by Best’s. Eleven are rated A- (Excellent) or better. The only major malpractice insurance company not rated by
Best’s is Medical Liability Mutual Insurance Company (MLMIC), which writes almost exclusively in New York and does not disclose its
surplus in its Annual Statement.
2
• Malpractice insurers have accumulated record amounts of surplus over the last three
years. As a result, the surplus the leading medical malpractice insurers now hold is
almost double the amount the National Association of Insurance Commissioners deems
adequate for those insurers.
II. Methodology
A. Written premiums vs. paid losses
The performance of insurance companies can be measured in several ways. The first is to
compare the premiums an insurance company collects in a given year--known as “written
premium”--with the amount the insurer pays out in claims in a given year--known as “paid
losses.” This comparison can be done on a “gross” or “net” basis. A gross analysis analyzes the
amounts the insurer takes in and pays out before accounting for reinsurance--reinsurance is the
insurance insurers themselves buy to cover claims above a certain amount, or to pay portions of
certain claims. A net analysis, in contrast, analyzes the amounts the insurer takes in and pays out
after accounting for reinsurance. This Report compares written premiums to paid losses on both
a gross and a net basis.
Comparing the premiums an insurer takes in in a given year with the claims it pays out in
that same year does not provide a complete picture of its performance, since claims paid out in a
given year are typically covered by policies written in prior years. Nevertheless, the trend in an
insurer’s written premiums and paid losses over several years is one relevant indicator of an
insurer’s performance. This Report shows that trend for each insurer during the past five years,
and also sets forth the ratio between the insurer’s losses and premiums for each of those years.
That ratio is referred to as the paid loss ratio.
3
B. Earned premiums vs. projected losses
Another way to measure the performance of an insurance company is to compare the
premiums it earns in a given year with the claims it projects it will pay in future years on policies
in effect in that year.
Earned premium refers to the portion of the premium that is attributable to a particular
period of coverage. For example, if a policy covering the period July 1, 2004 through June 30,
2005 costs $100, the insurance company writes $100 in premium for calendar year 2004, but
earns only $50 in premium for calendar year 2004, since only half of the coverage provided by
that policy occurs in 2004. Because insurance companies continually write policies, earned
premium and written premium typically do not differ greatly.
The claims an insurer projects it will ultimately pay that are covered by premiums earned
in a given year are referred to as the insurer’s “incurred losses” for that year. To the lay person
the term “incurred losses” is misleading, since an insurer’s “incurred losses” are not payments
the insurer has made but rather are estimates of the claims the insurer projects it will pay in the
future which ultimately may or may not be paid. In fact, many malpractice insurers have in the
past posted incurred loss estimates that ultimately proved to be substantially overstated --
sometimes by as much as 40%. Accordingly, insurers acknowledge in their Annual Statements
that their reserves – the amount they have set aside to pay their projected incurred losses – are
likely to be materially inaccurate and in the past have been materially inaccurate. Nevertheless,
insurers and regulators typically use the incurred loss ratio as a measure of profitability. The
Report therefore sets out the insurers’ earned premium and projected losses, along with the ratio
between those two numbers, for each of the last five years. That ratio is referred to as the
incurred loss ratio.
4
C. Surplus analysis
Surplus is the extra cushion an insurance company accumulates over and above the
amount it has set aside to pay its estimated future claims. A company increases its surplus to the
extent that, after setting aside a sufficient amount to pay all projected future claims, it both earns
a profit and declines to distribute that profit to its shareholders (in a stock company) or
policyholders (in a mutual company). The National Association of Insurance Commissioners
(NAIC) has developed a formula, based on the risk assumed by the insurer and the quality of the
assets it holds, that calculates the level of surplus the NAIC views as adequate for each company.
This Report analyzes the change in each insurer’s surplus during the most recent threeyear
period--the period during which insurers have publicly maintained that their surplus is being
threatened by increasing claims payments. It also compares each insurer’s actual surplus as of
December 31, 2004 to the surplus the NAIC deems adequate for that company.
III. Findings
A. Written premiums vs. paid losses
Whether one looks at gross or net paid losses, the amount the 15 leading medical
malpractice insurers have taken in in premiums during the 2000-2004 period has more than
doubled, whereas the amount they have paid out in claims has remained essentially constant.
Specifically, as Table 12 and Chart 1 indicate, the net written premiums of those insurers grew by
120.2%, while their net paid losses grew by only 5.7%.
2 For all companies except Lexington, Continental Casualty and Evanston, the source of the data in the tables is the Five Year Historical
Data pages from the 2004 Annual Statements. For Lexington, Continental Casualty, and Evanston, the source of the data in the tables is
pages 6-9 of each Annual Statement between 2000 and 2004. The Annual Statement for each of those years for each of those three carriers
had to be reviewed because the Five-Year Historical Data pages in the 2004 Annual Statement do not break out data by line of insurance
within a company, and unlike the other 12 carriers Lexington, Continental and Evanston write substantial amounts of other types of
insurance in addition to medical malpractice.
5
Table 1
Net Written Premium vs. Net Losses Paid,
2000-2004 (in millions of dollars)
Company3 2000 2001 2002 2003 2004 Change
MedPro NPW 267.1 345.0 538.4 713.5 526.3 +97.0%
NPL 152.4 151.9 190.4 216.9 257.8 +69.2%
Ratio 57.0% 44.0% 35.4% 30.4% 49.0%
Lexington NPW 21.1 94.2 274.5 442.7 483.0 +2200.0%
NPL 12.2 33.4 25.9 14.6 65.1 +433.6%
Ratio 58.1% 35.5% 9.4% 3.3% 13.5%
TDC NPW 209.7 274.1 389.2 332.0 457.2 +118.0%
NPL 115.1 123.8 171.5 167.6 143.2 +24.4%
Ratio 54.8% 45.2% 44.1% 50.5% 31.1%
HCI NPW 197.1 260.3 318.6 377.0 370.1 +87.8%
NPL 231.8 168.0 182.5 190.7 157.6 -32.0%
Ratio 117.6% 64.5% 57.3% 50.6% 42.6%
Continental NPW 114.3 89.5 196.5 245.1 347.1 +232.8%
NPL 208.7 188.7 71.5 -79.4 157.0 +24.8%
Ratio 182.6% 210.8% 36.4% -32.4% 45.2%
MedAssurance NPW 170.5 156.9 227.0 294.2 321.7 +88.7%
NPL 48.2 68.1 62.5 48.1 32.0 -33.6%
Ratio 28.3% 43.4% 27.5% 16.3% 9.9%
ProMutual NPW 98.1 127.0 171.2 190.9 263.4 +168.4%
NPL 115.7 107.8 78.8 90.6 93.6 -19.1%
Ratio 117.9% 84.8% 46.0% 47.5% 35.6%
MAG Mutual NPW 82.7 114.1 142.2 157.2 256.6 +210.2%
NPL 38.1 40.4 60.5 77.2 83.3 +118.4%
Ratio 46.1% 35.4% 42.6% 49.1% 32.5%
ISMIE NPW 139.4 175.5 217.5 276.8 223.8 +60.1%
NPL 129.8 115.1 119.4 126.2 126.6 -2.5%
Ratio 93.1% 65.6% 54.9% 45.6% 56.6%
Norcal NPW 129.3 170.3 169.2 201.2 200.8 +55.3%
NPL 52.8 70.1 82.0 81.5 69.7 +32.0%
Ratio 40.8% 41.2% 48.5% 40.5% 34.7%
ProNational NPW 110.1 132.1 148.7 193.0 197.2 +79.1%
NPL 67.6 77.3 56.9 53.1 25.0 -63.0%
Ratio 61.4% 58.5% 38.3% 27.5% 12.7%
AP Capital NPW 157.1 179.6 208.7 109.8 170.9 +8.8%
NPL 61.8 90.1 117.3 118.3 64.6 +4.5%
Ratio 39.4% 50.2% 56.2% 107.7% 37.8%
State Vol. NPW 77.4 94.5 130.8 135.2 150.0 +93.9%
NPL 41.8 54.5 56.6 50.7 70.7 +69.1%
Ratio 54.0% 57.6% 43.2% 37.5% 47.1%
FPIC NPW 110.3 93.6 94.0 103.4 136.5 +23.7%
NPL 45.0 53.2 48.3 27.9 49.1 +9.1%
Ratio 40.7% 56.9% 51.4% 27.0% 35.9%
Evanston NPW 38.1 60.4 123.3 137.3 128.5 +237.3%
NPL 23.4 21.1 30.0 32.1 26.0 +11.1%
Ratio 61.4% 34.9% 24.3% 23.4% 20.2%
Totals NPW 1,922.2 2,367.1 3,349.8 3,909.3 4,233.1 +120.2%
NPL 1344.4 1363.5 1354.1 1216.1 1421.3 +5.7%
Ratio 69.9% 57.6% 44.4% 31.1% 33.6%
3 Appendix A sets forth the full name of the company, along with its insurance holding company parent, if any, and its Best’s rating. It
also lists the states in which the company writes medical malpractice coverage.
6
120.2%
5.7%
0%
25%
50%
75%
100%
125%
150%
Premiums Increase
(Net Premiums Written)
Payout Increase
(Net Losses Paid)
Chart 1
Net Premiums Written vs. Net Losses Paid,
2000-2004
The difference between the leading malpractice insurers’ written premiums and paid
losses on a gross basis is similarly stark: as Table 2 and Chart 2 indicate, their gross written
premiums increased by 134.5% between 2000 and 2004, while their gross paid losses rose by
only 9.6%.
7
Table 2
Gross Written Premium vs. Gross Losses Paid,
2000-2004 (in millions of dollars)
Company 2000 2001 2002 2003 2004 Change
Lexington GPW 71.8 170.4 567.4 788.9 778.6 +984.4%
GPL 23.9 75.7 65.9 100.1 124.2 +419.7%
Ratio 33.3% 44.4% 11.6% 12.7% 16.0%
MedPro GPW 296.8 380.2 586.5 849.3 736.5 +148.1%
GPL 200.2 189.3 230.0 250.9 296.8 +48.2%
Ratio 67.5% 49.8% 39.2% 29.5% 40.3%
TDC GPW 236.6 311.3 428.1 431.3 489.6 +106.9%
GPL 130.4 140.7 196.0 197.5 155.0 +18.9%
Ratio 55.1% 45.2% 45.8% 45.8% 31.7%
ISMIE GPW 164.8 209.0 265.6 364.3 425.3 +158.1%
GPL 163.8 141.3 158.1 165.2 153.4 -6.3%
Ratio 99.4% 67.6% 59.5% 45.3% 36.1%
HCI GPW 243.6 288.4 344.7 386.5 382.2 +56.9%
GPL 276.8 193.5 237.3 206.9 187.1 -32.4%
Ratio 113.6% 67.1% 68.8% 53.5% 49.0%
MAG Mutual GPW 87.8 131.4 216.3 286.9 358.7 +308.5%
GPL 48.8 50.8 79.1 95.6 102.7 +110.5%
Ratio 55.5% 38.7% 36.6% 33.3% 28.6%
Med Assurance GPW 196.3 224.5 292.3 335.8 357.0 +81.9%
GPL 76.4 96.4 83.5 60.5 59.9 -21.6%
Ratio 38.9% 42.9% 28.6% 18.0% 16.8%
ProMutual GPW 107.0 148.4 182.8 216.2 273.3 +155.4%
GPL 117.9 117.7 84.0 92.3 100.6 -14.7%
Ratio 110.2% 79.3% 46.0% 42.7% 36.8%
FPIC GPW 179.3 212.2 295.8 287.0 285.2 +59.1%
GPL 59.7 79.1 70.3 78.9 101.0 +70.4%
Ratio 33.3% 37.3% 23.8% 27.5% 35.7%
State Vol. GPW 98.0 120.4 164.0 212.6 241.5 +146.4%
GPL 51.7 61.8 64.1 59.3 76.9 +48.8%
Ratio 52.7% 51.3% 39.1% 27.9% 31.8%
Norcal GPW 150.7 179.0 181.9 212.2 209.5 +39.0%
GPL 57.4 85.0 89.8 86.1 73.7 +28.4%
Ratio 38.0% 47.5% 49.4% 40.6% 35.2%
ProNational GPW 139.6 151.9 167.8 203.6 207.5 +48.6%
GPL 81.4 89.4 68.2 67.5 39.4 -51.6%
Ratio 58.3% 58.9% 40.6% 33.2% 19.0%
Continental GPW 72.2 140.2 177.5 173.0 196.6 +172.3%
GPL 165.7 150.7 151.8 111.9 108.4 -34.6%
Ratio 229.5% 107.5% 85.5% 64.7% 55.2%
AP Capital GPW 170.0 209.7 236.8 135.7 192.3 +13.1%
GPL 69.7 109.2 142.1 142.9 88.1 +26.5%
Ratio 41.0% 52.1% 60.0% 105.3% 45.8%
Evanston GPW 45.1 78.1 171.2 182.4 164.5 +264.7%
GPL 26.2 23.7 36.1 38.4 30.9 +17.9%
Ratio 58.1% 30.3% 21.1% 21.6% 18.8%
Totals GPW 2,259.6 2,955.1 4,278.7 5,065.7 5,298.3 +134.5%
GPL 1,550.0 1,604.2 1,756.3 1,754.0 1,698.8 +9.6%
Ratio 68.6% 54.3% 41.0% 34.6% 32.1%
8
134.5%
9.6%
0%
25%
50%
75%
100%
125%
150%
Premiums Increase
(Gross Premiums Written)
Payout Increase
(Gross Losses Paid)
Chart 2
Gross Premiums Written vs. Gross Losses Paid,
2000-2004
Put another way, between 2000 and 2004 the increase in the premiums collected by the
15 leading malpractice insurers was 14 times as great as the increase in their claims payments on
a gross basis (134.5/9.3 = 14.01), and 21 times as great as the increase in those payments on a net
basis (120.2/5.7 = 21.09).
As a result of this surge in premiums while claims payments remained virtually
unchanged, the paid loss ratio for the leading medical malpractice insurers fell by more than half
between 2000 and 2004: it declined from 69.9% to 33.6% on a net basis, and from 68.8% to
32.1% on a gross basis. Looked at another way, in 2004 the leading medical malpractice
insurers took in approximately three times as much in premiums as they paid out in claims.
9
Moreover, several insurers substantially increased their premiums even though their claims
payments fell substantially, as Chart 3 indicates.
Chart 3
Change in Premium vs. Change in Claims Payments,
Net Basis, 2000-2004
+88.0% +79.1% +88.7%
+2200.0%
-32.0%
-63.0% -33.6%
+433.6%
-500%
0%
500%
1000%
1500%
2000%
2500%
HCI ProNational MedAssurance Lexington
Company
Percentage Change
Premiums Payouts
For example, HCI increased its net premiums by $173 million, or 88%, during the same period in
which its claims payments fell by $74.2 million, or 32%. Even more striking is the divergence between
the premiums and claims payments of Medical Assurance and ProNational, both of which are
subsidiaries of the same parent company, ProAssurance Corporation. Unlike HCI, both those companies
had net written premium which already exceeded their claims payments in 2000, yet they continued to
increase their premiums substantially while their claims payments declined substantially. ProNational,
for example, had net premiums of $110.1 million and net claims payments of $67.6 million in 2000, for
a paid loss ratio of 61.4%. Yet over the next four years it increased its premiums by $87.1 million, or
79%, while its claims payments fell by $42.6 million, or 63%, as Chart 4 indicates.
10
Chart 4
ProNational Net Written Premium vs. Net Paid Losses,
2000-2004 (in $millions)
0
50
100
150
200
250
2000 2001 2002 2003 2004
Year
Amount
Written Premiums
Paid Losses
As a result of these countervailing trends, in 2004 ProNational had a paid loss ratio of only 12.7%, i.e., it
was paying out less than 13 cents in claims for each dollar it was collecting in premium.
More striking still, in 2000 Medical Assurance reported a paid loss ratio of only 28.3%--it took
in $170.5 million in premium while paying out only $48.2 million in claims. Nevertheless, over the next
four years, Medical Assurance increased its premiums by $151 million, or 89%, while its claims
payments declined by a third as, Chart 5 indicates.
11
Chart 5
Medical Assurance Net Written Premium vs. Net Paid Losses,
2000-2004 (in $millions)
0
50
100
150
200
250
300
350
2000 2001 2002 2003 2004
Year
Amount
Written Premium
Paid Losses
As a result, in 2004 Medical Assurance took in $322 million in premiums but paid out only $32 million
in claims, for a paid loss ratio of 9.9%. In other words, it was paying out only 10 cents in claims for
each dollar it was collecting in premium.
The most striking results of all, however, were reported by AIG subsidiary Lexington Insurance
Company. As Chart 6 indicates, Lexington reported that its net written premiums increased from $21.1
million in 2000 to 483.0 million in 2004—an increase of $461.9 million, or 2200%--while its net paid
losses increased by only $52.9 million.
12
Chart 6
Lexington Net Written Premium vs. Net Paid Losses,
2000-2004 (in $millions)
0.0
100.0
200.0
300.0
400.0
500.0
600.0
2000 2001 2002 2003 2004
Year
Amount
Net Premium Written
Net Losses Paid
As a result, Lexington had a paid loss ratio of only 13.5% in 2004. Moreover, during the three
year period 2001-2003, in which Lexington increased its net premiums from $94 million to $442
million, or by 370%, its paid losses fell by 56.3%, from $33.4 million to $14.6 million. As a result, in
2003 Lexington had a paid loss ratio of only 3.3%--i.e., it paid out 3.3 cents in claims for each premium
dollar it collected. Notwithstanding the malpractice insurance industry’s insistence that it is insuring
fewer doctors today than in the past, it is possible that Lexington is insuring more doctors today than in
the past; if so, its premium volume could increase substantially even if its rates did not.4 It strains
4 To be sure, because claims paid out in a given year are typically covered by policies written in prior years, one would not expect paid losses to increase at
the same rate as premiums if an insurer were loosening its underwriting standards—i.e., insuring more doctors. According to the Physicians Insurers
Association of America, however, insurers have been tightening their underwriting standards, and thus insuring fewer doctors. For example, on February 17,
2005, PIAA president Larry Smarr told Congress that “the recent exodus from and transformation of the market is of such magnitude that the carriers
remaining do not have the underwriting capacity to take all comers,” that “many of the carriers remaining in the market are forced to tighten their
underwriting standards,” and that “this includes the withdrawal from recently expanded markets.” Testimony of Larry Smarr before the House Small
Business Committee, Feb. 17, 2005, at 3 (available at www.thepiaa.org). If what the PIAA told Congress is accurate, then the leading medical malpractice
insurers are not only paying out less while taking in more—they are paying out less while both taking in more and insuring fewer doctors.
13
credulity, however, to believe that since 2000 the number of doctors insured by Lexington could have
increased by anywhere near the 2200% by which its premiums have increased.
The amount paid out in claims in 2004 for each dollar of premium collected in 2004 by
ProNational, Medical Assurance and Lexington is shown in Chart 7:
Chart 7
Claims Payments Per Dollar of Premium Collected,
2004
%t.00
%t.25
%t.50
%t.75
.00
ProNational Medical Assurance Lexington
Company
Payment
12.7¢
9.9¢
13.5¢
B. Earned premiums vs. projected losses
Like their paid loss ratios, the incurred loss ratios of the 15 leading malpractice insurers
have plummeted: as Table 3 indicates, the average incurred loss ratio for those carriers fell by
almost 25% during the period 2000-2004, to 51.4%. Looked at another way, those carriers taken
together earned in premiums in 2004 almost twice as much as they estimated they would
ultimately pay out in claims on those premiums.
14
Moreover, all but one carrier reduced its incurred loss ratio between 2003 and 2004, all
15 had 2004 incurred loss ratios of 62.6% or less, 12 had incurred loss ratios of less than 60%,
and six had incurred loss ratios of less than 50%. By way of comparison, the average incurred
loss ratio for the property-casualty insurance industry as a whole during the most recent reported
10-year period was 67.5, according to the NAIC5. Each of the 15 leading medical malpractice
insurers thus had a 2004 incurred loss ratio that was far more favorable than the long-run
industry average.
Table 3
Ratio Of Projected Losses To Earned Premiums:
Largest Medical Malpractice Insurers, 2000-2004
5 NAIC Report on Profitability by Line