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Corporate Upper Class
Ten years after so-called “tort reform” legislation, insurance companies that offer property, liability and casualty coverage are reporting record profits for 2005.
The tort reform movement in Texas successfully limited the damages that individuals could win by bringing civil suits or “torts” against corporations. In 1995, the Texas Legislature capped the payments on suffering, mental anguish and non-economic damages at $250,000 per provider per defendant. Injured individuals are still allowed full compensation for “actual damages,” such as the cost of ongoing medical treatment or the loss of income.
U.S. property and casualty industry recorded an underwriting profit of $15.1 billion for the first six months of 2006, a 31.8 percent increase over the first half of 2005, according to a September insurance industry report from AM Best.
“In recent years the insurance industry's profits have grown exponentially in comparison to the past three decades,” said Ruth Widdoes, branch manager with A-Affordable Insurance Co.
Despite near-record losses from hurricanes along the Texas Gulf Coast during 2005, the property and casualty insurance industry registered a $121 billion increase in total assets during the year. In fact, industry assets increased 9.4 percent in each of the last two years.
By comparison, insurance industry investments in bonds rose 7.5 percent and its stock investments increased 10.5 percent in 2005 – suggesting that most of the asset growth came from retained earnings rather than from investments. The industry is legally required to hold reserves and to place part of its assets in investments outside the industry to guarantee its ability to pay claims.
“Tort reform was marketed to consumers as a way to lower insurance rates and enable insurance companies to provide better services. Unfortunately, exactly the opposite has happened,” said John Ventura, the director of the Texas Consumer Complaint Center and author of 14 books on the subject.
“Insurance rates have consistently increased since reforms were initiated. Since payments have been capped, insurance customers are having a very difficult time being rewarded damages.”
The $250,000 cap has made cost and the risk of bringing a liability law suit an issue. A medical malpractice suit, for instance, costs an average of $50,000 to $100,000 for a law firm to prepare and try, and it takes on average two to three years to litigate.
Jana Sallinger, a Houston attorney who specializes in medical malpractice, said, “The media hype and insurance public relations campaigns have poisoned voters’ minds. The only people benefiting from tort reform are the insurance companies.”
Since the establishment of the first colonies in the New World, civil suits have enabled small farmers, workers and consumers to seek redress against wealthy individuals and powerful organizations because under the law they were equals. The insurance companies used the term “tort reform” to campaign tenaciously and successfully to overturn and restrict four centuries of legal precedent.
© Copyright World Internet News 2006-07
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