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Defense costs, around the country

Martin Grace, through his Center for Risk Management and Insurance Research at Georgia State, has access to data on liability insurance that seems to be hard if not impossible to find elsewhere. The other week he posted a commentary based on http://xeff.gsu.edu/mt/tort/defense.pdf">this highly fascinating state-by-state table of defense costs per capita in liability insurance generally ("all lines") and in medical malpractice claims specifically (PDF).

My eyes flew automatically to my own state of New York, which I was not surprised to find among the most costly, ranking 2nd highest of the 50-plus-D.C. overall and 3rd highest in malpractice. Per capita, according to the table, insurers incurred $145.45 in defense costs last year for every New Yorker -- an astounding $581.80 for each family-of-four -- of which $23.54 per capita, or $94.16 per family-of-four, went toward med-mal defense costs. (Again, these numbers, according to the people at Georgia State, are entirely separate from amounts laid out in actual verdicts and settlements, and from other underwriting and administrative costs). Other large states that lived up to their litigious reputations were Illinois (6th in both all-lines and med-mal), Pennsylvania (10th in all-lines, 8th in med-mal), New Jersey (3rd all-lines, 14th med-mal) and Florida (11th all-lines, 5th med-mal). Again, the table (PDF) is here.

Prof. Grace himself, in his commentary, points out that the numbers provide some evidence for a view which seems plausible to me, namely that a state's environment for med-mal litigation often diverges markedly from its environment for other litigation. This is clearly seen in the case of some otherwise litigious states with laws restricting medical litigation, such as California (5th highest all-lines, but only 24th highest on med-mal), Colorado (16th highest all-lines, 34th highest med-mal) and Louisiana (8th highest all-lines, 19th highest med-mal). Even aside from the presence or absence of doctor-protective legislation, the environment for M.D.s often seems to differ markedly from the environment for other groups.

Another interesting set of comparisons is between high and low states. On med-mal defense costs, for example, there's more than a 10-to-1 difference between the highest-outlay state, which I was surprised to learn was Oklahoma at $24.47 per capita, and the lowest, Minnesota at a mere $2.05. A nearly 3-to-1 ratio separates Illinois at $14.04 from nearby Wisconsin at $4.97. And if these figures correlate roughly with a state's degree of litigiousness -- though it's not entirely clear that they can be employed for that purpose without further study -- should we be surprised that states like New Hampshire and Arizona, with relatively pro-business reputations, score higher in the expense department than states like Maine, Rhode Island and Maryland?

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Rafael Mangual
Project Manager,
Legal Policy

Katherine Lazarski
Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.