Results matching “cjd”

CJD still lying about hot coffee - PointOfLaw Forum

Litigation-lobby front Center for Justice and Democracy is still falsely claiming that McDonald's "coffee was as hot as a car radiator." As we've previously noted, "A car radiator temperature, between chemical coolants and pressurization, is between 195 and 225 degrees Fahrenheit. Stella Liebeck's coffee was between 170 and 180 degrees, and would rapidly cool when exposed to room temperature."

Note also the humor in CJD's use of the passive voice: Liebeck was injured when "McDonald's coffee spilled in her lap." Well, who could complain about a lawsuit where coffee magically spilled itself? Oh, Stella Liebeck spilled the coffee on herself? Gee, that would seem a fact relevant to the assignation of proximate causation when evaluating whether it's appropriate to criticize a court that allowed this case to get to a jury, unlike over 90% of other courts that have dealt with cases similarly claiming that hot coffee was a "defective product."

Liebeck's injuries came from dumping an entire cup of coffee in her own lap while sitting in a car without a cup-holder, and then sitting in that hot coffee for well over a minute while wearing absorbent clothing. As Liebeck's own lawyer claimed, any coffee hotter than 140 degrees would be "unsafe" in those conditions. Unless you wish juries to have the power to punish vendors like McDonald's and Starbucks and Dunkin Donuts and everyone else that commercially sells coffee, that's no more McDonald's fault than it is Liebeck's auto manufacturer or sweatpants manufacturer.

That CJD and Susan Saladoff single out the poster child of abusive litigation as the point of attack on the tort reform movement—without ever fairly addressing the actual arguments tort reformers make—shows the bankruptcy of that attack.

Update, January 27: Welcome, readers of the dishonest "Pop Tort" blog. Note how they cherry-pick a couple of websites that say that radiator temperatures are 190 degrees. Of course, 190 degrees is hotter than Stella Liebeck's coffee (which, even if was "held" at 190 degrees, which there was no evidence of, would rapidly drop in temperature as soon as it stopped being held at that temperature); moreover, most websites give much higher temperatures for car radiators: "Most engines today are designed to operate within a "normal" temperature range of about 195 to 220 degrees F"; (same); many thermostats are set at 195 degrees for car radiators, etc. The only reason to use the "car radiator" analogy is to mislead. At best, a car radiator has such a wide range of temperatures that it is meaningless to use the analogy; if you're saying that Stella Liebeck's coffee is as "hot as a car radiator" because you're claiming that car radiators are 160 degrees, well, Starbucks and Dunkin Donuts and McDonald's and Burger King and Wendy's and Caribou Coffee and 7-Eleven and Cosi are selling coffee today that's hotter than 160 degrees—much less the 140 degrees that Stella Liebeck's lawyer claims makes coffee "unreasonably dangerous."

Note further how Pop Tort makes up a brand new theory of liability for McDonald's—that the cups were not capable of holding hot coffee—that not even Stella Liebeck's lawyer had the chutzpah to argue. Of course, there's no evidence for the proposition that McDonald's was selling coffee in cups that would collapse if "poked by a finger"; if they were, then the rate of injury from coffee spills would be far higher than 1-in-23-million cups (i.e., several times less likely than being struck by lightning).

Note further that CJD still has no answers for the actual arguments tort reformers make against the Liebeck verdict and the judge's erroneous legal decision to let the case get to a jury. Instead, all their website offers is ignorant snark. The question remains: if CJD is in the right, why can't they simply address the issues? Their reliance on dishonest arguments and misleading non sequiturs seems to be part of their business model.

Questions for Susan Saladoff about "Hot Coffee" - PointOfLaw Forum

Unfortunately, many journalists take trial-lawyer Susan Saladoff's conspiracy theory about the McDonald's coffee case at face value, and don't sufficiently scrutinize the movie's claims. Here are some questions for more enterprising journalists to ask.

Relatedly, the Center for Justice & Democracy spreads false urban legends about the hot-coffee case in the course of substanceless snark at a post I wrote debunking a typically shoddy CJD study. They claim that Stella Liebeck's coffee was as "hot as a car radiator." This, like much else on their website, is simply false. A car radiator temperature, between chemical coolants and pressurization, is between 195 and 225 degrees Fahrenheit. Stella Liebeck's coffee was between 170 and 180 degrees, and would rapidly cool when exposed to room temperature.

Center for Justice & Democracy study on new media - PointOfLaw Forum

A Center for Justice & Democracy study complains that "new media" overreports big-money plaintiffs' verdicts, while failing to report on all the small-money verdicts and losses. This strikes me as akin to complaining that there was a lot more tweeting about David Freese's World Series walk-off home run, when there are far more Little Leaguers who pop out to shortstop. Of course the news stories that are interesting and novel are going to get more attention than the events that are routine. Readers don't want to read about $15 thousand traffic accident cases, even if there are many more of them than multi-million-dollar propofol cases. Nor should they: the latter has real public policy consequences from trial lawyers putting profits ahead of people, while most traffic-accident cases do not.

So far CJD is doing nothing but identifying the obvious. But then, in its typically shoddy fashion, CJD draws conclusions that its data do not support. As I point out in an interview with Fair Warning, CJD's complaint about shorthand media reports does not support its conclusion that the result is to prejudice plaintiffs and the civil justice debate.

For example, CJD complains that newsrooms fail to mention that caps will reduce verdicts in many cases. But this is hardly a conspiracy by corporate media to promote an image of jackpot justice. It's plaintiffs' lawyers who are using the big (and often ultimately unsustainable) verdicts to draw business to themselves. For example, in Ernst v. Merck, as I pointed out contemporaneously, Mark Lanier's $253 million verdict could not possibly stand under Texas law's caps; indeed, as I predicted at the time, the entire judgment was thrown out for trial shenanigans. But Lanier disingenuously told reporters for over a year that he didn't think caps would apply to his verdict, and stalled the eventual appellate reversal so that he could use the publicity from the megaverdict to sign up thousands of clients that plaintiffs' lawyers ultimately turned into a multi-billion dollar settlement against an innocent defendant. Lanier's loss in Ernst, and the fact that Merck was victimized by thousands of fraudulent cases, didn't get a fraction of the publicity of the initial flawed jury verdict. That sort of analysis is absent from the one-side CJD "study."

Similarly, the exoneration of Toyota in the trial-bar's ginned-up sudden-acceleration hysteria got a fraction of the publicity as the original false claims of the trial bar; Jamie Leigh Jones's false accusations got much more promotion than the fact that they contradicted the evidence and a jury quickly rejected them. Teva and other propofol manufacturers are being dragged through the mud in the coverage of the Nevada litigation over propofol misuse, while the unfairness of that litigation gets a fraction of the coverage, and almost never mentioned in the stories about the big verdicts themselves. Susan Saladoff's dishonest documentary on the McDonald's hot coffee case has a far bigger footprint on the web than the truth about why the case is frivolous. (Ironically, Wyzga does a mea culpa for taking the CJD study on faith without considering the other side of the story, and then repeats the mistake with "Hot Coffee" in the next blog post.) conclusions on faith without considering the other side, and The media is far more likely to report sympathetically about litigation as a David-and-Goliath story when, in fact, the trial bar is wealthy and politically connected, and willing to use that power to extract wealth using trumped up allegations that fail to distinguish the innocent from the guilty. Again, this sort of analysis is absent from the CJD paper. The legal establishment promotes CJD's dishonest blog, while debunking websites are ignored.

Yes, media coverage of the civil justice system can be sensationalistic and skewed (as is the media's coverage of most events). But it's corporate defendants that bear the brunt of it.

Doroshow's Huffington Puffery - PointOfLaw Forum

As noted yesterday, Joanne Doroshow, executive director of the pro-trial-lawyer Center for Justice and Democracy (CJD), wrote a column in last Wednesday's Huffington Post that took aim at the Manhattan Institute's new Trial Lawyers, Inc.: K Street report. I published a lengthy rebuttal, pointing out just how deceptive Doroshow's hit piece was, and last night Doroshow went back on Huffington to reply, with a new column entitled (appropriately enough) "Huff and Puff."

What does Doroshow say? She makes no effort to resuscitate any of the arguments in her earlier piece that my rebuttal had exposed. (Draw your own conclusions.) Instead, Doroshow's odd reply boils down to one essential defense: "I was joking." (I kid not; take a look at her piece if you think I'm exaggerating.)

Joanne's reaction isn't surprising, I suppose: here at Point of Law, we've long known that Doroshow and her organization were anything but serious. I just hope the word gets out to the mainstream media the next time they uncritically report on one of the CJD's "studies."

Note, however, that Doroshow couldn't help but throw out a couple more deceptive nuggets -- which I'll take the trouble to correct for those interested:

My Response to Doroshow - PointOfLaw Forum

As I noted on Friday, Joanne Doroshow of the Center for Justice and Democracy authored a hit piece in last Wednesday's Huffington Post, which attacked the Manhattan Institute and the Trial Lawyers, Inc.: K Street report. I usually don't comment on the drivel spewed out by the trial-lawyer allied groups, since there's little reason to drive eyeballs to their otherwise lightly trafficked websites. But The Huffington Post has enough readers that I thought it wise to reply, this time. Today, published my lengthy reply, which:

  1. Spells out just what the Manhattan Institute's Center for Legal Policy is, what the Trial Lawyers, Inc. series is, and what the Center for Justice and Democracy is:
    The CJD's name is designed to obscure its actual mission, much like the trial lawyers have done by renaming their lobbying arm, formerly the Association of Trial Lawyers of America, as the innocuous-sounding American Association for Justice. Who, really, could be against justice or democracy? But the Center for Justice and Democracy, it turns out, is an organization that exists for the exclusive purpose of preserving the status quo system of tort litigation in America.

  2. Responds to Doroshow's misleading attacks on the K Street report's accurate claim that "over the last decade, lawyers and law firms--excluding lobbyists--have injected $780 million into federal campaigns":
    [Doroshow] argues that corporate interests also give large sums to the political process, which is unambiguously true. But Doroshow then tries to argue that corporate influence overwhelms lawyers' influence through a clever sleight of hand: she points to tables listing lobbying expenditures rather than campaign donations, which is what we're talking about in our report. They're not the same thing, and Doroshow almost certainly knows that, since the Center for Justice and Democracy--unlike the Manhattan Institute--reports lobbying activities on its own 990 federal tax returns.

  3. Responds to Doroshow's misleading attacks on "our report's detailed recitation of the trial bar's unprecedented efforts to get the current session of Congress to expand liability"--with a particular focus on her characterization of the Franken amendment (which I also discussed in some detail in my Friday post on the K Street report's federal government relations section):
    [Doroshow] mischaracterizes most of the federal legislation she describes. Most egregiously misleading is her description of the Franken amendment: "Al Franken's amendment to the defense appropriation bill[] ensured that women who serve as military contractors and get brutally drugged and raped by their co-workers ought to be able to seek legal recourse in court." Did Franken's amendment do that? Well, yes--but it did much more, too; and Doroshow is merely recycling the lie fed by the trial lawyers to late-night talk shows, the blogosphere, and an uncritical media.

I conclude:
The story of the Franken amendment, and the deceptive claims of the Center for Justice and Democracy's Joanne Doroshow, are good object lessons in how the trial bar feeds a gullible media to further its own political objectives. The Manhattan Institute's Trial Lawyers, Inc.: K Street report is intended to set the record straight; and we'll continue to do so, no matter what names and lies the personal-injury lawyers and their apologists throw our way.

Read the full piece here.

Around the web, February 21 - PointOfLaw Forum

  • "Ford failed to warn seating unsafe for obese persons" suit fails [Abnormal Use]
  • Plaintiff's lawyers battle over Zyprexa fees [Beck]
  • Humor quaint: Litigation Lobby claims Wall Street crash would never have happened if Bill Lerach and Mel Weiss had really been cut loose to do their thing [CJD] From the same source, another overwrought attack on Towers Perrin tort-cost survey numbers [AIR]
  • Class action in Canada: "Cadbury pays to avoid chocolate-bar lawsuit" [Montreal Gazette]
  • Tennessee: "Post Tort Reform Med Mal Filings Down 60%" [Robinette, TortsProf]
  • Suffolk county-exec Steve Levy could offer fiscally conservative choice in NY governor's race [Stoll]

Trial Lawyers, Inc.: K Street -- State Government Relations - PointOfLaw Forum

In addition to contributing some $780 million to political candidates in federal campaigns over the last decade, lawyers have funneled $725 million to state-level campaigns. As noted in the Trial Lawyers, Inc.: K Street report:

Whereas trial lawyers' giving at the federal level tends to focus on Congress, at the state level the money is spread among all three branches of government. Because state judiciaries make most tort law--and have the power to invalidate statutory tort reforms as unconstitutional--the plaintiffs' bar has long concentrated on getting its allies onto the state bench . . . . State legislatures, as the source of statutory tort reform, are another arena of interest: any state legislator who tries to advance tort-reform legislation immediately becomes a target of the trial bar and can expect a very expensive reelection campaign. The litigation industry has even begun to turn its attention to the executive branch, since state attorneys general can farm out representation of the state's civil lawsuits to attorneys in private practice, and state treasurers and comptrollers, who control public-employee pension funds, can hire outside lawyers to initiate securities-fraud lawsuits . . . .

I'll briefly discuss how trial lawyers play in the political process for each branch of government; further detail can be found in the report itself, here.

  1. Judicial branch. Since tort law is common law governed by the courts, and many states elect their judges (39 in total, and 21 for the highest court), it is hardly surprising that the plaintiffs' bar focused much of its early political efforts on ensuring that its allies filled state supreme courts. In 1990, a trial lawyer "brazenly told Forbes magazine: '[U]ntil last year the plaintiff bar owned and controlled the Texas Supreme Court.' "

    What happened, also unsurprisingly, is that business interests figured out that they could pool their resources and influence judicial elections, too--setting off an arms race that grew increasingly unseemly, the worst excesses of which were exposed in last year's U.S. Supreme Court case, Caperton v. A.T. Massey Coal Co. The need to campaign creates inherent conflicts of interest "between judges' role as neutral interpreters of the law and their status as elected officials with a need to fund-raise for campaigns," and as both Walter and I have noted here in the past, there's much to be said for the decision by the framers of the U.S. constitution to separate the federal judiciary from the electoral process.

    There are no easy solutions, however, and as Ted Frank noted here, much of the campaign for "judicial independence" is little more than a thinly veiled effort by George Soros and others on the left to achieve supremacy. As Ted notes, for these advocates, the "idea that judicial decision-making is beyond questioning by other branches of government . . . . somehow only appl[ies] to criticism of left-wing judges and judicial decisions." Tellingly, these same voices purportedly concerned about any criticism of the judiciary raised not a peep when President Obama upbraided Supreme Court justices for their Citizens United ruling--when the justices were seated before him, surrounded by hostile partisans, in the televised State of the Union address; instead, they were busy decrying the same judicial decision themselves.

  2. Legislative branch. The trial bar has long been giving to state legislative races, too. Historically, these efforts were largely defensive: "the trial-lawyer lobby largely contented itself with blocking legislative reforms, depending on state supreme courts to invalidate, on constitutional grounds, those that somehow achieved enactment." As previously suggested, those efforts are still ongoing (realized most recently in the Illinois supreme court's decision to overturn legislatively enacted medical-malpractice-law reforms, again, on dubious constitutional grounds). But of late, the trial bar has embarked on a more aggressive, affirmative legislative agenda, as they've sought to exploit recent electoral shifts that "produced or increased majorities of trial-lawyer-friendly Democrats in state legislatures."

    Among the trial bar's legislative successes are expansions of consumer-fraud statutes in Iowa and Washington; the creation of new qui tam statutes in New Mexico, New Jersey, and Oklahoma; the addition of new theories of non-economic damages in Iowa and Illinois; and an increase in statutory limits on damages recoverable against the state in Oregon. This legislation, as well as other trial-bar-backed efforts introduced but not passed into law, is summarized in the Trial Lawyers, Inc.: K Street report, as well as recent articles and reports by the American Tort Reform Association (see here and here (PDF)).

  3. Executive branch. Finally, it will come to no surprise to regular readers of this site--or those who have read Walter Olson's The Rule of Lawyers--that lawyers have also become increasingly active in working to influence state attorneys general and others with the capacity to engender litigation from the executive branch. Since Ron Motley and the now-incarcerated Dickie Scruggs pioneered this tactic in the multistate tobacco litigation, it has ballooned into a major part of the business model for the plaintiffs' bar.

    The week before we released the K Street report, this issue got significant media attention: The Washington Times (in an editorial) explored the trial bar's "pay to play" tactics with state AG's who hire outside contingency counsel; and The Wall Street Journal (in an in-depth investigative piece) looked at the securities-class-action bar's political contributions to various state and local politicians who influence or control public employee pension funds (among the biggest investors in the market, and thus the best able to control such lawsuits under the Private Securities Litigation Reform Act of 1995). More detail is available in the full report, here.

(I'd like to apologize to our readers for not posting a summary of our Trial Lawyers, Inc.: K Street's state government relations section before this morning: I got preoccupied penning a lengthy response to a disingenuous hit job on the report, which was written by Joanne Doroshow of the trial-lawyer-allied Center for Justice and Democracy (there's lots of stuff on that outfit and its shoddy and misleading work in our archives, and here); stay tuned for my reply.

Anyway, notwithstanding that I'm just getting around to my state government relations posting, I still intend to wrap this up with a post about the trial-bar's federal government relations activities sometime later today, so stay tuned for that, too.)

Reaching back for historical slur - PointOfLaw Forum

The Center for Justice and Democracy, a trial-lawyer-supported group that publishes the Tortdeform website PopTort website, has a new flyer out attacking the U.S. Chamber. You can see the flyer here.

The Chamber is depicted as an octopus strangling America's institutions and people with its tentacles.

Either the staff at CJD is woefully ignorant of the past or someone there has on purpose selected imagery with an ugly, ugly history. It's hard to believe someone would consciously choose to use symbolism that so obviously evokes anti-Semitic propaganda from the Nazi era.

So we'll say "ignorant."

CORRECTION: I originally had the wrong website published by CJR. Apologies to the Drum Major Institute for incorrectly citing its blog.

Activist attorneys general are just super! - PointOfLaw Forum

It's a few months old by now, but the report still makes for entertaining reading -- a full-throated defense of activist attorneys general hiring contingency lawyers to sue industry. "State Attorneys General: The People's Champion," comes from the Center for Justice and Democracy, one of the many "consumer" groups financed by the plaintiff's bar. From the news release announcing the report:

In State Attorneys General: The People's Champion, authors Emily Gottlieb and Amy Widman find that state AGs act on behalf of citizens in many diverse areas, including consumer protection, antitrust and utility regulation, and environmental protection. The White Paper delves into many past and current AG lawsuits, including cases where AGs, whose offices may be underfunded and understaffed, work with private outside counsel to accomplish these goals. Outside counsel are hired on contingency at no cost to taxpayers. According to the study, such agreements have been the target of brazen criticism by conservative business groups whose members have often been found liable by state AGs and forced to repay taxpayers millions of dollars.

Gottlieb and Widman write, "When Attorneys General and private attorneys join together, the power of the state is made stronger by the additional resources, manpower and strategic advice provided by private counsel. It increases their access to documents so the state can investigate exactly what was happening behind corporate doors. Also, because the state is involved, it can provide more whistleblower protection to insiders willing to speak the truth about industry misconduct." Moreover, "[S]ettlements and fees are paid for by the wrongdoer, not the taxpayer, and the money is used to cover the costs of the litigation as well as disbursed into public programs related to the lawsuit or funneled back into the Attorney General's office."

All rightee. Walter Olson has written about the group over the years, and Ted Frank* has aptly described CJD as a "trial lawyer front group." It's a 501(c)(3) organization that got out of the lobbying business back in 2006.

*We've updated the post to reflect clearly it was Ted, not Walter, who used the term "trial lawyer front group."

Funny how that works - PointOfLaw Forum

In New York, a medical malpractice insurance crisis has resulted in skyrocketing insurance rates, $50,000 surcharges, and calls for legal reform even from the Democratic governor and legislature. The Center for Justice & Democracy complains, claiming there's nothing wrong with the legal system, and it's all the fault of the insurance companies because they kept reserves too low by charging too little. (James T. Madore, "Spitzer to unveil plan to lower malpractice costs", Newsday, Mar. 5; George Wallace, "Malpractice Crisis Looms For Area MDs", Suffolk Life, Feb. 20).

This is ironic, given CJD's frequent allegations that insurance companies gouge doctors by keeping too high a reserve—an argument being made by trial lawyers in Colorado seeking to promote a bill raising medical malpractice damages caps in that state. (Bob Mook, "Lawmakers dissect COPIC", Denver Business Journal, Mar. 7 via Robinette).

Martin Grace and I have written a Liability Outlook for AEI looking at the last several years of CJD/AIR studies on medical malpractice. The conclusion? "In many ways, the problem with AIR�s reports is a perfect microcosm of what doctors find most distasteful about the liability system: a trial-lawyer mentality that cherry-picks facts and twists data to reach knee-jerk conclusions under the guise of a false science." See also Jim Copland's dissection of one such study Jul. 8.

We look forward to Kevin Drum giving this paper the same deference he credulously gave AIR's last bogus report.

One flaw of the paper is that we didn't include the story of "Bob," the dummy literally used to scapegoat insurance-company executives by CJD at an ATLA conference. For other CJD shenanigans, see OL Dec. 23, 2004 and Mar. 19, 2004. (Cross-posted at Overlawyered.)

Refuting Angoff on medical liability - PointOfLaw Forum

In work sponsored by the Health Coalition on Liability and Access, Rob Hoyt of the University of Georgia and Lars Powell of the University of Arkansas offer another critique ("Profitability in Medical Professional Liability Insurance", PDF) of the much-criticized Center for Justice and Democracy (CJD)/Jay Angoff report claiming that insurers are overcharging for medical malpractice coverage. Martin Grace thinks this critique is more thorough and devastating than the one cited in these columns a couple of weeks ago done by actuaries with the Towers Perrin firm.

"Actuaries Say Med-Mal Report Misled the Public" - PointOfLaw Forum

Insurance Journal:

Independent actuaries with the firm Towers Perrin say that a July 2005 report released by the Center for Justice and Democracy and five other "consumer groups" is incomplete and unsound.

Jay Angoff, an attorney employed by a personal injury law firm, performed the analysis for the six "consumer groups" and claimed that medical liability insurers have overcharged doctors and hospitals and accumulated record amounts of surplus over the last three years.

However, an analysis of Angoff's report by actuaries James Hurley and Gail Tverberg reportedly finds that those claims are not supported by the data, nor do they pass a common sense test.

Details, and a link to the new report (PDF), at the Tillinghast/Towers Perrin site. "The Physician Insurers Association of America (PIAA) brought the Angoff report to the attention of the Tillinghast business of Towers Perrin, and asked if Tillinghast would be interested in providing an independent review of the report," which review was carried out without compensation from any source, according to authors Hurley and Tverberg.

The Angoff/CJD report, to which the New York Times gave credulous coverage, was earlier taken to task by our own Jim Copland and Martin Grace. More on Angoff here and here. Update Oct. 31: another study refutes report.

CJD's Med Math Part II - PointOfLaw Forum

James Copland took the Center for Justice and Democracy to task earlier this week for its recent report by Jay Angoff.  Mr. Angoff is a former Insurance Commissioner for the State of Missouri and he seems to have particular problem with the med mal insurance industry as evidenced by an interview he gave published in Trial Magazine.  I discussed this interview earlier this year

James Copland has commented on a number of logical problems with the study and I thought I’d do a quick look at the data and provide a bit more information.  The first chart shows the number of companies selling malpractice insurance, as well as the US average loss ratios over this period 1995–2004.  (I excluded those companies that sold less than $10,000 in a given year because they are not likely really in the med mal business).  As we can see, the number of companies decreases over the period and only recently increases. This recent increase reflects alternative companies formed, in part, to deal with the med mal crisis. Entry may also be occurring as it looks like industry is becoming more profitable for the first time in recent years. 

Two other items to note are explored in this same chart.  Mr. Angoff’s conclusion that the loss ratio (shown in pink on the chart) is now quite favorable to insurers is an accurate statement as far as it goes.  The loss ratio is the ratio of losses incurred to premiums earned and does not include expenses.  We see that starting in 2000 the ratio is steadily falling (thus less of the premium dollar is going to pay claims and incurred losses).  What is truly amazing, however, about the report is its absolute failure to consider expenses.  The second loss ratio (shown in green) suggests a very different picture.  If we include loss adjustment expenses (which include legal fees, witness fees, and the like) we see that while the loss ratio including the expenses has decreased since 2000, it is still greater than 1. Thus, on average, a case costs $1.20 to close for each dollar of premium paid.  This does not sound like the insurance industry is “profiteering” to use the words of Connecticut AG Blumenthal.  To be fair this apparent loss is likely to be reduced somewhat as one must also include investment returns which may make the line profitable next year if the projections hold.  However, we still are not talking profiteering as profits will signal others to enter the industry. This is an appropriate competitive reaction.

CJD's med-mal math - PointOfLaw Columns

By James R. Copland

Back in January, I responded to a Bob Herbert New York Times column that attacked President Bush's medical malpractice liability reform plan. Herbert had relied heavily on the "Center for Justice and Democracy" (CJD), a Naderite shill for the trial bar that counts on its board of advisors such luminaries as Michael Moore and Erin Brockovich. (For more on the CJD, see Ted's dissection of their "Zany Immunity Laws Awards" at Overlawyered and my challenge to their misleading statements about the Tillinghast study here.)

Yesterday, the "paper of record" was at it again -- this time on the news page -- trumpeting the results of a new CJD study (PDF) purporting to show "that doctors have been price-gouged for several years as insurance industry profits have ballooned to unprecedented levels." Can this be right? As Ted has argued here, such claims make little economic sense: new entrants would take advantage of the abnormal profit opportunity and enter the medical malpractice market. Instead, though, what we've seen in recent years is medical malpractice insurers losing money and exiting the market. Something doesn't add up.

A look deeper into the numbers shows that, as usual, CJD is "creatively" using statistics to mislead its readers:

(1) The study mismatches cash flows by linking current premiums payments to current claim payments. The Times notes that the study claims that "the increase in premiums collected by the leading 15 medical malpractice insurance companies was 21 times the increase in the claims they paid" from 2000-2004. And indeed, the bulk of the report focuses on the relationship between current premiums and claims. But such year-to-year comparisons make no sense, since the average claim takes about 4.5 years to resolve; indeed, about 12 percent of claims take at least 8 years to resolve. It is thus hardly surprising that premium growth might outstrip current claim growth, substantially, over a short period of time. (The CJD report does give some attention to the relationship between incurred losses and premiums, the only sensible comparison from an accounting perspective. Indeed, the CJD admits that "insurers and regulators typically use the incurred loss ratio as a measure of profitability." Nevertheless, the study argues that "many malpractice insurers have in the past posted incurred loss estimates that ultimately proved to be overstated." While that is the case, such variations are not only inevitable given the inexact science of predicting liability exposure, but loss reserves must be reconciled in the accounting statements each year -- a point that might not be self-evident to those with no background in accounting. Also, it's worth noting that in its discussion of incurred loss ratios, CJD mysteriously (or not so mysteriously, see point 3 below) shows only 2003-2004 dollar total comparisons, otherwise sticking to company-by-company ratios.)

2. The study is seriously skewed by "survivorship bias" effects. The CJD study inevitably generates a disconnect between premiums paid and claims paid (or losses incurred) because it fails to acknowledge and account for the exit from the market of major medical malpractice insurers, which guarantees a skewed result that shows premiums growing much more quickly than they actually are and claims/losses not growing as quickly as they actually are. How so? Well, in 2001, the then-largest medical malpractice insurer, the St. Paul Companies, exited the market. In 2001 alone, St. Paul had collected about $530 million in premiums (and generated an underwriting loss of $940 million--out of over $3 billion in underwriting losses that year for the industry, see here (PDF), p. 13, exh. 3). In 2002, the physician-owned Pennsylvania insurer PHICO went bankrupt; by the end of last year, PHICO still had over $1 billion in claim liabilities. Then, in 2003, The Farmers Insurance Group exited the malpractice market; Farmers had written $231 million in premiums as recently as 2002. The exit of these and other major insurers from the medical malpractice market not only contradicts the basic theme of the CJD study--that insurance companies are scoring unprecedented profits by "gouging" their customers--but the sheer volume of these companies' premiums and claims completely distorts the numbers presented by CJD, whose study includes only the 15 largest surviving companies. Let's see how:

Table 2 on page 7 of the CJD report shows premiums growing from 2001 to 2004 79 percent, an annual growth rate of 21 percent. But wait--CJD only shows the $3 billion in 2001 premiums collected by these 15 companies, and does not account for the $500 million+ collected by St. Paul, not to mention those collected by PHICO and Farmers, among others. Add back in ~$1 billion, and all of a sudden the annual growth rate in premiums from 2001-04 is 10 percent--well above inflation, but completely in line with health care inflation. Moreover, it's important to remember that St. Paul and Farmers are still paying claims, and PHICO has $1 billion in claim liabilities outstanding, so the growth in claims paid presented by CJD, at 2 percent per annum from 2001-04, grossly distorts the real picture.

It is hardly surprising that companies like Lexington (a subsidiary of AIG) and MedPro (a subsidiary of GE Insurance) have had such rapid growth in premiums written in recent years after the exodus of such major players as St. Paul, PHICO, and Farmers; nor is it surprising that claims paid (which, remember, take about 4.5 years to resolve on average) have not yet caught up with that rapid premium growth.

3. The study hand-picks its time frame to generate its results. CJD's study picks as its beginning year 2000. At first glance, such a selection might seem arbitrary and innocuous, but in 2000, the industry generated a record $1.8 billion in underwriting losses, followed up by a $3 billion loss in 2001 (see here (PDF), p. 13, exh. 3). These losses followed naturally from an unanticipated and unprecedented rise in the expected value of med-mal claims: the median jury verdict in med-mal cases rose from $500,000 in 1997 to $712,000 in 1999 to $1 million in 2000, where it has since remained. Thus, CJD's use of ratios (e.g., page 14, Table 3) is inherently skewed. Is 2004's 51% incurred loss ratio out of line with what the med-mal insurance industry saw in the 1990s or before? We don't know, because CJD only begins with the beginnings of the current crisis in 2000.

That CJD's choice of years is not merely arbitrary is also evidenced by its "surplus analysis" (see pages 17-19). Without explanation, Table 5 on page 18 shows insurers' surpluses only for years 2002-04. Why would CJD omit years 2000 and 2001, which it had included in its earlier analysis? Well, because the med-mal insurers lost a ton of money in those years and had to draw down their surpluses, which for the industry topped out at $4 billion in 1999 and then were drawn down some $600 billion by 2002 (see here, slide 11). The increase in surpluses since that time is, therefore, merely a return to normalcy for the industry (plus, probably, a little extra cushion given the recent crisis and heightened concerns about potential future claims). (I also note that CJD's insistence that any surplus over the level deemed "adequate" by NAIC is "excess" and thus somehow unneeded is poppycock, akin to arguing that any bank which holds reserves above the minimum level prescribed by the Federal Reserve is somehow acting improperly. There's nothing wrong with management being risk averse, particularly in light of recent industry insolvencies; remember too that 9 of the 12 monoline insurance companies in CJD's analysis are mutual companies, thus owned by their (doctor) policyholders, not outside shareholders.)

Similarly, CJD's "note about medical malpractice stock performance" (pages 19-20) shows similarly manipulative date selection. It tracks the 3 publicly held monoline med-mal insurers' stock performance from May 17, 2002 through May 17, 2005, as compared to the Dow Jones (see Table 7, page 20). But why 2002? Because, of course, in May 2002 med-mal stocks would understandably be depressed, since the industry had had enormous losses ($4.8 billion) in the two preceding years. Remember that St. Paul had exited the market in December 2001 and PHICO was declared insolvent in February 2002. Let's go back further--to 1999, before the 2000-01 med-mal insurance crisis--and check things out:

Of the 3 monoline public companies CJD examines, only FPIC has had publicly traded stock since 1999. On May 17, 1999, FPIC's stock closed at $45.19, which means that it subsequently declined 34 percent by May 17, 2005. On May 17, 1999, the DJIA closed at 10,853, which means that it subsequently declined 5 percent by May 17, 2005.

When you don't use CJD's hand-picked dates, the situation for med-mal insurers doesn't look so pretty does it? Have med-mal stocks grown a lot since 2002? Of course, but only because regulators have permitted premium increases to cover the increases in expected liability, which were generated by the rapid rise in verdicts in the late 90s through 2000. Again, the change is only natural, and has not yet even returned to the status quo ante.

4. The study ignores all costs insurance companies incur apart from payments to claiments to create the illusion of profitability. Finally, it deserves mentioning that CJD seems to assume that insurance companies' only costs are incurred losses, i.e., payments made to claimants. But insurance companies also have allocated loss adjustment expenses (e.g., their own defense costs, including attorneys' fees and expert witnesses) and underwriting expenses (the administrative cost of writing policies). It's not as if an insurance company with an incurred loss ratio of 50 or 60 percent is making huge profit margins (though we can be sure that when the industry has an incurred loss ratio of 100 percent--as CJD shows that it did in 2001, see Table 3, page 14--it's losing a lot of money). Unfortunately, the costs of insuring tort liability are very high; there's just tons of administrative expense in the system.

In failing to take account for the market exit of some of the industry's largest players, mismatching premiums and losses, hand-picking dates to skew results, and painting a deceptive picture of the insurance industry's profitability, CJD's research is at best shoddy and at worst intentionally misleading. It's somewhat tiresome to rebut these studies, but as long as mainstream media sources pick them up rather uncritically, I think it's a useful exercise. For more information on medical malpractice and the misuse of statistics by the trial bar and its supporters, see my rebuttal to a similar Public Citizen report released a couple of months back.

CJD's med-mal math - PointOfLaw Forum

Back in January, I responded to a Bob Herbert New York Times column that attacked President Bush's medical malpractice liability reform plan. Herbert had relied heavily on the "Center for Justice and Democracy" (CJD), a Naderite shill for the trial bar that counts on its board of advisors such luminaries as Michael Moore and Erin Brockovich. (For more on the CJD, see Ted's dissection of their "Zany Immunity Laws Awards" at Overlawyered and my challenge to their misleading statements about the Tillinghast study here.)

Yesterday, the "paper of record" was at it again -- this time on the news page -- trumpeting the results of a new CJD study (PDF) purporting to show "that doctors have been price-gouged for several years as insurance industry profits have ballooned to unprecedented levels." Can this be right? As Ted has argued here, such claims make little economic sense: new entrants would take advantage of the abnormal profit opportunity and enter the medical malpractice market. Instead, though, what we've seen in recent years is medical malpractice insurers losing money and exiting the market. Something doesn't add up.

A look deeper into the numbers shows that, as usual, CJD is "creatively" using statistics to mislead its readers:

Vacation, holiday reading - PointOfLaw Forum

I'll be out of town through New Year's, so I won't be posting the rest of the week. For those interested in more reading, though, you may want to check out these two new entries from our friends at the Washington Legal Foundation:

Gibson Dunn's Ted Olson, former U.S. Solicitor General (who argued Bush v. Gore at the Supreme Court), has a co-authored legal opinion letter on the Kentucky Supreme Court's decision in Sand Hill Energy, Inc. v. Smith, which we discussed here.

Glenn Lammi, who heads WLF's Legal Studies Division, has a co-authored Legal Backgrounder discussing positive guidance from the Michigan Supreme Court on challenges to tort reform laws.

Also, I'd be remiss if I didn't point readers to our own Ted Frank's wonderful post on Overlawyered, "Center for Justice & Democracy's Zany 'Zany Immunity Law Awards.'" Ted picks apart CJD's flimsy document on supposedly outrageous legal immunity laws that was apparently designed to counter the American Tort Reform Association's well-documented "Judicial Hellholes" report. (Judicial Hellholes is 54 pages and has 391 footnotes; Zany Immunity is 15 pages long with 20 footnotes and humorous illustrations. Last year, CJD resorted to the tried-and-true tactic of calling ATRA's report "racist" because the judicial hellholes were in disproportionately minority counties.) It really boggles my mind that CJD thinks it's "zany" to stop baseball fans from suing stadium owners if they're hit by an errant fly ball, or -- get this -- to stop thieves who break into anhydrous ammonia tanks on farms to make methamphetamines from suing the farmer if they're injured in the theft. Read Ted's full posting for a thorough and entertaining analysis.

See you all in the new year!

The New York Times on medical malpractice - PointOfLaw Forum

In yesterday's New York Times, columnist Bob Herbert attacked tort reform as "all about greed." According to Herbert, "[w]hat tort reform will lead to, not surprisingly, is an unwarranted burst of additional profits for the insurance industry, which is why the industry is sinking so much money into its unrelenting campaign for 'reform.'" Herbert repeated the familiar trial lawyer canard that "there is no evidence that soaring malpractice premiums are the result of sharp increases in the amounts of money paid out for malpractice claims."

And the source of information for Herbert's contention? None other than the "Center for Justice and Democracy." Innocently called a "consumer advocacy group" by Herbert, the CJD is a Naderite group (its president, Joanne Doroshow, began working with Nader in 1986), heavily funded by the trial bar, and started with seed money by Michael Moore (yes, that Michael Moore), who remains on the group's board.

Problem is, the CJD's own data refute its claims that the "premium-gouging underwriting practices of the insurance industry have been widely exposed." The very "study" the CJD issued through its subsidiary group, "Americans for Insurance Reform," showed that since 1975, actual liability losses paid by doctors have escalated 1300%, versus a general 500% medical cost inflation, and only a 300% rise in actual premiums written per doctor. The result, of course, is that the paid-loss ratio -- the percentage of insurance premiums going to cover tort losses -- escalated from about 25% in 1975 to about 80% today. (CJD either doesn't understand its own data, or it deliberately misrepresents them. For more thoughts on the weakness of the CJD's claim that medical malpractice insurance rate increases are not linked to rising tort costs, see Ted Frank's earlier commentaries here and here.)

The medical malpractice insurance industry, therefore, has been a decidedly unprofitable business. In 2001, the country's biggest malpractice insurer, the St. Paul Companies, exited the business entirely after incurring nearly $1 billion in losses. In Pennsylvania, one of 20 states with out-of-control rates, only two malpractice insurers remain, down from ten only five years ago. In Mississippi, at least 15 insurers have exited the market since 1997.

In this environment, the majority of doctors today are insured through mutual insurance companies -- i.e., those owned by the doctors themselves. In other words, if the doctors' malpractice insurance rate hikes were "all about greed," it would be a peculiar greed indeed, since the doctors themselves control most the companies through which they are insured.

Herbert's column would be amusing were its implications not so deadly serious. Faced with potential bogus "botched delivery" suits, many obstetricians are limiting their practices to gynecology, forcing women in some areas to travel hours for prenatal care and delivery. High-risk specialists such as neurosurgeons are exiting some parts of the country entirely, meaning that stroke patients and head- and spinal-trauma victims have to be helicoptered to neighboring states.

Americans potentially have access to the best health care in the history of the world, but that health care is being threatened by a system that is reducing their access to care through a random and haphazard system of law. Of course, in medicine, mistakes happen, and some of those are due to doctor negligence. A system of deterring those mistakes, and compensating the victims of negligent mistakes, is extremely important. But that's not what our system is doing; our system is broken and it needs to be fixed. Instead of pointing a finger at the insurance industry, we should be thinking about solutions to the problem.

Tort reform opponents play race card - PointOfLaw Forum

Apparently lacking in meritorious arguments, opponents of tort reform have resorted to a strategy of accusing tort reform advocates of racism. According to the "Center for Justice and Democracy," "racial prejudice lurks behind the 'tort reform' movement." Among the out-and-out lies in the press release: "'Tort reform' laws weaken the only available forum, in some cases, for holding perpetrators of hate groups and hate groups accountable." But not even the scare paper supports this.

The report suggests that volunteer immunity laws are really a Trojan horse to provide protection for "volunteers for the Ku Klux Klan." (You may recall that the American Trial Lawyers Association recently falsely suggested that those very same volunteer immunity laws refuted the premise of a recent Newsweek cover story. (see Jan. 9; Dec. 12).)

Evidence? Well, none whatsoever. The CJD cites successful lawsuits against the Klan and Aryan Nations for assaults, a murder, and a church burning, but no tort reformer has suggested that civil liability be limited for those who commit violent crimes or intentional torts. Certainly, the Volunteer Protection Act of 1997 does not; aside from the exclusion in the law for hate groups, the supposed "loophole" that permits states to provide additional protections for volunteers would have no effect on a federal suit for deprivation of civil rights.

Does tort reform affect insurance rates? - PointOfLaw Forum

In my radio interview last week, I was asked about the Wisconsin Association of Trial Lawyers' claim that tort reform measures have no effect on medical insurance rates. ATLA's "fact sheet" on medical malpractice reform makes the same claim. A 2003 HHS compilation of studies on the matter, linked on our old medical page, refutes that proposition. (HHS, "Confronting the New Health Care Crisis", Mar. 3, 2003 at Tables 6 and 7).