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Some political ads have started to air with blatantly false reports about the exodus of doctors and hospital closings due to medical malpractice lawsuits. These spots also support the widely discredited notion that limiting lawsuits will bring down doctors' insurance rates, as repeated studies - and actual experience - show that the cause and solutions to those problems lie with the insurance industry, not the legal system.

The U.S. General Accounting Office (GAO) found that doctors' groups have misled, fabricated evidence, or, at the very least, wildly overstated their case about how medical malpractice problems have limited access to health care. Analysis of Medical Malpractice: Implications of Rising Premiums on Access to Health Care, General Accounting Office, GAO‑03‑836, 2003 (pp.12‑24)

The health care access problems that GAO could confirm were isolated and the result of numerous factors having nothing at all to do with the legal system. Specifically, GAO found that these pockets of problems "were limited to scattered, often rural, locations and in most cases providers identified longstanding factors in addition to malpractice pressures that affected the availability of services." (p. 13) For example:

o In Flordia, GAO found, "Reports of physician departures in Florida were anecdotal, not extensive, and in some cases ... inaccurate." (p. 17). "Hospital association representatives reported that access to newborn delivery services in Florida had been reduced due to the closures of five hospital obstetrics units. However, [GAO] contacted each of these hospitals and determined that ... demand for [each] now closed obstetrics facility had been low and that nearby facilities provided obstetrics services." (p. 16)

o "In Nevada, 34 OB/GYNs reported leaving, closing practices, or retiring due to malpractice concerns; however, confirmatory surveys conducted by the Nevada State Board of Medical Examiners found nearly one‑third of these reports were inaccurate... Random calls [GAO] made to 30 OB/GYN practices in Clark County found that 28 were accepting new patients with wait-times for an appointment of 3 weeks or less." (p. 18)

o "In Pennsylvania, despite reports of physician departures, the number of physicians per capita in the state has increased slightly during the past 6 years…." (p. 18)

o "In West Virginia, although access problems reportedly developed because two hospital obstetrics units closed due to malpractice pressures, officials at both of these hospitals told [GAO] that a variety of factors, including low service volume and physician departures unrelated to malpractice, contributed to the decisions to close these units. One of the hospitals has recently reopened its obstetrics unit." (p.16-17).

· An August 2004 study by the National Bureau of Economic Research [NBER] found: "The fact that we see very little evidence of widespread physician exodus or dramatic increases in the use of defensive medicine in response to increases in state malpractice premiums places the more dire predictions of malpractice alarmists in doubt. The arguments that state tort reforms will avert local physician shortages or lead to greater efficiencies in care are not supported by our findings." Katherine Baicker & Amitabh Chandra, NATIONAL BUREAU OF ECONOMIC RESEARCH, The Effect of Malpractice Liability on the Delivery of Health Care (Aug. 2004), p. 20.

· Local news stories have reached similar conclusions. For example, in Illinois, "Tales of doctors fleeing Illinois to escape soaring malpractice insurance costs have captured media attention and fueled the push for limits on jury awards, but the numbers tell a different story. Overall, the number of doctors in Illinois is rising, according to data from the state agency that licenses physicians." Bob Tita, "More does in Illinois; Numbers don't bear out idea of fleeing physicians, Crains Chicago Business, July 05, 2004.

· Weiss Ratings, an independent insurance-rating agency, found that between 1991 and 2002, states with caps on noneconomic damage awards saw median doctors' malpractice insurance premiums rise 48 percent - a greater increase than in states without caps. In states without caps, median premiums increased only 36 percent. Weiss speculated that state regulation of insurance premium increases made the difference. Jyoti Thottam, "He Sets Your Doctor's Bill; A Chastened Insurer," Time Magazine, June 9, 2003.

· NBER: "Surprisingly, there seems to be a fairly weak relationship between malpractice payments (for judgments and settlements) and premiums - both overall and by specialty." (p. 14). "Past and present malpractice payments do not seem to be the driving force behind increases in premiums. Premium growth may be affected by many factors beyond increases in payments, such as industry competition and the insurance underwriting cycle. (p. 20). Katherine Baicker & Amitabh Chandra, NATIONAL BUREAU OF ECONOMIC RESEARCH, The Effect of Malpractice Liability on the Delivery of Health Care (Aug. 2004).

· GAO: A study released by the congressional General Accounting Office in 2003, Medical Malpractice Insurance: Multiple Factors Have Contributed to Increased Premium Rates, found absolutely no support for capping damages as a solution to bring down insurance rates for doctors.

For more information, contact the Center for Justice & Democracy, http://centerjd.org

WHOLESALE COLLAPSE OF INSURANCE RATES IS NOW UNDERWAY; EVEN MEDICAL MALPRACTICE RATE HIKES CLOSE TO MEDICAL INFLATION

NEW YORK - Americans for Insurance Reform (AIR) and consumer rights organizations have long maintained that the "crisis" of skyrocketing insurance rates for doctors and other policyholders would end when the insurance investment cycle stabilized, and that this would occur whether or not "tort reform" laws were enacted. Insurance industry data now unmistakably confirms this prediction.

According to the third-quarter Council of Insurance Agents and Brokers survey of market conditions, commercial insurance rates are now dropping significantly. Even medical malpractice insurance, which has been skyrocketing for some doctors over the last two years, has now slowed to the point that med mal rates hikes (6 percent) are nearly as low as medical inflation (currently 4.4 percent).

"We are now witnessing the wholesale collapse of insurance rates," said J. Robert Hunter, AIR spokesperson, Director of Insurance for the Consumer Federation of America, former Federal Insurance Administrator and Texas Insurance Commissioner. "Rate increases in commercial property insurance are dropping across the board. The end of the `hard market' of sharp rate increases, less competition and cutbacks in coverage has occurred and a `soft market' is now fully in place."

A "hard" insurance market is characterized by higher rates, less competition and limited coverage. This is the result of the cyclical nature of the insurance business. Prior to the "hard market" of the last two years, the last such "hard market" occurred in the mid-1980s. But like today, the insurance cycle turned after two to three years and prices began to fall. This had nothing to do with tort law restrictions enacted in particular states, but rather to modulations in the insurance cycle everywhere. In 1991, for example, Washington State's insurance commissioner Dick Marquardt concluded that it was "impossible to attribute stable insurance rates to tort-law changes or the damages cap," since rates also improved in states that did not pass "tort reform," and that "requiring frequent rate review and reporting of investment income probably was more likely than tort reform to stabilize the insurance market." "Health Care Reform - [George H.W.] Bush's insurance cap plan a proven failure." The Seattle Times, May 16, 1991.

From the late 1980s until late 2000, the nation had enjoyed a "soft" insurance market for over a decade - with rates of liability insurance not only stable but down, at least in real, inflation‑adjusted terms. But the cycle turned from a "soft" to a "hard" market in late 2000. The September 1 I " terrorist attacks accelerated the rate increases that were already underway.

"The hard phase of the insurance cycle clobbers American businesses and professions every ten to fifteen years," said Hunter. "Although these hard markets last only about two to three years, they can no longer be tolerated. State regulators must enforce the rating laws in order to end the boom and bust swing from illegal overpricing, such as the rates some policyholders have been asked to pay today, to illegal and inadequate underpricing, which will be seen when the market softens too much later in the cycle. Fortunately, the hard market price jump is behind us and we are now entering the softer market so legislators have a decade or so to grapple with how best to do this before the next hard market hits the nation. And there is now clearly no need to rush into quick legislative fixes, such as legal limits on patients' rights.

· The property-casualty insurance industry's after‑tax net income for the first half of 2004 was the highest ever: a record-breaking $23.5 billion!1 1

· First half-year income in 2004 was up 62.2% from the first half‑year income of 2003, and comes on the heels of an earlier, astounding 997 percent increase from 2002 to 2003. 2

· The property/casualty industry's surplus also is at the highest level ever: over $370 billion.3

Health insurers' profits (and their executives' salaries) have also skyrocketed, as they raise premiums and limit reimbursement to doctors.

· "Despite a weak economy and soaring medical costs, U.S. health insurers have raked in earnings at a far greater pace than the rest of corporate America, with annual profits and margins doubling in the last four years." 4

· "Average pay for the five top executives at [the top] health insurers almost doubled [over the last four years] to $3 million a year."5

While telling lawmakers that payouts to injured patients are costing insurers too much money, internally the insurance industry is "celebrating" its rapidly rising profits.

· "The first half [of 2004] result is far better than what was expected by industry observers earlier this year... The financial and underwriting performance of the property/casualty insurance industry during the first half of 2004 was nothing short of outstanding." Robert P. Hartwig, Insurance Information Institute7

· 2003 "was an excellent year for the property/casualty industry and well ahead of the past several years' results." - John Ward, Ward Group8

· "I think the industry should have peak (return on equity) years the next couple of years." - Cliff Gallant, Keefe, Bruyette & Woods9

Notes

1Insurance Services Office, Inc. [ISO] & Property Casualty Insurers Assoc. of America [PCI], PropertylCasually Industrys First-Half Income and Surplus Rose on Strong Underwriting Results and Investment Gains (Oct. 18, 2004).

2 ISO & PCI, Sharp Increase in PIC Industry's Net Income Propels Surplus Upward in 2003 (April 2004).

3 ISO & PCI, Oct. 18 2004

4 Russ Britt, "Health insurers getting bigger cut of medical dollars," Investors' Business Daily, Oct. 15, 2004, http://investors.com/breakingnews.asp?journalid=23544168&brk=1

5 Ibid.

6 Kaiser Family Found. & Health Research and Educational Trust, Employer Health Benefits.‑ 2004 Annual Survey 16 (2004)

7 Insurance Information Institute, 2004 ‑ First Half Results, Oct. 18, 2004.

8 Judy Greenwald, "Results likely to remain strong," Business Insurance, Mar. 22, 2004

9 Ins. Info. Inst., 2004 - First Half Results.

For Release
October 12, 2004

Contact: J. Robert Hunter, 703/528-0062;
Joanne Doroshow, Geoff Boehm, 212/267-2801

INSURERS CONTINUE TO PRICE-GOUGE DOCTORS DESPITE
DROPPING MEDICAL MALPRACTICE PAYOUTS

NEW YORK — With the issue of medical malpractice and “tort reform” becoming an increasingly discussed topic this election year, Americans for Insurance Reform (AIR) announced today the release of a comprehensive new study of medical malpractice insurance around the country, based on the insurance industry’s own data. Its findings may be startling to some:

According to Joanne Doroshow, Executive Director of the Center for Justice & Democracy and AIR co-founder, “These findings undermine one of the central claims of interest groups who seek to blame the legal system for doctors’ insurance woes. In fact, the study shows that the causes of and solutions to this crisis lie not with the legal system (i.e., “tort reform”) but with reforming regulation of the insurance industry, which has been unfairly charging doctors excessive rates to make up for their own investment losses.”

The study by AIR, a coalition of over 100 consumer and public interest groups representing more than 50 million people, makes nearly identical findings to those reached in similar AIR studies of national trends released in 2001 and 2002. Specifically, the study, Stable Losses/Unstable Rates 2004, shows that the real reasons medical malpractice insurance rates have risen so dramatically in the last two years are market forces and dropping interest rates – not, as the insurance industry claims, because of a sudden massive increase in medical malpractice jury awards or payouts, which, in constant dollars, have been decreasing for the last decade.

Author of the study, J. Robert Hunter, Director of Insurance for the Consumer Federation of America, former Federal Insurance Administrator and Texas Insurance Commissioner, said, “The current jump in prices doctors pay is a result of a combination of two insurance company practices: (1) the insurer’s aggressive under-pricing to gain market share when interest rates were high, coupled with (2) the insurer’s classification plan that charges some high-risk doctors (such as OB/GYNs and neurosurgeons) for all of the cost of the high-risk cases referred to them by all other doctors. What is crystal clear is that what did not cause this crisis was an increase in losses. There simply is no evidence of that!”

Hunter said, “There is only one way to solve this problem: reforming the insurance industry. State lawmakers must strengthen state insurance laws in order to end the boom and bust swing from illegal overpricing, such as the rates doctors are being asked to pay today, to illegal and inadequate underpricing, which will be seen when the market softens later in the cycle. Fortunately, the hard market price jump is behind us and we are now entering the softer market so legislators have a decade or so to grapple with how best to do this before the next hard market hits the nation.”

The full study can be found at: http://insurance-reform.org.

By John M.R. Bull of the Morning Call
Copyright 2004, The Morning Call
John.bull@mcall.com

HARRISBURG. Doctors can't keep malpractice lawsuit settlements a secret anymore because the public is footing the bill, a Lackawanna County judge has ruled in a groundbreaking legal opinion.

"This is huge," said Dan Fee, spokesman for Pennsylvania Citizens for Fairness, a consumer group that sides with lawyers against doctors on malpractice issues. "The judge has correctly said it's time to rip the veil of secrecy off this issue."

Common Pleas Judge Terrance R. Nealon last week refused to seal the settlement in the case of an obstetrician-gynecologist sued for misdiagnosis in the case of a Lackawanna County woman who subsequently died.

While the single‑county case doesn't set a statewide precedent, the ruling could set the stage for further court decisions to prohibit sealed settlements in malpractice cases paid from a $230 million fund established by the Legislature last year to benefit doctors complaining of high insurance rates.

According to Nealon's ruling, Lucille M. Korczakowski died of an ovarian cyst in 1999 that went undetected for at least three years. She was 47. Her husband, James, sued her doctor, Jung Jang Hwan of Clarks Green, 15 miles north of Scranton.

Three weeks ago, the doctor's insurance company - the Pennsylvania Medical Society Liability Insurance Co. - offered to settle the case for $725,000 after court-ordered mediation.

As a condition of settlement, the insurance company insisted on a confidentiality clause that prohibited anyone involved in the case from discussing it publicly.

Except in rare cases doctors or their insurers' insist such cases be sealed from the public. When that was agreed to earlier this month, the judge then was asked to seal the terms of the settlement, as has been customary in medical malpractice cases for the last 20 years.

Hwan's privacy needs to be protected, the insurance company's lawyer contended. The judge refused, in an order obtained Wednesday by The Morning Call.

Judge Nealon ruled that the settlement of this, and possibly any, medical malpractice case in Pennsylvania is a matter of public interest because the medical community has made a big issue over the past few years out of rising malpractice insurance premiums.

In fact, the medical community claimed doctors have been fleeing the state in large numbers because of rising premiums and frivolous malpractice lawsuits, and demanded the state Legislature enact court reforms and appropriate money for doctors.

Lawmakers in December increased the state tax on cigarettes and allocated that $180 million a year to a state fund to help doctors pay insurance claims not covered by their primary insurance carrier. An additional $40 million a year in surcharges on moving vehicle violations also goes for that purpose.

Because 70 percent of the settlement in the death of Lucille Korczakowski is being paid from that state fund ‑ more than $500,000 of taxpayer money - the terms of payment can't be allowed to remain secret, the judge ruled.

"Since the. funds which will be used to pay the majority of the plaintiff s settlement with Dr. Hwan are derived from public taxes or surcharges, any documents relating to disbursement of those settlement proceeds are clearly public records under the Right to Know Act," according to the court ruling.

The state agency that administers that fund, the MCare fund, declined to comment. Nor would it reveal whether Dr. Hwan has lost or settled other malpractice lawsuits, something that is not a matter of public record in Pennsylvania.

A spokesman for the Pennsylvania Medical Society, a lobbying group for state doctors, said he didn't know if Judge Nealon's ruling would be appealed, and had no further comment. The husband of the woman who died also wouldn't comment because he had signed a confidentiality agreement.

Because of that agreement, his attorney wouldn't say how old Lucille Korczakowski was when she died, or reveal what was alleged to have caused her death - details revealed in the judge's order.

"We have a confidentiality agreement that prevents me from discussing the case or disclosing anything about the case to the media," said attorney Ezra Wohlgelernter of Philadelphia. Dr. Hwan's attorney did not return a phone call seeking comment.

If the judge had allowed the settlement to be sealed, no one would know that a half-million dollars of public money is being spent on a doctor's mistake, said Fee.

Court-sealed settlement of malpractice cases became commonplace over the past 20 years because doctors didn't want their mistakes publicized and because people injured - or their survivors - preferred a settlement to a public fight, said Clifford Rieders, former head of the Pennsylvania Trial Lawyers Association.

"People couldn't get valid claims resolved without agreeing to the extortion of silence," he said. "You can't talk about the case. You can't e-mail about it. Doctors just don't want their dirty laundry aired in public."

Judge Nealon's ruling is unlikely to be appealed because that could pave the way for a statewide precedent if a higher court agrees with it, Rieders said.

"It's what we lawyers call persuasive authority. It's well researched and likely will be used by other judges in the future," he said. "He basically said: 'You doctors wanted public money . the public's right to know comes with that.' I would say it is groundbreaking by that standard."

False Alarm - How the media helps the insurance industry and the GOP promote the myth of America's "lawsuit crisis."

Last December, Newsweek featured a cover package by Stuart Taylor and Evan Thomas that blared: "Lawsuit Hell: Doctors. Teachers. Coaches. Ministers. They all share a common fear: being sued on the job." Paired with a weeklong tie-in on NBC News and online chats on MSNBC.com, the article claimed that because "Americans will sue each other at the slightest provocation," the country is suffering from an "onslaught of litigation" that costs Americans $200 billion a year. The story was full of tales claiming to illustrate Americans' overarching sense of legal entitlement and desire to "win a jackpot from a system that allows sympathetic juries to award plaintiffs not just real damages...but millions more for the impossible-to-measure 'pain and suffering' and highly arbitrary 'punitive damages.'"

Among others, the story featured a softball tournament organizer, a minister, and a doctor who all claimed to have modified their behavior because they were terrified of lawsuits. Ryan Warner, an insurance salesman in Page, Ariz., told Newsweek that he had recently cancelled an annual charity softball tournament because an injured player had sued the city of Page for $100,000. Warner said that he worried he might be added as a defendant.

The story as published, though, lacks a few critical details. Newsweek didn't mention, for instance, that the 1997 federal Volunteer Protection Act ensures that people like Warner are immunized from these types of lawsuits. The article also excluded the injured man, Richard Sawyer, a locomotive engineer who suffered a dislocated ankle and a spiral fracture to the fibula--and missed months of work as a result--after he slid into a base that was supposed to break away on impact but didn't because the city hadn't followed the manufacturer's instructions for maintaining these fixtures properly, according to Kevin Garrison, Sawyer's lawyer.

The event organizers had insurance--required by the city--to protect against exactly this kind of situation, but Warner cancelled the tournament anyway because he says the lawsuit was "a hassle." Canceling the tournament proved a smart PR move, as it brought out an immense amount of pressure on Sawyer to drop his suit, says Garrison. The case was settled this January for an undisclosed amount and Warner was never named. In fact, the tournament has been revived and scheduled for early September.

Not only were the particulars of the Newsweek story misleading. The essence of the story was wrong, too. Newsweek's "onslaught" of lawsuits simply hasn't happened. According to the National Center for State Courts, a research group funded by state courts, personal injury and other tort filings, when controlled for population growth, have declined nationally by 8 percent since the 1975, and have been falling steadily in real numbers since 1996. The numbers are even more dramatic in places with rapid population growth, like Texas, where the rate of tort filings fell 37 percent between 1990 and 2000. Even in liberal California, the rate of filings has plummeted 45 percent over the past decade. And those overly sympathetic juries Newsweek derides as so eager to dole out big bucks to injured victims?

In 2001, they voted against plaintiffs in 75 percent of all medical malpractice trials, according to the federal government's Bureau of Justice Statistics (BJS).

In an interview, Taylor dismisses these numbers as insignificant compared with the tort system's $200 billion drag on the economy. "The costs of the tort system to society have gone up astronomically," he says. That figure, though, comes from the insurance-industry consulting firm Tillinghast-Towers Perrin (TTP), which includes in its definition of the "tort system" insurance company administrative costs and overhead and the salaries of highly paid insurance company CEOs (Maurice "Hank" Greenberg, chairman of AIG, one of the world's largest insurance companies, makes $29 million a year). One thing TTP doesn't include: court budgets, which makes its study seem a lot more like an assessment of the insurance industry than of the legal system.

It's not as though Newsweek wasn't aware of these facts. On Friday, Dec. 5, a day before the story went to press, Taylor contacted the Association of Trial Lawyers of America (ATLA) for a quote. ATLA relayed the request to the nonprofit Center for Justice and Democracy (CJD), whose director, Joanne Doroshow, emailed Taylor information that contradicted some of the assertions in the story, including the state court data and a critique of the TTP study. (Doroshow provided the entire email exchange to The Washington Monthly.) Taylor dismissed it all, telling Doroshow, "Based on your many emails to me over the past 24 hours, you have very little thoughtful analysis to contribute to that debate."

Taylor did, however, take lots of his information from Philip K. Howard, the founder of Common Good, a group funded by corporations and physicians seeking to limit their legal liability for wrongdoing. Common Good's agenda includes advocating for legislation that would end the civil jury's role in many lawsuits. To advance the cause, Common Good helps reporters generate anti-lawsuit articles by distributing colorful litigation horror stories from around the country--the story from the Arizona Sun about Warner's softball tournament, for instance, was linked on Common Good's Web site a few months before the Newsweek story appeared.

Incidentally, Howard also works for the law firm of Covington & Burling, which represents Newsweek's parent company. Post-Newsweek Inc. has been sued a number of times for employment discrimination and was hit with an $8.3 million verdict in 1999, a fact that Newsweek didn't mention in the story.

Unfortunately, Newsweek's one-sided coverage of the civil justice system is the rule, not the exception. Every few months, one or another newspaper, magazine, or television show does a story just like it. They all hew to a standard line, starting with a juicy but misleading--or even fictitious--lawsuit horror story typically describing an irresponsible plaintiff, followed by "studies" on the economic damage of the tort system published by corporate front groups, finally ending with calls for "reforms" to rein in mushy-headed juries and greedy trial lawyers. Such skewed coverage represents a victory in a sustained, 50-year public relations assault on the civil justice system by the insurance industry, tobacco companies, and other corporate giants. It's helped fuel political support for curtailing Americans' right to hold corporations and individuals accountable for negligence, fraud, and other malfeasance in court. Perhaps more serious, journalists' willingness to perpetuate anti-lawsuit propaganda has gravely jeopardized Americans' unique democratic right to participate on civil juries.

Runaway hedge-clippers
The current PR campaign by the insurance industry and other big corporations is just the latest iteration of a long fight tracing back to the 1950s. That was when plaintiffs' lawyers started breaking down some of the legal barriers that had long protected industry from responsibility for injuries to workers and consumers and opened up jury pools to make them more representative of the general public. The blood bath on the nation's highways during the post-war auto boom also created a whole new arena of litigation over who should pay for the injuries and deaths caused in car accidents. Auto insurance companies were frequently in the middle of these disputes (as they are today; insurance companies are the defendants in 90 percent of all auto-accident lawsuits).

With their profits threatened by unfavorable jury verdicts, the insurance industry started running anti-lawsuit ads targeted at jurors. For instance, in 1953, the industry ran ads in Life magazine and The Saturday Evening Post that declared, "ruled by emotion rather than facts, [jurors] arrive at unfounded or excessive awards--verdicts occasionally even higher than requested!" The ads implored potential jurors to remember that "you pay for liability and damage suit verdicts whether you are insured or not."

The industry also successfully planted articles in national magazines and TV shows that were designed to look like investigative reporting. In 1962, CBS broadcast "Smash-Up," a fictionalized docudrama that portrayed sleazy lawyers faking auto accident cases. The Insurance Information Institute, the industry's public relations arm, helped write the script. In 1977, the venerable insurance company Crum & Forester sponsored one of the first print ads that included what would become a staple of anti-lawsuit rhetoric: the fictional lawsuit horror story. The ad told the story of a guy who collected a $500,000 jury verdict after he was injured using a lawnmower as a hedge clipper. The agency later conceded that it had no factual basis for the story, but that didn't keep it from circulating widely in the media and in conservative political speeches.

The industry knew what it was doing. In 1979, Elizabeth Loftus, the famous memory researcher and University of California psychologist, tested the effects of this kind of advertising on potential jurors and their decision making in the jury box. At the time, the industry was spending $10 million on a series of ads in a host of national magazines. In an article in The American Bar Association Journal, Loftus reported that potential jurors who were exposed to even one insurance ad awarded much less for pain and suffering than those who weren't.

In the mid-1980s, with insurance companies hitting a slump, the insurance industry's "tort reform" movement, as it became known, broadened its emphasis. Instead of limiting itself to targeting individual jurors through mass media advertising, the industry began to heavily lobby legislators to restrict citizens' ability to sue. The movement pursued strict caps on damage awards, tougher standards for proving liability, and caps on plaintiffs' attorney fees. The industry's crusade was taken up by small government conservatives, who believed that tort reform paralleled their own efforts to fill the federal bench with pro-business jurists and roll back government regulations. They were also upset by changes in the 1960s and 1970s that broadened legal protections for women and minorities, such as the 1964 Civil Rights Act, and the expansion of product liability doctrines that made it easier for injured consumers to force companies to compensate them for faulty products. Politically, it was a lot easier to attack juries and trial lawyers than the popular consumer, civil rights, and environmental protection laws they enforced--or the injured victims they represented.

Advertising was a key component of those efforts. In 1986, Newsweek ran a series of ads sponsored by the insurance industry under the heading, "We all pay the price." The ads warned that lawsuits were driving ob/gyns out of business, shuttering local school sports programs, and scaring the clergy out of counseling their flocks--though few of these assertions turned out to be true. That same year, 1,600 tort reform measures were introduced in 44 state legislatures, 21 of which passed significant restrictions on lawsuits and jury awards before adjourning.

Tort reformers still weren't satisfied but were hamstrung by the fact that most Americans didn't see lawsuits as a huge problem. After all, most people never have any contact with the legal system unless they're getting divorced. So, a group of corporate leaders, including AIG's Greenberg, set about to change that by pumping money into right-wing think tanks to prepare a body of "evidence" proving that not only was there a crisis in the courthouse but also that "we all pay the price" as a result.

One of the most influential of those groups is the Manhattan Institute, founded by the late CIA director William Casey. In 1986, the institute created its Project on Civil Justice Reform with funding from all the same insurance companies who'd been responsible for circulating bogus lawsuit horror stories. The project was targeted specifically at journalists. In a 1992 memo, institute president William Hammett explained the strategy for molding reporters into a "pro-tort reform" position: "Journalists need copy, and it's an established fact that over time they'll 'bend' in the direction in which it flows. For that reason, it is imperative that a steady stream of understandable research, analysis, and commentary supporting the need for liability reform be produced. If sometime during the present decade, a consensus emerges in favor of serious judicial reform, it will be because millions of minds have been changed, and only one institution is powerful enough to bring that about: the combined force of the nation's print and broadcast media, the most potent instrument for public education--or miseducation--in existence."

Over the next decade, the institute produced a blizzard of reports, conferences, op-eds, books, and mailings all decrying the "litigation explosion" and greedy trial lawyers. They cultivated sympathetic and influential journalists such as "20/20"'s John Stossel, then-New Republic editor Michael Kinsley, and TNR columnist Fred Barnes, and more recently, Stuart Taylor, who frequently cites their work in his columns for Newsweek, The National Journal, and The Atlantic Monthly. The "research" conducted by the institute usually purported to show how lawsuits impact the average consumer's daily life by raising the cost of groceries or auto insurance or driving their favorite physicians out of business. But some of the institute's "scholars" played a little fast and loose with the facts.

Take the idea of a "tort tax," the financial hit allegedly taken by every citizen because of the legal system, which Taylor raised in his December Newsweek article. It dates back to 1988, when Manhattan Institute fellow Peter Huber coined the term in his book, Liability, and claimed that the tort system cost Americans $300 billion a year. Three years later, the figure made its way into a speech given by Vice President Dan Quayle, who blamed lawyers for wrecking the economy. After the speech, several researchers examined the methods Huber had used to arrive at that figure. Huber, they found, had simply made it up. As The Economist observed in 1992, "the $300 billion figure has no discernible connection to reality."

While the Manhattan Institute targeted the media elite, large corporations also set about creating the appearance of a "grassroots" movement to persuade lawmakers that tort reform had broad populist appeal. As Neal Cohen, one of the PR geniuses behind this project explained to a meeting of the Public Affairs Council in 1994, "In a tort reform battle, if State Farm...is the leader of the coalition, you're not going to pass the bill. It is not credible. OK? Because it's so self-serving." Cohen was speaking from experience. Since 1988, he had been running Philip Morris's "family tort project" through the D.C. consulting firm APCO, where he helped the tobacco industry wage a multi-million stealth campaign to insulate itself from smokers' lawsuits. By 1995, the tobacco industry was providing almost half the budget--$5.5 million in a single year--for the American Tort Reform Association (ATRA).

ATRA, in turn, helped funnel money to state level organizations called Citizens Against Lawsuit Abuse (CALA). These chapters were responsible for holding "lawsuit abuse awareness week," buying ads on buses and billboards, providing experts for reporters, generating "polls" that claimed 99 percent of Americans believe there are too many frivolous lawsuits. The groups were hardly grass-roots organizations of inflamed citizens; the original chapter, in Weslaco, Texas, is just a shell corporation housed in the local chamber of commerce.

Even after the corporate backing of these groups came to light (thanks in part to Cohen's speech, a tape of which was obtained by some muckraking reporters), tort reformers have continuted to use variations of the technique. Most recently, doctors seeking to restrict medical malpractice lawsuits have worked with corporate front groups like Texans for Patient Access and Californians Allied for Patient Protection.

After 50 years and hundreds of millions of dollars spent convincing the public of a litigation crisis, the tort reformers have largely succeeded. There's very little that journalists won't repeat and readers won't swallow about the evils of the civil liability system.

The lying florists
In November 2002, viewers of "60 Minutes" learned that Fayette, Miss., was the nation's capital of "jackpot justice," a place where "plaintiffs' lawyers have found that juries in rural, impoverished places can be mighty sympathetic when one of their own goes up against a big, rich, multinational corporation." In the story, Morley Safer interviewed a local florist who had received a multi-million dollar settlement in a diet-drug lawsuit. The unnamed florist alleged that trial lawyers were bribing jurors to give big awards. "The jury awarded these people this money because they felt as if they were going to get a cut off of it," he told Safer.

During the broadcast, Safer interviewed Wyatt Emmerich, the publisher of a newspaper in Jackson, who explained a few big verdicts there by saying, "Look at the jurors. These are disenfranchised people. These are people who've been left out of the system, who feel like, 'Hey, stick it to the Yankee companies. Stick it to the insurance companies. Stick it to the pharmaceutical companies.' The African Americans feel like it's payback for disenfranchisement. And the rednecks, shall we say, it's like, 'Hey, you know, get back at' revenge for the Civil War. So there's a lot of resentment, a lot of class anger, a lot of racial anger. And it's very easy to weave this racial conflict and this class conflict into a big pot of money for the attorneys." The day after the program aired, the legislature passed new restrictions on lawsuits.

Tiny Jefferson County's national reputation as a "judicial hellhole" came in part from intense publicity from the American Tort Reform Association, which every year publishes a "study" purporting to identify various jurisdictions around the country it deems too plaintiff-friendly and in need of reform. At the time of the "60 Minutes" episode, the U.S. Chamber of Commerce's Institute for Legal Reform was spending millions nationally on advertising and lobbying for restrictions on citizens' rights to sue. At least $100,000 of that had recently gone into an advertising campaign in Mississippi to push for a cap on damages in lawsuits against corporations. Those facts weren't included in the story. Meanwhile, the florist, Beau Strittman, retracted his comments about the payoffs, telling the AP, "I just said it as a joking statement." CBS spokesman Kevin Tedesco said the network could not comment on the segment because several jurors have sued CBS for libel over the broadcast.

It wasn't the first time "60 Minutes" got duped in an anti-lawsuit segment. Back in 1986, the show profiled the owner of a ladder manufacturing company who claimed his company had been hit with a $300,000 jury verdict in a suit by a man who fell off a ladder because he set it in a pile of manure. The business owner claimed the lawsuit alleged the company should have warned buyers of the dangers of setting ladders in dung. The real lawsuit had nothing to do with manure; the ladder had broken with less than 450 pounds on it, even though it had a safety rating that said it could support up to 1,000. Tedesco says the show never ran a correction.

The print media, mostly opinion columnists, have proven even more gullible in publishing stories about lawsuits that are simply fictional. For instance, in June 2003, in a column entitled, "Welcome to Sue City, U.S.A.," U.S. News & World Report owner Mort Zuckerman claimed that "litigation has become our national pastime." As proof, he offered several examples of lawsuits that illustrated the nation's "enormous inflation of rights over responsibilities." Zuckerman wrote, "A woman throws a soft drink at her boyfriend at a restaurant, then slips on the floor she wet and breaks her tailbone. She sues. Bingo--a jury says the restaurant owes her $100,000! A woman tries to sneak through a restroom window at a nightclub to avoid paying the $3.50 cover charge. She falls, knocks out two front teeth, and sues. A jury awards her $12,000 for dental expenses."

The anecdotes were catchy. Unfortunately, they weren't true. The stories had been circulating in an email for two years and had made it into several mainstream news outlets, including another Zuckerman property, The New York Daily News, which had published an email containing one of the fake lawsuits in the sports section a year earlier (with no correction). When The Washington Post's Howard Kurtz called him on the U.S. News error, Zuckerman was unapologetic. The magazine only published a brief clarification about the fictional suits, which ended by saying, "Mr. Zuckerman continues to believe, and most Americans agree, that we live in a country where far too many frivolous lawsuits are filed each year." When contacted by The Washington Monthly, a spokesperson for Zuckerman refused to disclose the source of the lawsuit anecdotes or to offer an explanation as to why Zuckerman would publish anything from a spam email without checking it out first.

Small-town papers seem even more vulnerable to such fabrications than the national media, yet their impact is substantial, as battles over most tort reform laws are fought in state legislatures, and juries are drawn from local pools. For instance, in February last year, the Weirton Daily Times in Weirton, W. Va., published an editorial supporting tort reform and blaming juries for outrageous decisions in frivolous lawsuits. Among the examples was the story of an Oklahoma man who put his Winnebago on cruise control at 70 mph and "calmly left the driver's seat to go into the back and make himself a cup of coffee." Naturally, after the crash, the man sued Winnebago for not advising him of the dangers of cruise control. A jury awarded the man $1.75 million and a new motor home, the paper said. But it turned out that every one of the lawsuits mentioned in the Daily Times editorial stemmed from an anonymous email and was fiction. A local attorney, Michael Nogay, called Daily Times managing editor Richard Crofton and alerted him to the error. But rather than print a humble retraction, Crofton argued in print that the essence of the editorial was true and published several examples of "real" frivolous lawsuits. "What really killed me was that they didn't even say 'we're sorry,'" says Nogay, who notes that the column came a week or so after the state chamber of commerce had run a full-page ad in the paper calling for tort reform while the legislature was in session. When I asked what made him write about the suits without checking their veracity, Crofton says, "We're a small paper, and I don't have the resources to track down things all over the country."

The media mogul Steve Brill first wrote about litigation myths back in 1986, when, as a journalist he traced several examples of the allegedly "frivolous lawsuits" for The American Lawyer magazine and found that many of them were simply urban legends. He says, "I had gone back through the archives of Time magazine, and every ten years, Time declared a 'litigation crisis.' But there was no crisis." Reporters' perpetuation of the litigation myths has become one of Brill's pet peeves, even though, as a business owner himself, he supports legal changes that would protect businesses. "Reporters are basically lazy," says Brill. "You can always find a ridiculous lawsuit to make the system look crazy."

The $30,000 jackpot
The plain fact is, most lawsuits are neither ridiculous nor lucrative. Despite the eye-popping headlines about billion-dollar fen-phen verdicts or David v. Goliath movies about little guys taking on corporate wrongdoers in court, the civil justice system looks a lot more like this: On Aug. 2, 1997, Bonnie Daniels rear-ended Diane Pitnikoff in Cumberland County, Maine, and was arrested for drunk driving. Pitnikoff suffered a number of lingering injuries and ran up $42,000 in medical bills. Pitnikoff sued Daniels for $100,000. On March 20, 2003, a jury voted in favor of Pitnikoff, awarding her a grand total of $21,000.

It's not a very sexy story--hardly the kind of thing that captures the imagination and lands on the cover of Newsweek. Yet most tort lawsuits in this country--nearly 60 percent--involve simple fender-benders, and the awards are generally quite small and getting smaller. New data released in April by the Justice Department's BJS show that in state courts, the median "jackpot" jury verdict in all tort suits was a mere $37,000 in 2001--down from $65,000 in 1992.

And what of the undeserved billions in punitive damages that Newsweek says Americans win from sympathetic juries? Punitive damage awards are intended to punish wrongdoers for reprehensible conduct, and as a result, must be high enough to get the defendant's attention. That's why an Alaska jury hit Exxon with a $4.5 billion penalty in the wake of the Valdez spill. But such awards are so rare that, according to BJS, the median punitive damage award in 2001 was only $50,000. Only 7 percent of all plaintiffs were awarded $1 million or more.

Because the Justice Department data conflict so sharply with conventional wisdom, you'd think it would have been big news. The media coverage that resulted from the new government study? Forty words in the USA Today. As of mid-August, no major media outlet had covered the study, including Newsweek. National editor Tom Watson says that his magazine has a strict policy of not commenting on its own news coverage. "No one is willing to report that tort awards are down, and that they're 30,000 bucks, not 5 million," says Theodore Eisenberg, a Cornell University law school professor who does empirical research on the legal system.

Indeed, the tort reformers' message has proven remarkably resistant to correction. Part of the reason is that those who have another side of the story to present have vastly fewer resources with which to make their case. BJS has a publicity budget of zero dollars, making it tough for the bureau to publicize its remarkable findings. Trial lawyers, who

	2001	2Q-02	3Q-02	40-02	10-03	2Q-03	30-03	4Q-03	1 -04	30-04
OVERALL RESULTS
Small Comm. Accounts	+21%	+20%	+15%	+08%	+11%	+07%	+04%	+04%	+03%	-03%
Mid-size Comm. Account	+32%	+27%	+22%	+19%	+14%	+08%	+05%	+05%	+O1%	-06%
Large Comm. Accounts	+36%	+34%	+25%	+21%	+15%	+08%	+04%	+04%	-03%	-09%
SPECIFIC LINES
Business Interruption	+30%	+21%	+16%	+13%	+09%	+05%	+03%	+02%	-01%	-05%
Construction	+46%	+44%	+30%	+34%	+22%	+17%	+13%	+13%	+08°/a	+02%
Commercial Cars	+28%	+27%	+18%	+18%	+15%	+11%	+06%	+07%	+03%	-05%
Property	+47%	+42%	+24%	+21%	+12%	+06%	+01%	+05%	-05%	-10%
General Liability	+27%	+24%	+18%	+19%	+14%	+11%	+07%	+06%	+03%	-04%
Umbrella Liability	+56%	+52%	+36%	+34%	+26%	+18%	+11%	+11%	+04%	-02%
Workers' Compensation	+24%	+26%	+19%	+21%	+17%	+15%	+10%	+09%	+04%	-05%
D&O			+35%	+32%	+29%	+21%	+16%	+13%	+07%	-05%
Employment Practices			+19%	+32%	+19%	+17%	+12%	+10%	+05%	-02%
Medical Malpractice			+61%	+63%	+54%	+48%	+28%	+34%	+19%	+06°/o
Surety Bonds			+14%	+18%	+18%	+13%	+06%	+07%	+06%	+01°/o
Terrorism				+63%	+13%	+06%	+02%	+02%	00%	-02%
Source: Analysis of Council of Insurance Agents and Brokers quarterly survey of market conditions.