Alaska Injury Law Blog

The "tort reform" statute passed by the Alaska Legislature in 1997 continues to whittle away, automatically, year after year, at the real damages available to Alaska families who have lost a loved one due to a defendant's negligent or reckless conduct. The 1997 legislation limited the amount of "non-economic damages" that can be recovered in a wrongful death action to $400,000, or $8,000 times the person's life expectancy, whichever is greater. AS 09.17.010 These amounts have not changed since 1997. The United States Bureau of Labor Statistics states that someone would need $520,712 in today's dollars to equal the purchasing power of $400,000 in 1997. Even when "tort reform" was passed in 1997, $400,000 was a modest amount for the death of a loved one. In real terms, the available damages decrease every year with the march of inflation. The $400,000 limit is also particularly harsh when the deceased did not have substantial economic earnings, such as a homemaker. Even assuming $400,000 was an appropriate limit when it was adopted in 1997, that amount should in fairness be updated by the current legislature to account for inflation and then indexed to the rate of future inflation. This limit also remains ripe for a constitutional challenge in court.

On January 9, 2008, a Texas judge sanctioned Texas Mutual Insurance Co. $30,000 for committing fraud on the court. In the litigation, a worker had prevailed against Texas Mutual in his claim seeking worker’s compensation coverage for his work-related injury. To defeat the worker’s claim, the court found that Texas Mutual falsified a medical record and intentionally used it throughout the litigation to prevent the worker from receiving his benefits. The trial court ruled inTexas Mutual Insurance Co. v. Juan Narvaez, that the insurer committed “fraud on this court and the defendant by falsifying a critical medical record, and then using that record throughout discovery, depositions and trial. This fraudulent conduct was committed knowingly and intentionally by agents and representatives of Texas Mutual Insurance Company.” In addition to the monetary sanctions, the court ordered the insurer to post the sanctions order on the insurer’s website, www.texasmutual.com, within seven days of the order and keep it up for 180 days. Remarkably, after being caught, the insurer then secretly solicited from a doctor yet another altered document which a hospital official later confirmed under oath was not a genuine record.

Another reason this case is remarkable is that Texas Mutual Insurance is well-known for its efforts lobbying for tort reform and limitations on bad faith claims against insurers. Here, the company’s own conduct makes the case for why insureds should be permitted to assert claims against insurers when acts in bad faith occur. Without the governance that litigation can bring, it would be open season on insureds by insurers willing to commit fraud to avoid paying legitimate claims.

Source: Texas Mutual Insurance Company v. Juan Narvaez (Cause No. 04-06061-C) in the 68th District Court of Dallas County, Texas.

A report just released by the Consumer Federation of America estimated that the average family in the U.S. has been overcharged for auto and home insurance over the last four years because companies have been charging excessive premiums and paying out proportionately less in claims.

The insurance industry reaped record profits in 2004 and 2005, and profits in 2006 rose to unprecedented heights. Profits in 2007 may also be recordbreaking. The CFA reported that the average percentage of premium payments paid back to cover losses has dramatically declined over the last 20 years – from a high of 70 percent to 54.6 percent last year – translating into a huge loss in the value of insurance to consumers. Insurers, on the other hand, had net income of $65 billion last year. Insurers thus paid out 34 percent of premiums to cover property losses – a figure that was topped in this decade only by the record low 27.7 percent loss ratio in 2004.

Regardless what type of insurance coverage is being discussed, insurers routinely claim that their losses are mounting because of unscrupulous lawyers, frivolous claims, and unexpected natural disasters. Such claims are then used to foment tort reform and explain away premium increases, neither of which are justified when the true loss experience of the insurer is examined. The critical reader is encouraged when hearing such claims by insurers to go to the data. More than likely it will be the case that the insurer’s decision to increase premiums will not be justified by the loss history. Moreover, the insurer will likely be sitting on extraordinary reserves and profits.

Sources: Dallas Morning News 1/10/08; www.consumerfed.org