Farmers Insurance Group is quitting the medical malpractice business, effective during 2004, dropping its 350 doctors or hospital groups in California and 1,300 nationwide.
Jeffrey Beyer, the company's communications director, said rising claims had resulted in a $100-million loss last year in this line of business. The action was taken despite rising premiums and, in California, three decades of a $250,000 cap on payments for pain and suffering.
The fact is, Beyer said, that even in California, there are no limits on payouts for economic damages, and there have been an increasing number of large ones. "Our malpractice business has been declining anyway, and we have made a business decision," Beyer said.
Farmers malpractice insurance has only 5.78% of the market share in California, so the company's decision may not, on the surface, seem to have much significance.
But Danielle Walters, executive vice president of Californians Allied for Patient Protection, a lobbying group dedicated to fighting for malpractice reform on behalf of the insurance and medical professions, said she viewed Farmers' departure as "a huge signal" that national limits on malpractice payouts are overdue.
Efforts to pass such limits foundered this year in Congress against solid Democratic opposition and some Republican hesitancy.
However, a leading consumer organization, the Santa Monica-based Foundation for Taxpayer and Consumer Rights, issued a statement asserting that Farmers' departure from the business does not make the case for payout limits. The organization argues that limits are unfair to victims and to the trial lawyers who represent them.
Beyer said Farmers' departure from the malpractice business would be accomplished by issuing policyholders non-renewal notices as their annual coverages expire. So it will take all of 2004 to drop everyone.
He noted that malpractice has been only a little more than 1% of Farmers' total insurance business.