The attorney general of West Virginia yesterday filed suit against the five largest medical malpractice insurers in the state, accusing the companies of violating state antitrust laws by boycotting doctors and hospitals.
The lawsuit is believed to be the first antitrust action brought by a state government against insurance companies, which recently have been withdrawing from many lines of liability coverage across the country, industry officials said.
West Virginia's action, filed in state court in Charleston, seeks to prevent the companies from cancelling malpractice and hospital liability coverage in May, state officials said.
"There's a real imminent threat of a breakdown in health care delivery in the state," said Charles G. Brown, the state's attorney general.
Brown said that, unless the court grants a preliminary injunction stopping the cancellations and nonrenewals, most of the state's 7,000 doctors, 58 hospitals and other health providers will be without protection. A hearing has been scheduled for Friday.
"Under any scenario, there's going to be lots of people who can't get health care," he said. He asserted the insurers' action was an effort to coerce the state legislature into relaxing the laws regulating their industry.
A spokeswoman for one of the companies, St. Paul Fire & Marine Insurance Co. of Minneapolis, said the lawsuit is without merit and that the company is withdrawing from the West Virginia market because of recent unfavorable changes in the state laws governing the insurance industry.
"We categorically deny that we've engaged in any illegal activity," said the spokeswoman, Barbara Reynolds.
A spokeswoman for CNA Financial Corp. of Chicago, an umbrella company for three of the other companies named in the lawsuit, said executives were not available to comment. The fifth defendant, Ohio Hospital Insurance Corp. in Columbus, was closed yesterday.
Yesterday's development brings into focus the recent national debate over the availability and cost of insurance. Insurance companies have pressed states to reform their liability laws, which they say have greatly expanded the ability of persons to sue, while consumer advocates and trial lawyers have said that poor underwriting is to blame for the industry's woes.
West Virginia officials said the insurers decided earlier this month to withdraw from the state after the legislature passed a new law that, among other provisions, restricts when policies can be cancelled and requires the companies to submit more detailed financial information to regulators.