The West Virginia Supreme Court, in a move with national implications, this week granted an unusual injunction stopping five medical malpractice insurance companies from canceling their coverage of doctors and hospitals in the state.
The order came as state officials continued efforts to avert the breakdown in health care delivery they said would occur if the insurance companies followed through on their threat to withdraw from the West Virginia market at the end of the month.
As expected, Gov. Arch A. Moore yesterday called the state legislature into a special session starting next Thursday to deal with the malpractice insurance crisis.
At a news conference in Charleston, the governor unveiled a plan to set up a state-run fund that would provide mandatory coverage to doctors. While other states have set up insurance pools to provide malpractice insurance to doctors who otherwise cannot obtain coverage, industry officials said Moore's proposal would be the first that effectively bars private companies from a state market.
John Price, the governor's press secretary, said Moore is proposing the radical measure to ensure West Virginia will not "continue to be held hostage periodically by the insurance companies."
The developments this week highlight the debate that has taken place across the nation about the availability and cost of liability insurance. Insurance companies have pressed states to reform the liability laws they say allow excessive court awards to plaintiffs, while consumer advocates and trial lawyers have urged tighter scrutiny of the insurance industry itself.
In West Virginia, the state legislature recently adopted a malpractice insurance bill that puts a $1 million cap on noneconomic damages in lawsuits, but which imposes limitations on the ability of insurance companies to cancel policies. The law also requires companies to submit more detailed information about their finances to regulators.
Soon after the law was signed by Moore last month, the state's five largest medical malpractice insurance companies sent out notices to most of the 7,000 doctors and 58 hospitals in the state that they would cancel their coverage by June. The companies asserted the bill infringes upon their ability to make sound business judgments.
Soon after the cancellation notices went out, the state's attorney general, Charles G. Brown, filed suit against the insurers, accusing them of violating West Virginia's antitrust laws. Brown sought a temporary injunction preventing the cancellations, which was turned down by a state circuit court. However, in a 5-0 ruling, the state Supreme Court granted the injunction on Thursday.
Although the companies can move to vacate the injunction, Brown said yesterday that the ruling should give the legislature breathing room to consider changes in the malpractice insurance law without undue pressure from the insurance industry.
"The gun is no longer at the head of the legislature," said Brown. "We've ended the panic. We've ended the fear that all the insurance would be canceled." Brown said the court's ruling is a sign to other states that they can successfully resist pressures to reform liability laws hastily and without carefully examining the issues.
Officials for four of the insurance companies involved yesterday declined comment on the court's ruling, although they have told state officials they will delay their withdrawal from the state until after the legislature meets in special session. They noted that the legislature's leadership has proposed amendments to the law that would be satisfactory to the companies.
"We do not want to leave West Virginia," said Barbara Reynolds, a spokeswoman for the St. Paul Fire and Marine Insurance Co. "We are still hopeful that we will be able to work out some of the problems we had with the legislation." The other companies involved are the Ohio Hospital Insurance Co. and three companies under the umbrella of CNA Financial Corp. of Chicago.