About half of the nation's 2,800 certified nurse-midwives are at risk of losing their malpractice insurance, which could force them out of business by the end of the year.

Mutual Fire, Marine and Inland Insurance Co., which has provided group liability insurance for about 1,400 certified nurse-midwives over the past year, notified the American College of Nurse-Midwives (ACNM) last month that it would not renew the policy when it expires this week. The company said it could no longer find other insurers willing to share the risk of providing liability insurance, because of soaring malpractice costs.

"This is a tragedy for the nurse-midwife profession," says ACNM president Susan A. Yates. "If we cannot get the coverage -- and soon -- a large segment of a vitally important profession will be simply wiped out."

Nurse-midwives, who help deliver babies in hospitals and birthing centers, are caught up in the same malpractice crisis that threatens the whole medical profession. Malpractice claims have tripled in the last decade, with 16 claims filed for every 100 physicians in 1983, the American Medical Association (AMA) reported recently. The average medical claim is settled for about $330,000, and settlements of more than $1 million are increasingly common.

Obstetrics is one of the specialties hardest hit by rising malpractice insurance rates. A dramatic rise in the number and size of malpractice claims against obstetricians has driven their premiums as high as $80,000 a year in some areas.

"The system isn't working," says Mutual Fire president Richard Guilfoyle. "The system is broke."

But the American College of Nurse-Midwives says it is unfair for insurance companies to lump nurse-midwives together with obstetricians in calculating the incidence of malpractice claims.

Only about 6 percent of nurse-midwives have been sued for malpractice since 1974, the group says. By comparison, 60 percent of obstetricians have been sued at least once, according to the American College of Obstetricians and Gynecologists.

"The claims data show there is no reason to be afraid of insuring nurse-midwives," says Karen Ehrnman, a lobbyist for ACNM.

ACNM's 2,600 members are registered nurses with specialized training in obstetrical, prenatal and postnatal care, who have passed a written national certification exam in nurse-midwifery. In collaboration with obstetricians, they provide maternal and child care and deliver about 2 percent of births in the United States, ACNM says.

Mutual Fire's decision would cancel malpractice coverage immediately for 271 certified nurse-midwives who have renewed their policies since Jan. 1. More than 1,100 others would lose coverage as their individual policies come due for renewal during the next six months.

Of the nearly 1,400 nurse-midwives who stand to lose coverage from Mutual Fire, about 800 are independent practitioners who have no other liability insurance through employment with a hospital, birthing center or health maintenance organization. They would have no choice but to stop practicing, Ehrnman says.

"We have nurse-midwives who have been in practice for years, who are going out of business in one week," she says.

In search of a replacement for Mutual Fire, ACNM and its insurance broker have contacted more than 15 other insurance companies, without success.

"We have been to every carrier in the United States who writes professional liability insurance," Ehrnman says, "and they have all turned us down."

The group is working with legislators around the country to find a way to encourage the insurance industry to resume offering malpractice insurance coverage. Nurse-midwives are also seeking congressional hearings on their plight.

Mutual Fire received about $600,000 in annual premiums last year for a total coverage of more than $1.3 billion -- covering about 1,300 nurse-midwives up to $1 million each -- says company president Guilfoyle. Until now, Mutual Fire has shared that risk with more than 10 other companies who reinsure Mutual Fire.

But with the soaring risk of malpractice claims, Mutual Fire cannot find any other companies willing to reinsure it for coverage of malpractice claims against nurse-midwives, Guilfoyle says.

"If we can't find a reinsurance market," he says, "then we can't write that insurance. We're virtually out of the business as far as medical malpractice is concerned."

The problem, Guilfoyle says, is not the nurse-midwives' past record, which is generally good, but the larger medical-legal-economic malpractice crisis, which has outgrown the traditional private insurance industry's ability to handle it.

To persuade other companies to reinsure cov-erage of the nurse-midwives, he says, coverage would have to be substantially reduced and the premiums would have to jump 10-fold in a single year.

Obstetrical malpractice insurance is especially risky, Guilfoyle says, because suits can be brought anytime before the child reaches age 18 or 21, depending on the state. And juries are put in the difficult position of having to put an economic value on human life lost or damaged through alleged injustice and negligence.

"The jury awards are escalating at a phenomenal rate," he says, adding that between 30 and 50 percent of the typical medical malpractice judgment pays for legal fees that never reach the victim or the victim's family.

Despite traditional differences in their approach to medical practice, obstetricians, ACNM members and other midwives agree on the seriousness of the malpractice threat.

A recent AMA report on malpractice blamed part of the problem on rising and unrealistic demands by patients accustomed to hearing about medical miracles and technological triumphs.

"Many claims involve no negligence at all, only unfulfilled expectations," the report said.

The AMA has called for limits on damage awards for "pain and suffering" and "mental anguish," a reduction in the statute of limitations from 18 years to six or seven, and establishment of state compensation funds to pay part of judgments above a set limit.

Mutual Fire is the third professional liability insurance company ACNM has worked with in the past three years. In 1983, ACNM switched from the Chicago Insurance Co. to Home Insurance Co. to take advantage of lower premiums. Home pulled out of the medical malpractice insurance business last year.

Annual premiums for malpractice coverage up to $1 million now average about $1,000 for a certified nurse-midwife. ACNM anticipated that premiums would increase sharply this year.

"We expected them to double or triple," Ehrnman says, "because we expected to get our policy renewed," Ehrnman says.

Nurse-midwives earn an average of about $25,000 a year, compared with about $110,000 for obstetricians. If malpractice premiums jump to several thousand dollars a year, that will drive some nurse-midwives out of business, ACNM says.

"It's really going to hurt," says Judy Melson, director of midwifery in the graduate nursing program at Georgetown University School of Nursing.

The loss of malpractice insurance coverage also would prevent nurse-midwives from gaining hospital staff privileges, Melson says, because hospitals require such coverage for staff practitioners.