As a Republican and as federal insurance administrator under President Ford, I am appalled that the Reagan administration has proposed limiting compensation to severely injured people as a "solution" to the insurance crisis.
I am even more appalled that the administration has refused even to consider the possibility that insurance mismanagement and the McCarran-Ferguson Act, which allows insurance companies to fix prices, may be at least partly responsible for skyrocketing insurance rates.
But I am most appalled at the Post's endorsement of the administration's approach (editorial, April 1) and particularly at its lack of analysis in making that endorsement.
For example, The Post calls the following recommendations by the administration "sensible":
Limiting damages for pain and suffering to $100,000. This means that a 17-year-old girl who contracted vaginal cancer and had to undergo a total hysterectomy and vaginectomy because her mother took the cancer-causing drug DES could recover no more than $100,000 for her inability to have children or have normal sexual relations.
Limiting punitive damages to $100,000. (Actually, the administration recommends limiting punitive damages plus damages for pain and suffering to a total of $100,000.) In the Ford Pinto case, Ford deliberately did not make an $11 improvement in the Pinto gas tank because it calculated that the cost of the improvement was greater than the benefit of avoiding the 180 deaths and 180 burns it estimated would occur without the improvement. Ford was held liable for millions in punitive damages, and it fixed the Pinto gas tank. Under the administration's proposal the maximum Ford would have to pay in punitive damages would have been $100,000 -- less than half what Ford calculated a human life to be worth in doing its cost-benefit analysis.
Eliminating joint and several liability. Under current law, if an asbestos worker dying of mesothelioma (asbestos-caused cancer) worked with asbestos made by more than one manufacturer, he can recover his damages from any of those manufacturers, and it is then up to the asbestos makers to settle among themselves. Under the administration's proposal, if the mesothelioma victim cannot establish the degree to which each asbestos manufacturer contributed to his injury, he recovers nothing from any manufacturer.
Limiting contingency fees. Plaintiff's lawyers, who today typically get one-third of the total recovery if they win and nothing if they lose, could receive no more than 10 percent of any verdict above $3,000. Defense lawyers, on the other hand, who are paid by the hour and thus have an incentive to keep their meter running, would not have their fees limited.
Perhaps even more unusual than the Post's conception of what is sensible is the reasoning it uses to conclude that compensation to severely injured people should be limited. Because nurse- midwives can't get insurance, The Post asserts, there must be something wrong with the legal system. Yet only 3 percent of nurse-midwives have ever been sued -- exactly what one would expect, because nurse-midwives do only low- risk deliveries. Insurance companies are refusing to insure nurse-midwives not because they are paying out claims against nurse-midwives but because they are trying to "change the widely held perception that there is an insurance crisis to a perception of a lawsuit crisis," as the Insurance Information Institute has candidly put it.
Former GEICO chairman John Byrne has put it even more candidly. "It is right for the industry to withdraw and let the pressures for reform build in the courts and in the state legislatures," Byrne told an udience of insurance company actuaries last summer, just before insurers stopped writing certain lines and rates began skyrocketing.
The most candid insurance executive of all, however, may be American International Group President Maurice Greenberg, who recently admitted that it was price cutting in the early 1980s "to the point of absurdity" -- and not the tort system -- that is responsible for the industry's current problems. Greenberg told an industry conference that if insurers had not cut prices but had merely held them constant there would not be "all this hullabaloo" about the tort system.
In creating still more hullabaloo about the tort system, The Post cites a Philadelphia case in which a woman supposedly recovered money for loss of her psychic powers, and a study by the Rand Institute that found that punitive damage awards had risen dramatically. Had The Post bothered to read the case and the study, however, rather than rely on what insurers and the administration say they say, it would have found that the judge in the Philadelphia case specifically prohibited any award for loss of psychic powers, and that the Rand study found that the median jury award, when adjusted for inflation, has remained constant since 1960. The Post might also have found that the punitive awards it criticized were well deserved -- particularly in view of the lack of any criminal penalties to deter reckless corporate behavior.
As federal insurance administrator, I was able to persuade both President Ford and President Carter -- this time with The Post's editorial support -- to support no-fault auto insurance, which was very substantial tort reform. Before deciding to limit the amount people can recover in certain auto-accident cases, however, we got the data, and we provided an alternative compensation system for injured people whose recovery would be limited.
We did this because we found that severely injured people received only about half their out-of-pocket loss under the tort system, while those with relatively slight injuries received five times their out-of-pocket loss. Our recommendation to eliminate the right of people with limited damages to sue but in exchange to guarantee them prompt payment of their economic damages made sense; capping awards, which would limit the amount recoverable by the severely injured -- who were already being undercompensated -- would have been cruel and nonsensical.
To what extent are victims of business, professional and medical negligence being compensated under the present system? We don't know because the insurance industry won't tell us: the industry has continually refused to disclose how victims fare under the present system and how proposed reforms would affect system costs and victim welfare. The disclosure of such data would allow legislators to decide intelligently what, if any, reforms in the legal system were needed.
Isn't The Post even a little curious about what the data would show?