SYDNEY, May 9 (UPI) -- How many lawyers does it take to destroy an insurance system? It's a question many Australians have been forced to ponder as they see one of the pillars of their stable society begin to crumble.
Blame is being sheeted home to a legal system that allows people to sue for negligence, sometimes in the most bizarre of circumstances.
Like the case of David Griffin, who was recently awarded $500,000 in damages after claiming that a schoolyard fight, which he instigated seven years ago, had left him with migraines and mood swings.
The Daily Telegraph contrasted his case with that of Donna Carson, who received only $25,000 after her former partner set her on fire in front of their children, leaving her permanently disfigured and requiring 19 operations. "Have we gone completely mad?" railed the Telegraph.
The Premier of New South Wales, Mr. Bob Carr, who presides over Australia's most populous and litigious state, has weighed in heavily. He has blamed a community with a "roulette wheel mentality," "Santa Claus judges" and "ambulance-chasing lawyers" who "bustle around getting people to sue" for the blow-out in insurance costs which has brought the system to its knees.
His sentiments are echoed by Prime Minister John Howard, himself a lawyer, who has said: "We cannot go on imagining that you can sue at the drop of a hat."
In recent years, increasing litigation and damages payouts have sent the cost of public liability insurance soaring to unsustainable heights, almost paralyzing some areas of normal life, from local playgrounds to the building industry, to health care.
In many parks, playgrounds are being removed or replaced by less challenging equipment to stop children hurting themselves and then, perhaps years later, suing the local council for damages. Claims against local councils have quadrupled in a decade.
Public events, from the annual Gay and Lesbian Mardi Gras to community fairs, are being threatened or cancelled for lack of money to cover the premiums.
The crisis almost brought the building industry -- one of the mainstays of the economy -- to a halt in April when the insurance company that covers builders was unable to tolerate the risks and costs, forcing governments to underwrite the cost of insuring building projects.
The latest casualty came at the end of April when 32,000 doctors, two-thirds of the medical profession, suddenly found themselves uninsured for private patients when their insurer, United Medical Protection, sought liquidation, unable to meet outstanding claims of over $500 million.
Australia has a two-tiered system of medicine. All patients are provided with free medical cover for basic treatment and emergency care, thanks to a taxpayer-funded system of health cover called Medicare. However, for specialist elective procedures, people not wanting to wait their turn in the public hospital queue are required to pay, either directly or through having private health insurance. Doctors operating in public hospitals are insured by the government. When they operate in private hospitals they require separate cover from insurers like UMP.
The insurance crisis sparked by UMP's collapse "is the single greatest threat to the delivery of medical services we have ever seen," Australian Medical Association president, Dr. Kerryn Phelps, told United Press International.
Doctors performing procedures were immediately put at risk. Many stopped performing all but life-saving operations until the federal government stepped in with a written guarantee to cover doctors until June 30, by which time hopefully other insurers will have filled the vacuum.
The collapse of UMP has led to the inevitable questions about how it all went wrong. Criticisms of the company include that it expanded too quickly, underprovided for its liabilities, and was run largely by surgeons and medical specialists, not insurance executives. "Obviously there have been some management decisions that have brought this about," says Treasurer Peter Costello. Some people are taking aim at UMP's former chairman, Richard Tjiong, who ran it for 15 years and turned UMP into the nation's biggest player. He blames his successors at UMP, who in turn blame a range of circumstances beyond their control.
The company cites rising damages claims, with 60 cents in every dollar going to lawyers. In the most celebrated case, it had to pay out nearly $7 million last year to a 22-year-old woman, Calandre Simpson, whose cerebral palsy was found by a court to have been caused by a botched forceps delivery at birth. In another case, it was reported that an obstetrician received a claim for a mother whose baby had been delivered by caesarean section because she had "missed out on the opportunity of vaginal delivery."
Phelps says UMP's collapse was "multi-factorial", with errors of judgment compacted by other factors. "A number of freight trains hit UMP," she said. She is critical of the 25-year statute of limitations, which she says is "way too long," the "breathtakingly large damages awards" to patients, and changes to prudential regulations that put added pressure on insurers. She also points to last year's multi-billion dollar collapse of HIH Insurance, the reinsurer to UMP, and Sept.11, which pushed up reinsurance costs.
But she reserves her harshest criticism for a legal industry which she says has created a more litigious society, the emergence of no-win/no-fee advertising by lawyers, and courts that have "lowered the bar for negligence to a point where ordinary human activity can be seen as negligent."
"We're being litigated into oblivion," says Phelps. In the latest twist, several groups of doctors are planning legal action against the board of UMP on the grounds it may have made false and misleading statements. On March 28, four weeks before it collapsed, UMP sent a letter to doctors urging them to stay with the insurer, saying, "United has never functioned better."
While there are many factors behind the demise of UMP, one clear reason is the increasing number of claims against doctors. This growth is not so much due to increased litigiousness, but rather a huge increase in the number of things doctors do. The volume of medical interventions and their associated potential harm is on the rise.
Phelps considers the health insurance crisis can be remedied but requires unprecedented cooperation from both sides of government, and legal changes at state and federal level to make medical indemnity affordable for doctors and commercially viable for insurers.
Otherwise, she says, doctors in high-risk areas like delicate microsurgery and obstetrics will become uninsurable.
"Procedural (general practitioners) who are the backbone of our country areas, are already an endangered species and almost extinct," she says. "Three-quarters of our obstetricians have said they don't want to be delivering babies in 10 years. Half of them want to quit in the next five."
She applauds the move by Carr to tackle the burgeoning cost of medical indemnity and public liability insurance. Under new laws, the defense of doctors against malpractice claims will be strengthened. The changes will require doctors and other people defending personal injury claims only to show they took reasonable care. In addition, lawyers will be held personally liable for court costs for the first time if they instigate "unmeritorious" public liability insurance claims. Damages payouts will be capped and access to the courts limited.
But concerns remain. "There are two major issues -- what happens after June 30 and what happens with the tail," said Phelps. "This is still a major disaster area." The tail describes as yet unreported claims which occurred prior to UMP's collapse and which can take up to 15 years to surface. They are expected to be worth $250 million.
As for the lawyers, they're pleading innocent. Rob Davis, president of the Australian Plaintiff Lawyers Association, says people sue because they have been injured as a result of something going wrong. "Lawyers are the people who assist them in getting access to justice." He said lawyers, and particular plaintiff lawyers, are "an easy target" for blame in the current climate. "It is a political strategy designed to deflect attention away from the real causes."
But as Phelps said, "It's his job to say that."
