Copyright 2000 Star-Telegram Newspaper, Inc.
Fort
Worth Star Telegram
February 14, 2000, Monday FINAL EDITION
Correction Appended
SECTION: NEWS; Pg. 1
LENGTH: 897 words
HEADLINE:
Bush critics question tort reform benefits;
Governor counts
$3 billion in savings
BYLINE: R.A.
Dyer; Star-Telegram Austin Bureau
BODY:
AUSTIN -
Despite Gov. George W. Bush's estimate, Texans
have not saved
$3 billion in insurance premiums as a result
of tort reform
legislation, insurance experts said last week.
Instead, say two former
officials of the Texas Department of
Insurance, it has been insurance
companies that have benefited the
most - through greater profits. The
experts, a former commissioner
for the Texas Department of Insurance and a
former economist for
the department, work on behalf of consumer advocacy
groups.
"In order to get public support for tort reform, you need to
have
a story about how citizens benefit," said consumer advocate Birny
Birnbaum, former chief economist for the Insurance Department
during the
administration of Democratic Gov. Ann Richards. "But
saying there is
$3 billion in savings is fantasy." Bush, campaigning in South
Carolina for the GOP's presidential
nomination, unveiled a tort reform
package last week that largely
parallels his 1995 Texas legislation that is
now coming under fire.
Tort cases, which are filed in civil courts,
generally involve
claims of injury or damage for which a plaintiff is trying
to collect money.
Under Bush's campaign proposal, penalties would
increase for
so-called frivolous lawsuits; lawyers who file three such
lawsuits
would lose the right to appear in federal court for three years.
And teachers, principals and school board members would be
protected
from federal suits found to be groundless.
Likewise, the governor's plan
would allow clients to challenge
their lawyer's bill in federal court.
"When I ran for governor, I made legal reform a key part of my
campaign," said Bush, who unveiled the tort overhaul package during
a
discussion with South Carolina business leaders. "Once elected
[in Texas], I
went to work right away ... and we passed some of the
strongest legal
reforms in America. As a result, lawsuits are down,
and Texans have saved
nearly $3 billion in premiums."
But J. Robert Hunter,
Texas insurance commissioner under
Richards, said the governor's numbers are
off by as much as $1
billion - and perhaps as much as
$2 billion.
"There's no way those projections are going
to hold because none
of their projections have held in the past," said
Hunter, director
of insurance for the Consumer Federation of America. "If
they're
saying $3 billion [in savings], I would expect it
to be under $1
billion."
In a recent study of Texas
tort reform, Hunter concluded that the
resulting savings amounted to about
one-sixth of that contemplated
by the Legislature - and less than half that
estimated by the
Insurance Department.
Hunter said that although the
insurance department estimates
about $1.5 billion in
premium savings for the years 1996 through
1998, true savings amounted to
about $483 million for those years.
Likewise, Hunter
said that although premiums declined those
years, his analysis shows that
the decline generally paralleled a
nationwide trend. He said the decline can
be explained, in part, by
factors other than tort law changes, such as safer
automobiles and
aging baby boomers who drive more cautiously.
"A lot
of these savings are going to commercial business, not the
consumer," Hunter
said. "And it's a trade-off. You have to ask: How
much of your legal rights
are you willing to give up to get these
savings?"
Scott McClellan,
spokesman for Bush, disputed Hunter's findings.
"It's not surprising
that these statements come from a former
appointee of Governor Richards,
whose organization has sided with
powerful personal injury trial lawyers,"
McClellan said.
"Governor Bush has a record as a reformer with results,"
McClellan continued. "He took on the powerful trial lawyers in
Texas and
successfully passed meaningful tort reforms."
Jose Montemayor,
commissioner of the Texas Department of
Insurance, also disputed Hunter's
conclusions. The department
calculated savings by reviewing rate reductions
ordered by
Montemayor and his predecessor since 1996, including
$685 million
on various lines of liability insurance for
2000.
"We definitely stand by the numbers," Montemayor said. "The study
published by Robert Hunter is remarkably flawed. It failed to
consider
some rather significant factors, and his computations
resulted in wrong
conclusions."
Despite the legislation, Birnbaum said, insurance
companies
continue to overcharge Texas customers.
Birnbaum, who
advises the Democratic Party-aligned Center for
Economic Justice, recently
completed a study that found that Texas
auto insurance customers were
overcharged $2.9 billion for the
years 1996 through 1998.
"Despite 'mandatory tort reform rate reductions,' auto insurance
premiums continued to increase, loss ratios fell dramatically and
auto
insurers reaped windfall profits from 1996 through 1998,"
noted a Center for
Economic Justice report.
But John Marlow, spokesman for the American
Insurance Association
that has praised Bush for his tort reform proposal,
said profit
margins for Texas insurance companies consistently lag behind
profit margins for other industries.
"The assertion that insurance
companies are making money hand
over fist is not true," he said.
R.A. Dyer, (512) 476-4294
rdyer@star-telegram.com
CORRECTION-DATE: February 16, 2000
CORRECTION:
The Center for Economic Justice is a
nonpartisan Austin-based group that advocates on behalf of low-income and
minority consumers. This article may have improperly suggested that it was
aligned with a political party. .
LOAD-DATE: March 2,
2000 
