The Effects of Tort Reform on Medical Malpractice Insurers’ Ultimate Losses

Whereas the literature evaluating the effect of tort reforms has focused on reported incurred losses, this paper examines the long run effects using a comprehensive sample by state of individual firms writing medical malpractice insurance from 1984-2003. The long run effects of reforms are greater than insurers’ expected effects, as five year developed losses and ten year developed losses are below the initially reported incurred losses for those years following reform measures. The quantile regressions show the greatest effects of joint and several liability limits, noneconomic damages caps, and punitive damages reforms for the firms that are at the high end of the loss distribution. These quantile regression results show stronger, more concentrated effects of the reforms than do the OLS and fixed effects estimates for the entire sample. keywords: medical malpractice, tort reform, insurance * California State University, Northridge. Corresponding author. Please send any comments and suggestions to the author at [email protected]. ** Cogan Professor of Law & Economics, Harvard Law School, 1575 Massachusetts Avenue, Cambridge, MA 02138. phone: 617-496-0019 e-mail: [email protected]. Viscusi’s research is supported by the Harvard Olin Center for Law, Economics, and Business and the Program on Empirical Legal Studies. *** University of Connecticut School of Law.