PRESIDENT’S PAGE
TORT REFORM 2003: THE TEXAS
MIRACLE!
For those readers of the Dallas
Medical Journal who are
under 60 years of age, I would
like to share with you “The Texas
Miracle,” the incredible passage
of the House Bill 4, the Medical Malpractice
and Tort Reform Act of 2003.
During the 1990s, malpractice lawsuit
abuse was rampant, resulting in runaway
liability payments that resulted in excessive
increases in premiums for physicians and
higher losses for insurance companies. In
fact, before The Texas Miracle, 13 of the 17
insurance companies discontinued selling
liability policies in Texas.
Higher premiums undoubtedly discouraged
some physicians from establishing a
practice in Texas. During the height of the
crisis, I recall reading an article in our local
newspaper that described the difficulty
that one of our trauma centers was having
trying to recruit a neurosurgeon to its
campus. According to the article, the least
expensive liability insurance option was
going to cost over $400,000! I don’t know
what ultimately occurred, but the trauma
center stayed open.
How high were the premiums? Well, of
course that depends on your specialty and
liability history, and perhaps the company
selling the policy. While practicing at UT
Southwestern, I never had to choose a
liability carrier because UT Southwestern
had its own liability plan. I never researched
the nature of the plan but assumed that
all physician employees had institutional
coverage, and in fact I don’t ever remember
purchasing a “tail coverage” policy when I
departed.
Premium Increases
I opened my private practice in January
1999. Due to rising cost of defending
meritless claims, and the rising cost of
noneconomic damages, the Texas Medical
Liability Trust (TMLT) had premium increases
in January 2000, July 2000, January 2001,
and July 2001. And to add insult to injury, in
2002 the TMLT asked for a “surplus deposit”
to increase the amount of reserve funds.
Investment losses
The trial lawyers, represented by the
American Trial Lawyers Association (whose
name later changed to the American Association
2 | DALLAS MEDICAL JOURNAL • May 2022
for Justice), claimed that the reason
for premium increases was due to investment
losses that allegedly occurred during
the dot.com bubble in the late 1990s. I am
going to assume that we all remember the
dot.com bubble; if you are under 40 years of
age, please google “dot.com bubble.” While
I can’t speak for all insurance companies,
the TMLT had about 90% of assets invested
in fixed income securities (bonds), about 5%
cash, and only 5% in stocks, which we would
all agree is a very conservative portfolio.
Contrary to the false claims propagated by
trial lawyers, the increase in premiums was
not due to investment losses.
Noneconomic Damages
Years ago, I remember reading an article
published by the TMLT that estimated the
amount of indemnity payments that were
noneconomic versus economic. Prior to The
Texas Miracle and at the peak of the crisis,
approximately two-thirds of payments
were noneconomic in nature, while only a
third were economic. I venture to guess that
many of these decisions to increase noneconomic
damages were made perhaps
in mediation, where a $100,000 payment
that was half economic and half noneconomic
would be increased to $150,000 so
that the plaintiff attorney could get their
third (noneconomic) while the plaintiff
maintained their indemnity. After, the Tort
Reform Act, The Texas Miracle, the opposite
is true whereby currently most of the indemnity
payments are economic in nature.
Ultimately, the cap on noneconomic damages
was least likely to benefit the plaintiff
attorney.
Upon entering private practice in 1999,
there were few insurance companies that
were still selling liability policies. Ultimately,
Samuel J. Chantilis, MD