Insurance Firms Subpoenaed in New Probe

By Brooke A. Masters
Washington Post Staff Writer
December 8, 2004

New York and Connecticut state officials said they are investigating whether improper behavior by insurance companies has been a factor in the rapidly rising cost of malpractice insurance for lawyers and doctors.

New York Attorney General Eliot L. Spitzer and Connecticut Attorney General Richard Blumenthal have not filed charges, officials said. Over the past week, three insurers that cover lawyers -- the Hartford Financial Services Group Inc., American Financial Group Inc. and Arch Capital Group Ltd. -- have said they received subpoenas from Spitzer's office.

Lawyers for Spitzer's office have also been interviewing class-action attorneys about their particular problems getting insurance, said Fred Taylor Isquith, president of the National Association of Shareholder and Commercial Law Attorneys. Many of the group's more than 75 member firms have faced large premium increases or their carriers have refused to renew coverage in the past few years, Isquith and other plaintiffs' lawyers said.

"It has been infuriating. We didn't have any claims of substance against us . . . but our rates went up four, five, six times," said Steven J. Toll, managing partner of Cohen, Milstein, Hausfeld & Toll PLLC, a class-action firm based in Washington.

Doctors nationwide have similar complaints about their malpractice insurance, and Blumenthal said yesterday that his investigation has not found that lawyers are being singled out. Rather he said, his evidence suggests that the entire field of professional insurance -- including medical and legal malpractice and coverage for corporate officers and directors -- is suffering from "excessive rates resulting from anti-competitive or illegal behavior."

The latest subpoenas are part of a nationwide investigation of the insurance industry that Spitzer sparked in October when he accused corporate insurance broker Marsh & McLennan Cos. of bid-rigging and taking kickbacks. Spitzer and Blumenthal have said they are also looking at the health, life and auto insurance industries.

Many business groups blame plaintiffs' lawyers for rising legal and insurance costs, saying their big wins force carriers to increase costs for everyone. Business interests are pushing Congress to make it harder to file and win class-action lawsuits. Consumer advocates counter that class actions hold big corporations accountable for bad behavior.

"The whole area of professional liability insurance has been under tremendous pressure due to a litigation explosion," said Robert P. Hartwig, chief economist of the Insurance Information Institute trade group. "In a litigious era, anybody who provides a service is going to find themselves at the other end of the lawsuit gun."

Copyright © 2004 The Washington Post Company

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