Courtroom Trauma: It's time to highlight the role that trial lawyers can play in causing insurance prices to rise. (Selling Insight: Property/Casualty).

By now, just about everyone knows that insurance rates are rising in almost every line. Just as naturally, everyone wants to know why. Two completely different explanations are colliding over the crucial role of costs, and the stakes for insurers couldn't be higher. Trial lawyers have rallied their troops to basically argue that insurance prices bear no relationship to the costs of providing coverage.

Thrown on the defensive by their well-publicized role in the medical malpractice crisis, the plaintiffs' bar is trying frantically to pretend that the costs it imposes on physicians and patients have nothing to do with the problem. Desperate to show they bear no responsibility for soaring asbestos costs, exploding mold claims, nursing home closings and more, plaintiffs' attorneys seek to blame the "pricing cycle," investment returns, insurer greed--anything but themselves. Since their economic future depends on stopping change, they and their apologists have orchestrated a campaign to deflect attention from the real cost drivers, which of course, include excessive litigation. Here, as elsewhere, a principal weapon is misinformation.

For example, the so-called consumer group Public Citizen, in support of the plaintiffs' bar, says the average medical-malpractice payment for all claims closed in 1996 was $29,504. This figure is a fraction of the true amount. It was arrived at by including all claims closed without payment, typically 70% according to the Physician Insurers Association of America. The true amount for 1996 is $228,547, the association's data show. Public Citizen pretends that information for later years was not available because not all claims have been closed. However, the association puts the average medical-malpractice claim for 2001 at $352,820.

We also know that medical-malpractice jury awards have more than doubled over the past few years, with the median award rising to $1 million in 2000 from $474,536 in 1996, according to Jury Verdict Research, a fact conveniently ignored by the plaintiffs' bar. Trial lawyers would have us believe there is no connection between litigation and prices for medical-malpractice insurance when common sense says otherwise.

The Public Citizen report with misleading information on medical malpractice was circulated to the press. The bulk of the report was simply a list of short quotations from newspapers around the country about rising insurance rates, of course without explanation. The goal apparently is to plant the idea that prices rise on their own, driven only by greedy insurers, and have nothing to do with costs, such as litigation.

Asbestos is another example. Through ads in newspapers and on Web sites, attorneys are encouraging workers who have been exposed to asbestos to file claims even though they have few symptoms and may never be ill. One Tillinghast study found 94% of claimants in 2000 had no malignancy. Another by the RAND Corp. found that so-called nontraditional defendants now account for 60% of asbestos litigation costs. Amazingly, the trial bar denies these costs affect prices for commercial insurance.

Plaintiffs' attorneys also are using the same techniques to deflect attention from their role in the mold problem. From the end of March to the end of December 2001 in Texas alone, the frequency of mold claims per 1,000 policyholders rose 252% and mold claim costs jumped 237%, pushing up homeowners insurers' costs substantially Lawyers profit when mold problems can be converted into actions for bad faith, negligence, etc.

Finally, we all know that the highest yield for attorneys is the class action lawsuit, especially against auto insurers. We also know one reason auto insurance prices are rising is the added cost of having to repair damaged cars with crash parts from the original manufacturers when generic parts would be cheaper and equally as good. Plaintiffs' attorneys had hoped to cash in on the diminished value concept. Fortunately, only Georgia's high court has sided with them. Awards alone in this one state cost more than $180 million. Now a case, filed in Ohio against 21 auto insurers seeking class action status on behalf of up to 1 million policyholders, alleges auto insurers' claims-paying practices created unnecessary costs to policyholders. It is only one of several auto insurance-related class actions in that state.

We know what's going on and it's our responsibility to make sure the media, government officials and, most important, the public do, too. We simply cannot permit all those who cause rising insurance prices and their defenders to pretend that the costs they impose play no role in today's rising prices.

Gordon Stewart, a Best's Review columnist, is president of the Insurance Information Institute, New York. He can be reached at [e-mail].