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Insurance premiums for doctors, small businesses and families are on the rise. Millions of Americans are without healthcare. While insurance companies continue to charge outrageously high premiums for decreased coverage, they are reaping outrageously high profits at the expense of American families. The legal rights of people injured through no fault of their own are being trampled... but guess what? The insurance industry is booming.
$25,240,000,000 ($25.24 Billion) = Total profits in 2003 for the Top Ten U.S. insurance companies according to Forbes.com. (Forbes 2000 List, www.forbes.com, 3/25/04)
HMO Profits Doubled in 2003
'The nation's HMOs nearly doubled their net profits last year, earning $10.2 billion in 2003, up from $5.5 billion in 2002 (an 86 percent increase), according to a new report by financial ratings firm Weiss Ratings.' ('HMOs almost doubled net profits in 2003,' Laura B. Benko, Modern Healthcare, 8/30/04). Some examples of those booming companies are:
- Blue Cross Blue Shield plans - 63% increase in profit
- Kaiser Foundation Health Plan - $995.5 million profit
- Physicians Service - $314.2 million profit
- Group Health Cooperative - $187.8 million profit
- Aetna Health - $129.8 million profit
(www.jacksonville.bizjournals.com, 'HMOs nearly double profits in 2003,' 08/30/04)
Best Profits in a Decade for Health & Life Insurers
According to Weiss Ratings, Inc., 'Health and life insurers this year posted their best profits in a decade... those firms jumped $5.9 billion to $8.7 billion in the first three months of 2004.' ('Health insurers rake in records,' www.austin.bizjournals.com, 9/23/04)
Property & Casualty Profits Up
'U.S. property and casualty insurers reported surging underwriting profits in the first half of this year amid rate increases from prior years and low catastrophe losses, A.M. Best said. The industry generated $9 billion in underwriting profit in the period...' ('P&C insurers post $9B underwriting profit in first half,' AFX Asia, 09/21/04)
According to the insurance industry's main data source, the Insurance Services Office, U.S. property and casualty insurance companies increased profits by 1000% in 2003. ('Sharp Increase in P/C Industry's Net Income Propels Surplus Upward in 2003,' http://iso.com/press_releases/2004/04_14_04.html)
American Families Pay for Increased CEO Salaries & Profits
The aggregate salaries for the CEOs of the Top Ten U.S. insurance companies in 2003 according to Forbes.com totaled $76.6 million, while the companies' profits totaled $25.2 billion. (Executive Pay List, www.forbes.com, 4/23/04)
"The industry's soaring profits continue to irk both consumers and businesses who are shouldering skyrocketing healthcare costs without any perceived improvement in benefits," said Melissa Gannon, Weiss Ratings vice president.' ('Health insurers rake in records,' www.bizjournals.com 9/23/04)
Some examples of companies reporting the largest increases in earnings include:
Pacific Life Insurance Co., $523 million profits in first quarter, up from $99 million for the same period the year prior.
Continental Assurance Co., $303.1 million profits in the first quarter, up from $91.2 million loss from the same period the year prior.
Insurance & Annuity Association of America, $247.2 million profit, up from a $113.2 million loss from the same period the year prior. (www.bizjournal.com, 'Weiss Ratings: Insurers record best profits in a decade,' 09/22/04)
In the years following the civil lawsuit filed by Stella Liebeck against McDonald's as a result of burns she received from spilling hot coffee in her lap, a great deal of negative publicity against trial lawyers, and specifically personal injury lawyers, was generated. Most specifically, the insurance companies began an intense advertising blitz touting the "outrageousness" of the suit, and the verdict awarded Ms. Liebeck. Of course, those using this case as their "poster child" never told the real, and complete facts. They are as follows:
Stella Liebeck of Albuquerque, New Mexico, was in the passenger seat of her grandson's car when she was severely burned by McDonald's coffee in February of 1992. Ms. Liebeck ordered coffee that was served in a Styrofoam cup at the drive-through window of a local McDonald's.
After receiving the order, her grandson pulled his car forward and stopped momentarily so that Ms. Liebeck could add cream and sugar to her coffee. (Critics of civil justice, who have pounced on this case, often charge that Ms. Liebeck was driving the car or that the vehicle was in motion when she spilled the coffee; neither is true.) Ms. Liebeck placed the cup between her knees and attempted to remove the plastic lid from the cup. As she removed the lid, the entire contents of the cup spilled into her lap.
The sweatpants Ms. Liebeck was wearing absorbed the coffee and held it next to her skin. A vascular surgeon determined that she suffered full thickness burns (or third-degree burns) over 6 percent of her body, including to her inner thighs, perineum, buttocks, and genital and groin areas. She was hospitalized for eight days, during which time she underwent skin grafting, as well as painful debridement treatments. At the conclusion of her treatment, and after her burns had healed, Ms. Liebeck sought to settle her claim for $20,000, but McDonald's refused. Ms. Liebeck subsequently filed suit.
During discovery, McDonald's produced documents showing more than 700 claims by people burned by its coffee between 1982 and 1992. Some claims involved third-degree burns substantially similar to Ms. Liebeck's. This history documented McDonald's knowledge about the extent and nature of this hazard.
McDonald's also said during discovery that, based on a consultant's advice, it held its coffee at between 180 and 190 degrees Fahrenheit to maintain optimum taste. Other establishments sell coffee at substantially lower temperatures, and coffee served at home is generally 135 to 140 degrees.
Further, McDonald's quality assurance manager testified that the company actively enforced a requirement that coffee be held in the pot at 185 degrees, plus or minus five degrees. He also testified that a burn hazard exists with any food substance served at 140 degrees or above, and that McDonald's coffee, at the temperature at which it was poured into Styrofoam cups, was not fit for consumption because it would burn the mouth and throat. The quality assurance manager admitted that burns would occur, but testified that McDonald's had no intention of reducing the "holding temperature" of its coffee.
Plaintiff's expert, a scholar in thermodynamics as applied to human skin burns, testified that liquids, at 180 degrees, will cause a full thickness burn to human skin in two to seven seconds. Other testimony showed that as the temperature decreases toward 155 degrees, the extent of the burn relative to that temperature decreases exponentially. Thus, if Ms. Liebeck's spill had involved coffee at 155 degrees, the liquid would have cooled and given her time to avoid serious burns.
McDonald's asserted that customers buy coffee on their way to work or home, intending to consume it there. However, contrary to these assertions, their own research showed that customers intend to consume the coffee immediately while driving.
McDonald's also argued that consumers know coffee is hot and that its customers want it that way. The company admitted its customers were unaware that they could suffer third-degree burns from the coffee and that a statement on the side of the cup was not a "warning" but a "reminder" since the location of the writing would not warn customers of the hazard.
The jury awarded Ms. Liebeck $200,000 in compensatory damages. This amount was reduced to $160,000 because the jury found Ms. Liebeck 20 percent at fault in the spill. The jury also awarded Ms. Liebeck $2.7 million in punitive damages, which equals about two days of McDonald's coffee sales.
Post-verdict investigation found that the temperature of coffee at the local Albuquerque McDonald's had dropped to 158 degrees Fahrenheit.
The trial judge subsequently reduced the punitive award to $480,000 -- or three times compensatory damages -- even though the judge called McDonald's conduct reckless, callous and willful. Subsequent to remittitur, the parties entered a confidential post-verdict settlement.
