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Courts, Scheduled Damages, and Medical Malpractice Insurance

34 Pages Posted: 14 Dec 2013 Last revised: 2 Nov 2015

Paola Bertoli

University of Economics, Prague; Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Veronica Grembi

Mediterranean University of Reggio Calabria

Date Written: November 2, 2015

Abstract

Medical malpractice insurance is considered a unprofitable market in many countries, and this is why many policies have been implemented to increase its attractiveness for private insurers. We test the effects of limits to noneconomic compensations- scheduled damages- using Italian data. We estimate the average treated effect of schedules and whether it depends on the judicial efficiency, measured as court backlog. Our identification rests on the partial overlap between healthcare authorities districts and judicial districts, thus the caseload of a court and malpractice events at the healthcare provider level are not perfectly correlated. On average, the adoption of schedules does not produce any significant effect on insurers and paid premiums. However, it has a robust and significant effect on the number of insurers only in inefficient courts. We further investigate these findings using data for 17,578 malpractice insurance claims. We find evidence of a composition effect among claims which is triggered by higher levels of judicial inefficiency: the more inefficient a court, the lower the probability to have a case not decided on the merits, and the higher the level of reserve and recovery per claim. These results shed light on previous conflicting evidence in the literature.

Keywords: Schedules of Non-Economic Damages, Courts, Medical Malpractice Insurance, Difference-in-Differences

JEL Classification: I10, K32, K40

Suggested Citation

Bertoli, Paola and Grembi, Veronica, Courts, Scheduled Damages, and Medical Malpractice Insurance (November 2, 2015). Baffi Center Research Paper No. 2013-145. Available at SSRN: https://ssrn.com/abstract=2367218 or http://dx.doi.org/10.2139/ssrn.2367218

Paola Bertoli

University of Economics, Prague ( email )

Prague
Czech Republic

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

P.O. Box 882
7 Politickych veznu
Prague 1, 111 21
Czech Republic

Veronica Grembi (Contact Author)

Mediterranean University of Reggio Calabria ( email )

Via dei Bianchi, 2
Reggio Calabria, Reggio Calabria 89127
Italy

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