A new lawsuit alleges that insurance companies engineered a record medical malpractice verdict in Iowa to force the state Legislature to pass tort reform legislation.
In March 2022, a Johnson County jury awarded more than $97.4 million in damages to the family of a boy who suffered a severe brain injury during birth at an Iowa City hospital. The award was thought to be the largest medical malpractice judgment in Iowa history, but was later reduced to $75.6 million.
The boy’s parents, Kathleen Klomphardt and Andrew Klomphardt, say their son’s brain injury was caused by negligence in the hours leading up to his birth in August 2018, according to the Obstetrics and Gynecology Association of Iowa City and Coralville. was complaining.
Court filings by both parties to the lawsuit suggest the clinic, the doctor and the family were interested in settling the case for an amount covered by the clinic’s insurance policy. . However, the insurance company resisted and rejected the offer to settle the case for any amount, so the malpractice case ended up going to trial.
This week, the clinic’s attorney, Nick Lowry, filed a lawsuit in state court accusing the insurance company, MMIC Insurance/Constellation, and its Cedar Rapids-based attorneys, Shuttleworth & Ingersoll, of acting in bad faith.
According to the complaint, MMIC is using this lawsuit and the resulting jury award to save insurance companies millions by capping the amount of medical malpractice damages that can be paid to patients and their families. He claims to have convinced state legislatures to pass tort reform legislation that would save dollars.
“Once the jury determined that the case was worth $97 million, MMIC/Constellation used the jury’s verdict to persuade Iowa politicians to cap non-economic damages.” The complaint alleges. “MMIC/Constellation unfairly chose not to settle, vacate the lawsuit and verdict, and used Obstetrics and Gynecology Associates’ financial and reputational damage as propaganda to pass tort reform in Iowa. MMIC/Constellation has sought to impose severe non-economic damages caps in Iowa for years…MMIC/Constellation faces $97 million judgment and three female gynecologists file for bankruptcy They knew the story of hospitals having to close due to large jury verdicts. You can get something.”
The defendants in the case have not yet filed a response to the lawsuit, but they deny wrongdoing in related federal court filings.
Lowery acknowledged Wednesday that the lawsuit speaks not only to the insurance company’s actions but also to its motives, but said he doesn’t expect it to be a difficult case to prove.
“I don’t think it’s going to be that tough,” he said. “The jury is going to see what happened. It’s right there, it’s in the public domain, because in Iowa that’s their audacity. And I’m going to take their emails and text messages and everything. We will wait until we receive it. We will consider everything and take every step.”
Lawsuit: Governor and legislators lobbied
The claims in this lawsuit mirror those made in court filings related to the initial medical malpractice suit and the clinic’s bankruptcy. In connection with these filings, Mr. Rowley said that the insurance company’s decision to take the case to trial rather than settle is part of a predetermined strategy to force the clinic into bankruptcy, and that lobbyists and lawmakers are They argued that it was now possible to argue that tort reform was necessary to save provider transfers. From Iowa.
Lowry said the bankruptcy element of the plan was nearly successful until a federal judge in the bankruptcy case intervened and dismissed the lawsuit as fraudulent.
The new lawsuit comes after a record-breaking ruling alleging that MMIC/Constellation “held seminars in Iowa and lobbied for non-economic caps, including the governor’s involvement.” claims. MMIC/Constellation tells the story of three female obstetricians and gynecologists in Iowa who had to file for bankruptcy and close their practices because of greedy trial lawyers and out-of-control civil litigation. . What MMIC/Constellation failed to share in these seminars and meetings with Iowa state legislators is that MMIC/Constellation is an insurance company in the $97 million verdict and in all of Iowa’s other large jury verdicts. Each case went to trial because MMIC/Constellation refused reasonable negotiation and settlement. ”
house file 161 Limits noneconomic damages in actions against health care providers for medical incidents resulting in loss or disability, disfigurement, or death to $1 million for clinics and individual physicians and $200 for hospitals. Limited to $1,000,000.
Mr. Rowley has repeatedly put his own financial and political interests ahead of his policyholder clinics in carrying out the alleged scheme to “defraud” state legislators. He claimed he used it as a “pawn to change Iowa law regarding non-economic damages.” – Telling Iowans a half-truth at best, an outright lie at worst… The malice runs deep and is one of the worst acts of malice in Iowa history to warrant punitive damages. There will be one. ”
Lowery said Wednesday that insurers are “playing the long game” and are focused on long-term gains rather than short-term losses. “They sit on the high thrones of insurance companies and see the world through a completely different lens than the rest of us,” Lowry said.
judge questioned bankruptcy filing
The lawsuit seeks unspecified damages for bad faith, violation of law, breach of fiduciary duty and breach of contract.
The new lawsuit follows the clinic’s suspension of its bankruptcy filing last fall. Lawyers for the Kromperls had challenged the lawsuit, arguing that it was filed in bad faith to avoid paying medical malpractice awards.
On January 20, the custodian of the bankruptcy case filed a motion with the court, alleging that the clinic acted in bad faith by filing for bankruptcy in order to avoid paying a bond securing some of the clinic’s assets. argued that it was a litigation tactic. assets.
In a March 29 ruling dismissing the bankruptcy case, U.S. Bankruptcy Judge Anita L. Shodeen expressed concern about the clinic’s “relationship” with insurance company MMIC. The judge suggested that the insurance company may have given the clinic certain financial incentives in exchange for the clinic’s bankruptcy filing as part of an effort to save MMIC from having to pay $12 million in insurance claims. did.
He pointed out that MMIC paid a fee to the clinic’s bankruptcy attorney and offered the clinic favorable terms for insurance coverage that no one else would match. Additionally, the judge said MMIC offered to extend credit to the clinic.
“The question arises as to whether the motive for the bankruptcy was for a proper purpose or to obtain economic benefit from MMIC in exchange for filing for bankruptcy in order to protect MMIC from payments under the insurance contract.” he said in his judgment.
