Supporters of Tort Reform in Iowa Accused of Manufacturing a Crisis

Billionaire Charles Koch’s political network won a major state legislative victory last year when Iowa passed a bill that limits damages in medical malpractice lawsuits. Now, a new court filing claims that an insurance company deliberately lost a major medical malpractice case instead of agreeing to a settlement, with the explicit goal of spurring the Iowa Legislature to take action on the issue.

The case involved severe brain damage to a child due to a botched delivery, which in 2022 resulted in a $97.4-million jury verdict, the largest in Iowa’s history.

In response, the Iowa Legislature passed a so-called “tort reform” bill that Republican Governor Kim Reynolds — who won reelection in 2022 with Koch’s backing — signed into law on February 16, 2023. House File 161 limits “noneconomic” damages for pain and suffering that a jury can award a plaintiff to $1 million (or $2 million if the civil action includes a hospital) in cases of medical malpractice if there is substantial or permanent loss or impairment of a bodily function, substantial disfigurement, loss of pregnancy, or death.

Legislators cited the record-high jury verdict as a reason for supporting the cap on damages. Prior to passage of the new law, there were no limits on jury awards for medical malpractice cases in Iowa involving severe injury or death.

Tyler Raygor, director of Iowa’s American for Prosperity (Iowa AFP), and Drew Klein, director of the group’s Des Moines branch, lobbied in favor of the bill while its members sent legislators letters of support. Charles and David Koch founded AFP, which relies on Koch funding vehicles for most of its revenues. 

Nationally, the Koch astroturf operation claims 4 million members and 36 state chapters, with plans to expand to all 50 states.

AFP’s super PAC, AFP Action, recently endorsed former South Carolina Governor Nikki Haley in the GOP presidential primary.

AFP state chapters have long pushed tort reform, and last year Florida’s AFP chapter congratulated Governor Ron DeSantis and the state legislature for limiting what it called “frivolous” lawsuits. AFP also endorses candidates who support limiting the rights of plaintiffs to collect damages.

The legislation supported by AFP in Iowa passed because legislators reacted to this one very large court judgment, fearing that more verdicts awarding such high damages would prevent doctors from practicing and force hospitals to close down. But in their belief that the case had been manipulated to create a manufactured crisis calling for tort reform, the doctors at Obstetric and Gynecological (OB/GYN) Associates of Iowa City, who were the defendants, sued their insurance company MMIC — one of the nation’s largest medical malpractice insurers — and its lawyers, claiming that they conspired to refuse to settle the lawsuit even though the plaintiffs (the parents of the child born with brain damage) were willing to do so. 

It’s not the first time MMIC has been accused of refusing to settle a medical malpractice case. In 2019, the insurer was sued for bad faith over a $12-million verdict involving the unnecessary removal of a man’s prostate. That case was dismissed in February 2023.

According to the current lawsuit, MMIC’s motivation was to let the OB/GYN case go to jury trial and hope for such a large judgment that state legislators would be forced to limit huge jury awards for noneconomic damages in the future. 

In fact, at the same time MMIC was representing the OB/GYN doctors, it was simultaneously holding seminars for lawmakers and lobbying for limits on medical malpractice awards. The pending state lawsuit brought by the doctors and clinic — which was forced into bankruptcy by the record-breaking award, even though it was subsequently reduced to $76 million by a judge — claims that Shuttleworth Ingersoll, the law firm MMIC hired, did not represent them and instead delivered on a political favor for the insurance company. 

OB/GYN and its doctors allege that MMIC and its lawyers used them as political pawns to advance their legislation, acted in bad faith, and presented a sham defense.

The lawsuit, brought by the clinic’s and doctors’ new legal counsel, also claims:

The jury trial and resulting verdict and Judgment in this case were completely avoidable. The case never should have gone to trial. Plaintiffs wanted the case settled. The only reason the case went to trial was the Defendants’ collective failure and refusal to settle the case for an amount of money that was within the limits of the available insurance policy.

The lawsuit also alleges that MMIC wanted to get such a high jury verdict that the defendants would be forced into bankruptcy.

MMIC and its lawyers, according to the lawsuit, “knew that the story of a $97 million verdict and three female OB/GYN physicians having to file bankruptcy and close their practice because of a large jury verdict would give [the insurer] what it needed to convince Iowa lawmakers to vote to pass the cap [on med-mal judgments].” 

AFP Action is not the only Koch-founded group pushing limits on medical malpractice judgments. The American Legislative Exchange Council (ALEC) has developed dozens of model bills that limit liability for medical malpractice, unsafe products, damage to the environment, and workplace safety. Those bills include one to cap noneconomic damages and one to limit what kind of evidence juries are allowed to hear when considering damages for pain and suffering.