On Tuesday, the N.C. Academy of Trial Lawyers called upon state Insurance Commissioner Jim Long to conduct a hearing into the rates charged by Medical Mutual Insurance Co. of North Carolina, which insures about 6,300 doctors statewide.

Dick Taylor, the academy's CEO, said Medical Mutual's rates have "crossed the legal threshold." State law bars medical malpractice insurers from charging excessive rates.

Medical Mutual's general counsel, David Sousa, defended the company's rates as "absolutely reasonable" and said it has become an annual event for the trial lawyers to bash Medical Mutual's financial performance.

"They always spin it the same way -- the medical malpractice companies are charging too much money, and therefore there's no reason for medical malpractice reform," Sousa said.

"Here you have the organization that represents the people who regularly make a living suing doctors, and now they want you to believe they are the watchdogs on behalf of these doctors," Sousa said. "That is a little bit like the fox guarding the henhouse."

Trial lawyers and doctors have clashed over the medical malpractice issue for years. Physicians contend large jury awards need to be reined in because climbing malpractice rates are contributing to rising medical costs.

Trial lawyers have countered that insurance companies, not malpractice lawsuits, are to blame. But until now they hadn't argued that malpractice rates overstepped state law or asked the insurance commissioner to step in.

The group hired Jay Angoff, a lawyer and former insurance commissioner in Missouri, to analyze Medical Mutual's financial condition and performance from 2001 to 2006. The study was based on data submitted to the state Department of Insurance and the National Association of Insurance Commissioners.

Angoff said the amount of claims paid by Medical Mutual has been "very stable" from year to year "while premiums have gone way up."

As a result, the insurer's surplus -- the amount it sets aside, over and above reserves, to pay future claims -- has mushroomed from $35.3 million in 2001 to $127.7 million in 2006, Angoff said.

"Surplus is a good thing, not a bad thing," Angoff said. "Companies should have a surplus. But there comes a point where enough is enough."

Medical Mutual could cut its surplus in half and distribute about $60 million to policy holders and still have more surplus than the average insurer, Angoff said. That would amount to refunds ranging from $6,000 to $12,000 per doctor, he said.

Sousa argued that Medical Mutual's surplus is in line with the industry average for companies that focus solely on medical malpractice and called the charges ludicrous. He pointed out that Medical Mutual was started by physicians 30 years ago and remains physician-owned.

"Why would the doctors charge more to themselves than they have to charge?" Sousa said.

The lawyers group wants the state insurance commissioner to hold a hearing on the matter and order refunds if its opinion is upheld.

Initial state reaction

Chrissy Pearson, a spokeswoman for the state insurance department, said of the request: "We are certainly not ruling out the idea." First, however, the department intends to review the lawyers' report.

Pearson also said the mechanism for the state to challenge medical malpractice rates isn't as clear-cut as its ability to govern auto, homeowners and workers' compensation insurance rates. And -- unlike the hearings the department conducts on auto and homeowners insurance rates -- the burden would be on the state to prove a medical malpractice rate request is excessive, she said.

Medical malpractice companies file their rate requests to DOI. Department actuaries review each request to determine that it meets statutory requirements. "That is different from saying we approve it," Pearson.

If the actuaries think a rate request isn't justified, the insurer will be asked to lower its request, she said.

In 2005 and 2006, Medical Mutual agreed to lower rate increases than it initially requested, according to DOI. Last year the insurer requested a 6.4 percent increase but settled for 4.1 percent. The insurer has not asked for a rate increase this year.

Pearson said physicians in North Carolina have few options for malpractice insurance. Just four companies account for 98 percent of the policies, with Medical Mutual alone writing half.

"We don't want to do anything that will scare companies out of a market that is already very fragile," she said.

Since 2000, Medical Mutual's rates have risen 68.9 percent, according to DOI. That is lower than the rate increases of the other three insurers that dominate the market.

Pearson also noted that the lawyers' study had the benefit of hindsight.

Just because Medical Mutual's financial condition is strong doesn't necessarily mean that it charged excessive rates, she said, because rates are set to cover future claims. If the volume and value of claims are lower than expected, an insurer can end up sitting pretty financially even though its rates were justified at the time.