Insurer Will Pay Hospitals $50 Million

About 450 California hospitals which paid high premiums for malpractice insurance during the 1970s will split $50 million in refunds from a Los Angeles-based insurer because malpractice suit payments were lower than expected.

The refunds will be divided over two years, with the insurer paying $10 million this year and $40 million by the end of next year.

The refunds were cleared after a federal appeals court upheld in August the constitutionality of a California law that imposed a $250,000 ceiling on damage awards for pain and suffering caused by medical malpractice.

Condition Imposed

California hospitals were granted the refunds under an agreement negotiated in 1973 with Truck Insurance Exchange of Los Angeles. The hospitals paid higher premiums between 1973 and 1979 to cover potential future malpractice losses, on the condition that any surplus would be returned in 1986.

The agreement was struck to make it more attractive for Truck to remain a medical malpractice insurer during an era when costly awards had prompted other companies to refuse to renew malpractice policies.

H. Robert Nichols, Truck’s vice president of professional liability, has told the California Hospital Assn. in Sacramento that each of the hospitals will receive $98,432, with the option of either cash or credit toward current premiums.