Lawsuit Claims Insurance Company Orchestrated Record Medical Malpractice Judgment to Influence Iowa Tort Reform

IOWA CITY, Iowa – An insurance company is facing a lawsuit alleging that it orchestrated a record medical malpractice judgment in Iowa to influence state legislators to pass tort-reform legislation. In March 2022, a jury in Johnson County awarded over $97.4 million to the family of a boy who suffered severe brain damage during birth at an Iowa City hospital. Although the judgment was later reduced to $75.6 million, it is believed to be the largest medical malpractice verdict in Iowa’s history.

The lawsuit was filed by the boy’s parents, Kathleen and Andrew Kromphardt, against Obstetric and Gynecologic Associates of Iowa City and Coralville, among others. They claim that their son’s brain damage resulted from negligence in the hours leading up to his birth in August 2018. Court documents indicate that both the clinic and the family were interested in reaching a settlement that would fall within the clinic’s insurance policy coverage. However, the insurance company, MMIC Insurance/Constellation Inc., resisted and rejected any proposed settlements, leading to the malpractice case going to trial.

The clinic’s attorney, Nick Rowley, recently filed a lawsuit in state court accusing MMIC and its attorneys, Shuttleworth & Ingersoll of Cedar Rapids, of acting in bad faith. The lawsuit alleges that MMIC used the lawsuit and the resulting jury award to convince state lawmakers to pass tort-reform legislation that would limit damages for malpractice. According to the lawsuit, MMIC had been pushing for a hard cap on non-economic damages in Iowa for years, and it saw the $97 million verdict as an opportunity to strengthen its case. The lawsuit claims that MMIC refused to negotiate reasonably and instead used the clinic’s financial and reputational struggles following the verdict as propaganda in support of tort reform.

The defendants named in the lawsuit have yet to respond, but they have denied any wrongdoing in related federal-court filings. Rowley, the clinic’s attorney, expressed confidence in proving the case, stating that the evidence will clearly show what occurred. He mentioned the possibility of uncovering emails and text messages that will shed further light on the insurance company’s actions.

The lawsuit echoes previous court filings related to the original malpractice lawsuit and the clinic’s bankruptcy. Rowley alleged that the insurance company deliberately took the case to trial as part of a strategy to force the clinic into bankruptcy, enabling lobbyists and lawmakers to argue for tort reform. The clinic’s bankruptcy filing was ultimately dismissed by a federal judge, who raised concerns over the relationship between the clinic and MMIC. The judge noted that MMIC had provided financial assistance to the clinic and offered favorable terms on insurance coverage, raising questions about the motivations behind the bankruptcy filing.

The newly filed lawsuit contends that MMIC held seminars and lobbied for the implementation of non-economic damage caps in Iowa, with the involvement of the governor. However, the company failed to disclose its role as the insurer in the $97 million verdict and other large jury awards in the state. Instead, it portrayed itself as a victim of excessive civil litigation and trial lawyers. The lawsuit seeks unspecified damages for bad faith, legal malpractice, breach of fiduciary duty, and breach of contract.

Rowley has criticized the insurance company’s long-term profit focus at the expense of policyholders like the clinic. He argues that MMIC’s actions demonstrate a case of bad-faith conduct that warrants punitive damages. The outcome of this lawsuit could have significant implications for future medical malpractice cases and the insurance industry’s role in shaping tort-reform legislation in Iowa.