This article evaluates whether and how tort reform, specifically damage caps, stabilizes medical malpractice insurance markets. We examine statelevel medical malpractice insurance market performance in the United States for the period 1994-2010, a period characterized by a significant variation across states in their legal environments. First, we find that states with damage caps are less likely to have a crisis. Second, we find that the magnitude of crisis events is attenuated in states with damage caps, while the volatility of performance is not significantly different across states with and without damages caps. Finally, conditional on a state entering a crisis, we find that states with damage caps improve more quickly following the crisis than states without damage caps. Overall, our results suggest that damage caps stabilize medical malpractice insurance markets.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.