Many states that passed malpractice caps a decade ago should expect to see judicial review because caps aren’t passing constitutional muster and aren’t delivering on what they advertised, says a legal expert.

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John Commins, for HealthLeaders Media, April 28, 2014

The Florida Supreme Court’s ruling this spring invalidating that state’s 11-year-old cap on damages in medical malpractice suits marks the latest successful challenge to state laws across the nation that critics say enrich insurance companies but deny due process to grievously injured people.

“It is unfortunately a constant battle for victims of malpractice. This seems to go on in just about every state,” says Richard Levin, a medical malpractice attorney with the Chicago-based firm of Levin, Riback Law Group.

“What seems to be the overriding ethos of the insurance companies and the physicians is that the premiums are too high and doctors are leaving the state and as a result we have a malpractice crisis. But the statistics bear out the exact opposite.”

The battle over malpractice caps reignited in March when on a 5–2 ruling the Florida Supreme Court struck down as unconstitutional a 2003 statute that capped at $1 million medical malpractice payouts for intangible damages such as pain and suffering.

The Florida case involved the 2006 death of a pregnant 20-year-old woman who died from complications that arose during labor. The woman’s family was awarded $2 million for pain and suffering, but that award was halved to comply with the state statute, which was passed into law at a time when many states were enacting “tort reform.”

Florida’s high court invalidated the law and ruled that it violated the equal protection clause of the state constitution. The majority ruling also challenged the validity of the purported medical malpractice crisis that supposedly prompted the law in the early 2000s and said the crisis was “not fully supported by available data.”

Instead, the court majority wrote that the effect of the law was to enrich insurance companies at the expense of plaintiffs and that the malpractice caps had done “virtually nothing” to stabilizing malpractice premiums for physicians and other providers.

Astronomical Income Increases for Insurers
Citing testimony brought forward by committees in the Florida Legislature, the high court said that “it is estimated that the Florida medical malpractice line of business standing alone generated a… return on surplus of 14% in 2012… This represents the ninth consecutive year of profitability.”

The court went on to say that “The profits would probably shock most concerned. Indeed between the years of 2003 and 2010, four insurance companies that offered medical malpractice insurance in Florida cumulatively reported an increase in their net income of more than 4300 percent.”

Levin says many states that passed malpractice caps a decade ago should expect to see new judicial review because they aren’t passing constitutional muster, and they aren’t delivering on what they advertised.

 “There are 19 states that have malpractice caps, and none of them have a provision in them that if the awards are capped at a certain number when the premiums are paid then the premiums will be reduced,” he says.

“In fact, the opposite has been shown, that the premiums increase. And there is nothing in the statute that says when there has been a decrease and the insurance companies will reap the benefits of that they will pass the savings on to the doctors. That has not been done. They are not, in fact, paying lesser premiums.”

Defense Attorneys See it Differently

Jeff Scott, general counsel for the Florida Medical Association, which filed an amicus brief supporting the caps, blasted the high court’s ruling.

“We had documented the premium increases prior to 2003 and in many instances we were seeing triple-digit increases. It was a full-blown crisis. The rates were skyrocketing. Physicians were dropping their coverage because they couldn’t afford it,” he says.

“For the (FL) Supreme Court to question whether there was a medical malpractice crisis was absurd. They were either living under a rock in 2003 or just plain ignorant. I cannot fathom how they made that determination.”

Scott says tort caps “absolutely” work. “One needs only look at the states that have an effective cap in place, such as California and Texas, to see that malpractice rates are lower and the movement of physicians to those states,” he says.

The reasoning behind the malpractice cap and its effect on premiums is just common sense, he says.

“It provides a measure of predictability for the insurance companies,” he says. “They are the ones who have the authority on whether to settle a case or to take it to trial. If you have a predictable number as to what your non-economic damages are going to be, then you are able to settle claims at a lesser amount. If the sky’s the limit then your costs of settling the claim increase.”

Scott also predicts that malpractice premiums will increase in Florida now that the cap has been invalidated and more suits are filed.

“There isn’t any doubt about that. We have heard word from some of the insurance companies that it is an inevitable result,” he says. “They mandated back in 2003 when they passed the cap something called the ‘presumed factor’ by which the insurance companies were supposed to reduce their rates. If you take away the cap that provides some measure of stability for awards then I don’t see there is any way that rates wouldn’t go up.”

More Suits Anticipated
Levin concedes that lawsuit filings will likely increase with the caps invalidated, but not for “frivolous” reasons.

“Malpractice cases of all fields of personal injury are the most expensive to pursue. The average malpractice case for a catastrophic injury with multiple defendants usually costs about $200,000 in out-of-pocket expenses that the attorney fronts on behalf of the client,” he says.

“So, if that case is lost, the attorney has to pay for it. As a result, since the caps have been in place, attorneys won’t take the cases where somebody has been catastrophically injured because they know the risks are too high. That is why the filings are going down.”

“You hear a great rallying cry about ‘frivolous lawsuits.’ You hear that all the time. But insurance companies and corporations are not afraid of frivolous lawsuits. They are afraid of legitimate lawsuits.” Levin says.

It’s an easy thing to say that somebody has a frivolous lawsuit, but the people who are affected by the cap on damages are not people who have frivolous losses. They are people with serious losses,” Levin continues.

“Tort reform is always going to be one of those issues that is always on the agenda because of insurance companies. They would like to pay less money and if you can cap risk at $1 million as opposed to an unlimited amount, wouldn’t you do that? I understand why they are trying to do it. I just disagree with it.”

The original article can be found here.