Sound and Fury Signifying Nothing?

A Somewhat Critical Review of the New Medical Malpractice Statute

Bonnie Bulla, Esq., Daniel E. Curriden, Esq.*

The readers of this publication do not need to be told that the lack of affordable professional liability insurance in Nevada constitutes a crisis. The media have been full of dueling full page ads and press releases featuring injured patients and fleeing physicians. In the recent special session, our state legislature addressed this crisis by passing Assembly Bill 1. While a step in the right direction, the legislature's remedy will probably prove inadequate to relieve the crisis.

To offer affordable coverage, an insurer needs a measure of predictability. Only when risk can be reliably predicted, can the insurer gauge how much it will need to charge its customers to provide enough income to pay claims and expenses, and provide a reasonable return to investors. In the last five years, the severity of medical malpractice jury awards has climbed sharply, both nationally and in Clark County. Predictably, insurers have reacted by raising rates and becoming a great deal more selective about which doctors they will cover. The St. Paul, the nation's largest insurer of physicians, has concluded that it can no longer profitably offer professional liability insurance to doctors at rates they can afford to pay, abandoning the market entirely.

If the goal of a tort reform measure is to increase the availability and affordability of coverage, it must restore some measure of predictability and reduce the risk faced by insurance carriers. This article will address some of the ways in which Assembly Bill 1, though a start, will most likely fail to do this. Other aspects of Assembly Bill 1, including its extensive new requirements for the reporting of adverse outcomes and its protections for doctors involved in the care of trauma patients, are not addressed, though they are certainly worthy of further study.

When is a Cap Not a Lid?

The portion of AB 1 which has received the most attention places a cap on non-economic damages awardable in a malpractice action. This would seem to give insurers what they need to lower your rates. However, the statute as presently enacted makes application of the cap so unpredictable that it is not at all clear whether there will be a material change in the risk to insurers and doctors. This is because the statute allows the cap to be "stacked" where there are multiple plaintiffs or defendants and because the exceptions to the cap are so broad that it will be impossible to know whether or not the cap applies until after trial. Finally, the statute is written so that any salutary effect the cap does have will not be felt for several years to come.

Section 5(1) of the bill states that "in an action for damages for medical malpractice or dental malpractice, the non-economic damages awarded to each plaintiff from each defendant must not exceed $350,000." (Emphasis added) The more plaintiffs there are, the larger the cap, because each plaintiff gets his or her own cap. Since few of us are truly alone in life, most claims with serious adverse outcomes are going to come with enough plaintiffs to multiply the $350,000 cap to two or three times that amount. Moreover, the cap can also be stacked with multiple defendants.

Section 5(3) of the bill does limit this somewhat by providing that so long as the doctor has coverage limits of $1,000,000 per claim and $3,000,000 aggregate, his or her total liability to all plaintiffs may not exceed his or her coverage limits. However, this is no great help to the insurer. So long as there are two or more plaintiffs, it will still pay out most or all of its policy if the doctor is liable, just like it does now.1 More importantly, this limit does not apply to economic damages. If economic damages, which include past lost income, future loss of earning capacity, and future cost of care as well as medical bills, are more than $1,000,000, as they often are in the highest exposure cases, the doctor's personal assets are still exposed to an excess judgment. This means that the insurer has to settle if possible in order to avoid that exposure, or risk paying a judgment far in excess of its limits.

Section 5(2) states two specific exceptions to the cap which further erode the predictability necessary to bring about a decrease in rates or increase in availability. The cap will not apply to "a case in which the conduct of the defendant is determined to constitute gross malpractice" or where after a verdict by a jury or a finding of damages in a bench trial, "exceptional circumstances" are found to justify an award of non-economic damages in excess of $350,000. These exceptions are likely to make it impossible to tell if a cap even applies until after a jury has heard the case.

With respect to the "gross malpractice" exception, predictability will be sacrificed to the great liberality with which Nevada courts allow claims to go to the jury. Under our law, any claim supported by even the smallest amount of arguable evidence will not be dismissed, but must be presented to a jury. In practice, courts are reluctant to dismiss any but the most harebrained legal or factual theory. "Gross malpractice" is defined as a "failure to exercise the required degree of care, skill, or knowledge that amounts to: (a) a conscious indifference to the consequences which may result from the gross malpractice; and (b) a disregard for and indifference to the safety and welfare of the patient." A creative plaintiff's attorney can argue that nearly any situation where clinical judgment is questioned constitutes a doctor's conscious indifference. Since this sort of argument is very effective in getting a jury whipped up enough to award big dollars, it already shows up in many cases. It would not be surprising if nearly every complaint filed under the new statute has a count of gross malpractice. Where such an accusation is made, it will be rare that it is dismissed before going to a jury.

Likewise, the "exceptional circumstances" exclusion takes away the predictability that a cap might otherwise have brought. The statute is utterly silent as to what sort of exceptional circumstances might justify a departure from the cap. To those involved, every case is exceptional–without further guidance as to which exceptional circumstances are worthy of negating the cap, trial lawyers are free to argue, and judges are free to agree, that nearly every claim is exceptional. One is reminded of Garrison Keillor's village of Lake Woebegone, where all the children are above average. It is unlikely that the state Supreme Court will do much to change this outcome. The Court has generally been reluctant to write specific limits into a statute when the legislature has not chosen to do so; where a statute gives great leeway to the trial judge, the Court almost never second guesses or overturns the judge's exercise of discretion. No one will ever know if a case has exceptional circumstances until after a verdict, when the trial judge has nearly unlimited discretion to decide that it does.

Finally, the damage caps set out in AB 1 come with a subtle but important clause which will delay their implementation, and any reduction in risk to insurers, for years. The effective date of the new statute is October 1, 2002. However, the cap does not apply to claims filed after the effective date. Instead, it applies to claims accruing after October 1, 2002. "Accrue" is a legal term of art: a claim is said to accrue when all of the elements necessary to make a claim are present. In the medical malpractice context, a claim accrues at the time a breach of the standard of care causes injury to a patient. If malpractice occurs and causes injury on September 30, 2002, the resulting lawsuit will not be subject to the cap even though it may not be filed for another two to three years. Under this implementation provision, any positive effect the cap might have will not show up for several years.

In for Dimes or Dollars?: AB 1 and Joint and Several Liability

The Legislature made an effort to revise the archaic doctrine of joint and several liability that today is only followed in a minority of jurisdictions. This doctrine can best be explained by the old adage, "in for a dime, in for a dollar." In other words, each defendant who is found liable is responsible for the full amount any verdict awarded, regardless of the extent of the defendant's culpability. Traditionally, the plaintiff decides from whom to collect the verdict. Indeed, plaintiff's counsel may deliberately choose not to sue all of the possible tortfeasors contributing to a claim, but only proceed against those where the plaintiff's case is the strongest. The problem, of course, arises where a co-defendant is rendered financially incapacitated (i.e., without insurance and/or bankrupt), so that the other defendants must pay the entire verdict, even if they are far less culpable. The stated purpose of the joint and several liability doctrine is to shift the risk of insolvency of a joint tortfeasor from the innocent plaintiff to the other joint tortfeasor. This is also one rationale of why comparative fault by the plaintiff typically destroys joint and several liability, i.e., the Plaintiff is no longer an "innocent" participant.

Unfortunately, the legislature only saw fit to repeal this archaic doctrine as it applies to non-economic damages, i.e., pain and suffering, inconvenience, physical impairment, and disfigurement, as defined by statute. For economic damages, joint and several liability remains in place. For example, take a case where Defendant "A" is found to be 90% liable and Defendant "B" is 10 % liable. Assume that the jury awards non-economic damages in the total amount of $350,000 (to be paid by both defendants). So, Defendant "A" owes $315,000 (90% of $350,000) and Defendant "B" owes $35,000 (10% of $350,000). But also suppose that the jury awards economic loss of 1.5 million dollars ($1,500,000) for a total jury verdict of 1.85 million dollars ($1,850,000). Defendant "A"'s liability is capped at $1 million ($1,000,000). Defendant "B" must then pay the balance of the award, $850,000, even though this far exceeds her equitable share of the liability. This is because per the statute, nothing limits the Plaintiff's ability to collect the total economic damages awarded from any defendant, even if the amount collected exceeds the defendant's one million dollar policy of insurance.

The problem with the new legislation, therefore, is that although it may destroy joint and several liability for non-economic damages, it may also provide leverage to plaintiff's counsel in settling cases where there are extensive economic damages. Defendant physicians who are arguably less culpable than other defendants but who are involved in cases where there are significant economic damages, remain at risk for bearing greater than their proportionate share of the jury verdict and will be forced to settle cases where they bear minimal culpability.

This risk can be avoided in cases where we can argue that the plaintiff was partially (the legal term is comparatively) at fault for his or her injuries. Unfortunately, that defense is not often available in malpractice cases, especially those involving surgical mishaps: it's hard to argue a anesthetized patient contributed to his or her injuries unless there is clear failure to follow medical advice. It's also difficult to argue that a patient contributed to an injury by failure to live a healthy life: even though a patient's coronary artery disease might have resulted from years of Marlboro's and Big Macs, failure to diagnose the problem and provide whatever help medical science might have offered is still the doctor's fault if the failure occurred because the standard of care was breached.

Stop Me Before I File Again: AB 1's Impact on the Statute of Limitations

In cases filed before October 1, 2002, the current statute of limitations applies. The current statute permits a claim to be filed two years from the date that the plaintiff knew or should have known he had a legal injury, but no more than four years from the date of the event. Basically, the statute of limitations is always construed in favor of the plaintiff. A legal injury does not merely include knowledge that something wrong occurred, but also knowledge that the wrong is related to a breach of the standard of care. Arguably, this knowledge does not occur until the plaintiff has retained an expert to support his claim. The four-year statute (a statute of repose) is typically not meaningful. There are few cases filed beyond two years from the date the plaintiff knew or should have known of an injury. The new legislation substitutes a two-year/three-year statute, which shortens the statute of repose by one year. It is difficult to ascertain whether or not this will have a significant impact on reducing the number of cases filed, since again, most plaintiffs follow the two-year rule. Overall, shortening the statute of repose by one year will probably not have a significant impact on either the number of cases filed or the ability to successfully argue a motion to dismiss based on statute of limitations, since judges are highly reluctant to grant these motions.

The Screening Panel: Is the Head Dead Yet?

AB1 administers capital punishment to the Medical Dental Screening Panel. Unfortunately, the mode of execution chosen by the legislature is akin to being hung, drawn, and quartered: it involves a good deal of mess while unduly prolonging the subject's demise.

If the Medical Dental Screening Panel has not rendered a finding on a case before October 1, 2002, it is unlikely that case will receive a Panel finding. Plaintiffs' attorneys are permitted to opt out of the Panel after October 1, 2002 and before December 1, 2002, if they have not received a Panel finding by October 1, 2002. If a plaintiff's attorney wishes to stay in the Panel, the attorney must provide written notification to the Department of Insurance of this desire. If the plaintiff has not opted in by December 1, then her or she is automatically opted out of the panel process. This is likely to result in a large influx of new medical malpractice cases in the Clark County District Court and some resulting delay in moving these cases towards resolution.

If the plaintiff's attorney elects to remain in the Panel, then the statute of limitations is tolled until thirty days after the Panel finding, which is the current law. If the plaintiff's attorney elects to opt out of the Panel process, then the statute of limitations is tolled until December 1, 2002, after which time the statute commences to run. Most plaintiffs are likely to opt out of the panel procedure unless the case is a "slam dunk", where a finding of malpractice is very likely. However, for all current cases pending in the Department of Insurance, where defendants have not filed an answer, it is anticipated that the plaintiffs' attorneys will not opt out of the Panel process until they receive defendants' answers for informational purposes. It is anticipated that the majority of the Plaintiffs bar will choose to opt out of the Panel and proceed directly to court, primarily to expedite their cases.

So, Where do you Stand?

Assembly Bill 1 does a lot of things: it will change the way malpractice cases are litigated in this state and impose extensive reporting requirements on doctors and hospitals. Unfortunately, what it probably won't do is result in any near-term relief for doctors squeezed by high insurance premiums. If such relief is essential, more must be done to create a legal environment which allows carriers to predict their risk and insure against it at rates doctors can afford to pay. At a minimum, the cap on non-economic damages should have fewer loopholes and the abolition of joint and several liability should be extended to economic damages. We would also like to see the collateral source rule further modified. Under the rule as now applied, a jury is not entitled to know if the plaintiff's medical care providers have taken substantial discounts under managed care agreements, leading to unfairly inflated awards. As these measures would also limit recovery by innocent victims of real malpractice, some consideration must be given to the difficult questions of increasing disclosure of complication rates and malpractice claims and limiting contingency fees so as to insure a fair return to trial lawyers while maximizing recovery by those injured by malpractice.