For other versions of this document, see http://wikileaks.org/wiki/CRS-RL31692 ------------------------------------------------------------------------------ Order Code RL31692 CRS Report for Congress Received through the CRS Web Medical Malpractice Liability Reform: Legal Issues and Fifty-State Survey of Caps on Punitive Damages and Noneconomic Damages Updated January 18, 2006 Henry Cohen Legislative Attorney American Law Division Congressional Research Service ~ The Library of Congress Medical Malpractice Liability Reform: Legal Issues and Fifty-State Survey of Caps on Punitive Damages and Noneconomic Damages Summary Medical malpractice liability is governed by state law, but Congress has the power, under the Commerce Clause of the U.S. Constitution (Art. I, § 8, cl. 3), to regulate it. In the 108th Congress, the House passed virtually identical bills (H.R. 5 and H.R. 4280) that would have preempted state law with respect to certain aspects of medical malpractice lawsuits, and it seems likely that the 109th Congress will also consider medical malpractice reform proposals. This report does not examine the effects of medical malpractice litigation or medical malpractice liability reform on the health care system or on the cost of liability insurance premiums. In other words, it does not consider whether tort reform would be a good idea. Rather, it explains specific tort reform proposals that have been included in past legislation, and discusses their individual pros and cons from a legal perspective. These proposals include imposing caps on noneconomic damages and punitive damages, permitting defendants to be held liable for no more than their share of responsibility for a plaintiff's injuries, requiring that damage awards be reduced by amounts plaintiffs receive from collateral sources such as health insurance, limiting lawyers' contingent fees, creating a federal statute of limitations, and requiring that awards of future damages in some cases be paid periodically rather than in a lump sum. An appendix to this report presents a chart of current state caps on punitive damages and noneconomic damages. Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Tort of Medical Malpractice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Caps on Noneconomic Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Pro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Con . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Caps on Punitive Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Pro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Con . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Limiting Joint and Several Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Pro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Con . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Abolishing the Collateral Source Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Pro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Con . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Limiting Lawyers' Contingent Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Pro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Con . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Creating a Federal Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Periodic Payment of Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Pro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Con . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Appendix: Fifty State Survey of Caps on Punitive Damages and Noneconomic Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Medical Malpractice Liability Reform: Legal Issues and Fifty-State Survey of Caps on Punitive Damages and Noneconomic Damages Introduction Advocates of medical malpractice liability reform argue that current state tort law provides a costly and inefficient mechanism for resolving claims of health care liability and compensating injured patients. Increasing liability insurance premiums, they argue, are forcing doctors to curtail their medical practices and to engage in excessive "defensive medicine." As consequence, high liability insurance premiums diminish consumers' access to health care and raise health care costs. Physicians and their insurers claim that frivolous malpractice lawsuits and unreasonably large jury awards are responsible for the problem. They typically support tort reform legislation that would limit the amount juries may award to plaintiffs in malpractice cases. Opponents of medical malpractice reform have argued that "there is a very minimal relationship between health care costs and malpractice litigation," and that, "[a]s the Harvard Medical Practice Study reported in 1990, . . . about one in eight negligently injured patients file a malpractice claim. The study's authors concluded that the problem is not too many claims, but, if anything, too few claims.1 Lawyers and consumer groups argue that the insurance industry is to blame for the rapid rise in malpractice insurance premiums. These groups contend that bad investment choices, in addition to the underwriting cycle, have led to dwindling profits for insurers, who then try to recoup their losses through over-priced insurance products. Lawyers and consumer groups generally support efforts to reform the insurance industry in order to rein in premiums. This report does not consider the debate outlined in the prior two paragraphs, and does not examine the effects of medical malpractice litigation or medical malpractice liability reform on the health care system or on the cost of liability insurance premiums. In other words, it does not consider whether tort reform would be a good idea. Rather, it explains specific tort reform proposals that have been included in past legislation, and discusses their individual pros and cons from a legal perspective. These include imposing caps on noneconomic damages and punitive damages, permitting defendants to be held liable for no more than their share of responsibility for a plaintiff's injuries, requiring that damage awards be reduced by 1 Barry J. Nace, Changing medical malpractice liability will not reduce health care costs, National Law Journal (Oct. 11, 1993). CRS-2 amounts plaintiffs receive from collateral sources such as health insurance, limiting lawyers' contingent fees, creating a federal statute of limitations, and requiring that awards of future damages in some cases be paid periodically rather than in a lump sum. An appendix to this report presents a chart of current state caps on punitive damages and noneconomic damages. The Tort of Medical Malpractice Medical malpractice is a tort, which is a civil (as distinct from a criminal) wrong, other than a breach of contract, that causes injury for which the victim may sue to recover damages. Actions in tort derive from the common law, which means that the rules that govern them were developed by the courts of the fifty states, and no statute is necessary in order to bring a tort action. Statutes, however, can change the court-made rules that govern tort actions, and many states have enacted tort reform statutes, including medical malpractice reform statutes. Congress also has the power, under the Commerce Clause of the U.S. Constitution (Art. I, § 8, cl. 3), to regulate medical malpractice litigation. Medical malpractice liability arises when a health care professional engages in negligence or commits an intentional tort. Negligence has been defined as conduct "which falls below the standard established by law for the protection of others against unreasonable risk of harm."2 In most instances it arises from a failure to exercise due care, but a defendant may have carefully considered the possible consequences of his conduct and still be found to have imposed an unreasonable risk on others. "Negligence is conduct, and not a state of mind."3 The following is a "traditional description" of the standard of care to which doctors are held to avoid liability for medical malpractice: This legal duty requires that the physician undertaking the care of a patient possess and exercise that reasonable and ordinary degree of learning, skill, and care commonly possessed and exercised by reputable physicians practicing in the same locality.4 Today, however, "[t]he growing majority of jurisdictions employ some variation of the national standard of care."5 The skill, diligence, knowledge, means and methods [required] are not those "ordinarily" or "generally" or "customarily" exercised or applied, but those that are "reasonably" exercised or applied. Negligence cannot be excused on the 2 RESTATEMENT (SECOND) OF TORTS, § 282. 3 W. Page Keeton, Prosser and Keeton on Torts, § 31 (5th ed. 1984). 4 Quoted in David M. Harney, MEDICAL MALPRACTICE, § 21.2 (3d ed. 1993). 5 Nalder v. West Park Hospital, 254 F.3d 1168, 1176 (10th Cir. 2001). CRS-3 ground that others practice the same kind of negligence. Medicine is not an exact science and the proper practice cannot be gauged by a fixed rule.6 Medical malpractice liability, as noted, may arise from an intentional tort as well as from negligence. One commentator explained: [A]n important part of medical malpractice law in some jurisdictions -- failure [of the patient] to give consent -- falls into the category of intentional torts . . . . The reasoning is that because the doctor did not fully explain the risks that might arise from the contact, the doctor's contact with the patient was done without permission. In traditional liability law, such contact is a battery, which is an intentional tort.7 Caps on Noneconomic Damages Economic damages refer to monetary losses that result from an injury, such as medical expenses, lost wages, and rehabilitation costs. Noneconomic damages consist primarily of damages for pain and suffering. (Though punitive damages -- discussed in the next section of this report -- are not economic damages, they are typically viewed -- and capped or not capped -- separately from noneconomic damages.) Determining the amount of noneconomic damages is traditionally subject to broad discretion on the part of juries, which must equate two variables -- money and suffering -- that are essentially incommensurable. Judges, however, have the authority to reduce damage awards that they find excessive.8 Pro. Advocates of caps on damages for pain and suffering argue that a lack of caps guarantees inconsistency and unpredictability in the tort system, and forces insurers to counter this uncertainty by charging higher premiums. Disagreement over the amount of pain and suffering damages is a major obstacle to out-of-court settlement, thus increasing litigation and coercing insurers to overpay on settlements of smaller claims. Further complicating the problem is a tendency of juries to inflate pain and suffering awards to cover some or all of the plaintiff's attorney's fees. Con. Caps on noneconomic damages punish the worst afflicted, because the more pain and suffering that a plaintiff has endured, the more a cap deprives him of damages to which he would otherwise have been entitled. "By forever freezing compensation at today's levels, caps discriminate against a single class of Americans whose members are destined to suffer a lifetime of deprivation of dignity and 6 Id. 7 Victor E. Schwartz, Doctors' Delight, Attorneys' Dilemma, Legal Times, Health-Care Law Supplement (Feb. 28, 1994) at 30. 8 See Michael Higgins, Homogenized Damages: Judge suggests using statistical norms to determine whether pain and suffering awards are excessive, American Bar Association Journal (Sept. 1997) at 22. CRS-4 independence."9 The $250,000 cap in the bills that the House passed in the 108th Congress would have imposed was adopted by California in 1975 "at a time when pain-and-suffering awards rarely exceeded that amount."10 Twenty years later, in 1995, the median award for pain and suffering in malpractice cases reportedly was $300,000, and inflation has also taken a toll.11 "Instead of embracing arbitrary limits that are unfair if not inhumane -- and useless as a device for controlling insurance premiums -- we must continue to rely on our time-tested jury system for determining what's right."12 In any event, jury awards for noneconomic damages are not totally arbitrary, as they are often based on multiples of the award for economic damages. Caps on Punitive Damages In 1851, the Supreme Court wrote: It is a well-established principle of the common law, that in actions . . . for torts, a jury may inflict what are called exemplary, punitive, or vindictive damages upon a defendant, having in view the enormity of his offense rather than the measure of compensation to the plaintiff. We are aware that the propriety of this doctrine has been questioned by some writers.13 When may punitive damages be awarded? A treatise states: Something more than the mere commission of a tort is always required for punitive damages. There must be circumstances of aggravation or outrage, such as spite or "malice," or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that the conduct may be called wilful or wanton. There is general agreement that, because it lacks this element, mere negligence is not enough, even though it is so extreme as to be characterized as "gross," a term of ill-defined content, which occasionally, in a few jurisdictions, has been stretched to include the element of conscious indifference to consequences, and so to justify punitive damages.14 Among the restrictions that have been proposed with regard to punitive damages, besides that they be capped, are (1) that the circumstances in which they may be awarded be narrowed, (2) that plaintiffs be required to prove by "clear and 9 Peter Perlman, Don't Punish the Injured, American Bar Association Journal (May 1986) at 34. 10 Edward Felsenthal, Why a Medical Award Cap Remains Stuck at $250,000, Wall Street Journal (Nov. 1995). 11 Id. "Nationally, median jury awards for medical malpractice [not just for pain and suffering] doubled from 1995 to 2000, increasing from $500,000 to $1 million. Median out- of-court settlements also were significantly up during that time, rising 40 percent from $350,000 to $500,000." William R. Brody, Dispelling Malpractice Myths, Washington Post (Nov. 14, 2004). 12 Perlman, supra note 9. 13 Day v. Woodworth, 54 U.S. (13 How.) 363, 371 (1851). 14 W. Page Keeton, supra note 3, § 2. CRS-5 convincing" evidence that they are entitled to them (instead of having to prove it by a mere "preponderance of the evidence."), (3) that liability for punitive damages be determined in a separate proceeding from liability for compensatory damages,15 and (4) that punitive damages be paid in part to the government or to a fund that serves a public purpose instead of to the plaintiff.16 Pro. Critics charge that punitive damage awards in medical malpractice cases "are often unfair, arbitrary and unpredictable, and result in overkill. . . . One publication argues that reform is needed because there has been an outpouring of `the most outrageous punitive damage awards' in medical malpractice."17 "Even though punitive damage awards occur in a small percentage of cases, they can have a devastating impact on individual defendants and can impose big costs on the economy as a whole . . . ."18 Con. The American Bar Foundation found that punitive damage awards are not routine, and "are not, typically, given in amounts that boggle the mind."19 Punitive damages have been called "a necessary tool in the effective control of socially undesirable conduct. . . . Punitive damages must be allowed to fill the gaps the criminal law leaves open."20 Finally, plaintiffs often do not recover the amounts that juries award. This is because trial judges often reduce punitive damages awards that they find excessive, and a recent Supreme Court decision "makes it easier for appellate courts to reduce punitive damages."21 It is also because "[m]any plaintiffs settle for less than a jury's verdict, to eliminate delays and the uncertainty of appeal. Sometimes, even before a jury rules, a plaintiff has signed an agreement that limits how much money actually changes hands."22 15 In BMW of North American, Inc. v. Gore, 517 U.S. 559, 618 (1996), the Supreme Court listed state statutes that provide for this. 16 In BMW of North American, Inc. v. Gore, 517 U.S. 559, 616 (1996), the Supreme Court listed state statutes that provide for this. 17 Micahel Rustad and Thomas Koenig, Reconceptualizing Punitive Damages in Medical Malpractice: Targeting Amoral Corporations, Not "Moral Monsters," 47 Rutgers Law Review 975, 978, 980-981 (1995). 18 Mark Thompson, Applying the Brakes to Punitives -- But is There Anything to Slow Down?, American Bar Association Journal (Sept. 1997) at 68, 69. 19 Stephen Daniels, Punitive Damages: The Real Story, American Bar Association Journal (Aug. 1986) at 60, 63. 20 Lisa M. Broman, Punitive Damages: An Appeal for Deterrence, 61 Nebraska Law Review 651, 680 (1982). 21 Tania Zamorsky, Impact of High Court's Ruling In "Leatherman": Punitive awards reduced in four cases, National Law Journal (Aug. 1, 2001), citing Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424 (2001), which held that appellate courts should perform de novo review, rather than apply an abuse-of-discretion standard, when determining whether punitive damages are excessive in violation of the Eighth Amendment. 22 Joseph T. Hallinan, In Malpractice Trials, Juries Rarely Have the Last Word, Wall Street Journal (Nov. 30, 2004). CRS-6 Limiting Joint and Several Liability Joint and several liability is the common-law rule that, if more than one defendant is found liable for a plaintiff's injuries, then each defendant may be held 100 percent liable. With joint and several liability, the plaintiff may not recover more than once, but he may recover all his damages from fewer than all liable defendants, with any defendant who pays more than its share of the damages entitled to seek contribution from other liable defendants. Some states have eliminated joint and several liability, making each defendant liable only for its share of responsibility for the plaintiff's injury. Other states have adopted compromise positions, eliminating joint and several liability only for noneconomic damages (presumably with the view that it is more important for the plaintiff to recover all his economic damages than all his noneconomic damages), or eliminating joint and several liability only for defendants responsible for less than a specified percentage (e.g., 50 percent) of the plaintiff's harm (presumably with the view that it is especially unfair for such defendants to be held liable for up to 100 percent of the damages). Pro. Advocates of abolishing or limiting joint and several liability argue that it "frequently operates in a highly inequitable manner -- sometimes making defendants with only a small or even de minimis percentage of fault liable for 100% of plaintiff's damage. Accordingly, joint and several liability in the absence of concerted action has led to the inclusion of many `deep pocket' defendants such as governments, larger corporations, and insured entities whose involvement is only tangential and who probably would not be joined except for the existence of joint and several liability."23 Con. Advocates of joint and several liability cite the reason that the common law adopted it: it is preferable for a wrongdoer to pay more than its share of the damages than for an injured plaintiff to recover less than the full compensation to which he is entitled. Abolishing the Collateral Source Rule The collateral source rule is the common-law rule that allows an injured party to recover damages from the defendant even if he is also entitled to receive them from a third party (a "collateral source"), such as a health insurance company, an employer, or the government. To abolish the collateral source rule would be to allow or require courts to reduce damages by amounts a plaintiff receives or is entitled to receive from collateral sources. 23 Report of the Tort Policy Working Group on the Causes, Extent and Policy Implications of the Current Crisis in Insurance Availability and Affordability (Feb. 1986) at 64. CRS-7 Often a collateral source, such as a health insurer or the government, has a right of subrogation against the tortfeasor (the person responsible for the injury).24 This means that the collateral source takes over the injured party's right to sue the tortfeasor, for up to the amount the collateral source owes or has paid the injured party. Though the collateral source rule may enable the plaintiff to recover from both his insurer and the defendant, the plaintiff, if there is subrogation, must reimburse his insurer the amount it paid him. If the collateral source rule were eliminated, then the defendant would not have to pay the portion of damages covered by a collateral source, and the collateral source would apparently not be able through subrogation to recover the amount it paid the plaintiff. In the medical malpractice context, therefore, eliminating the collateral source rule would benefit liability insurers at the expense of health insurers. Some jurisdictions, however, have abolished the collateral source rule only in cases in which there is no right of subrogation. In such jurisdictions, where there is no right of subrogation, the collateral source would be unaffected by elimination of the collateral source rule (i.e., the health insurer would still not recover its money), and the defendant would benefit by not having to pay the plaintiff.25 Some proposals to abolish the collateral source rule have taken into account that the plaintiff may have paid insurance premiums for his collateral source benefit. Such proposals, instead of allowing a damage award to be reduced by the full amount of a collateral source benefit, allow it to be reduced by the full amount of a collateral source benefit minus the amount the plaintiff paid to secure that benefit. Some proposals would allow the defendant to introduce evidence of collateral source payments, but do not specify whether the jury must reduce economic damages awards by the amount of such payments. Eliminating the collateral source rule could also indirectly reduce noneconomic damages awards, because juries often set such awards as a multiple of economic damages. If the collateral source rule were abolished, then could the plaintiff disclose to the jury only his out-of-pocket expenses, or could he disclose his total economic damages before collateral source payments are deducted? If the former, then the plaintiff might receive a lesser award of noneconomic damages. Pro. Advocates of abolishing the collateral source rule object to the fact that it "permits the plaintiff to obtain double recovery for certain components of his damages award," unless the collateral source is subrogated to the plaintiff's claim 24 The Medical Care Recovery Act, 42 U.S.C. § 2651(a), provides: "In any case in which the United States is authorized or required by law to furnish or pay for hospital, medical, surgical, or dental care and treatment . . . to a person who is injured or suffers a disease . . . under circumstances creating a tort liability upon some third person . . . , the United States shall have a right to recover . . . from said third person, or that person's insurer, the reasonable value of the care and treatment . . . and shall as to this right be subrogated to any right or claim that the injured or diseased person . . . has against such third person to the extent of the reasonable value of the care and treatment . . . ." 25 Michael F. Flynn, Private Medical Insurance and the Collateral Source Rule: A Good Bet?, 22 University of Toledo Law Review 39, 49 (1990). CRS-8 against the defendants.26 Abolishing the collateral source rule will reduce damage awards without denying plaintiffs full recovery of their damages. Con. Advocates of the collateral source rule cite the reason that the common law adopted it: it is preferable for the victim than for the wrongdoer to profit from the victim's prudence (as in buying health insurance) or good fortune (in having some other collateral source available). One commentator has also noted that, when the collateral source is the government, and the benefit it provides are future services, such as physical therapy, there is no guarantee that it will provide such services for as long as they are needed, as government programs can be cut back.27 Limiting Lawyers' Contingent Fees A contingent fee is one in which a lawyer, instead of charging an hourly fee for his services, agrees, in exchange for representing a plaintiff in a tort suit, to accept a percentage of the recovery if the plaintiff wins or settles, but to receive nothing if the plaintiff loses. Payment is thus contingent upon there being a recovery. Plaintiffs agree to this arrangement in order to afford representation without having to pay anything out-of-pocket, and lawyers agree to it because the percentage they receive -- usually from 33a to 40 percent -- generally amounts to more than an hourly fee would. Twenty-five states reportedly regulate contingent fees in medical malpractice cases in one or more of the following ways: "(1) establishment of a sliding scale for the attorney fees; (2) establishment of a maximum percentage of the award that may be paid for attorney fees; and (3) provision for court review of the reasonableness of the attorney fees."28 Legislation to limit contingency fees might consider specifying whether plaintiffs' attorneys would be allowed to "add costs, including expert-witness fees, travel, and photocopying on top of the cap[.] Or must costs be recouped from the lawyer's . . . recovery? In medical malpractice cases, where costs can skyrocket, the difference is significant."29 Pro. Advocates of limiting contingent fees argue that such fees cause juries to inflate verdicts, result in windfalls for lawyers, and prompt lawyers to file frivolous 26 Report of the Tort Policy Working Group, supra note 23. 27 Barry J. Nace and Virginia C. Nelson, Plaintiffs' Lawyers Have Already Seen Many of the Proposed Tort Reforms in the States, and Find Them Disastrous for Clients, National Law Journal (Jan. 17, 1994) at 29. 28 American Medical Association, AMA Tort Reform Compendium (1989) at 19, 132-134; see also, Office of Technology Assessment, Impact of Legal Reforms on Medical Malpractice Costs (1993) at 93. A more recent chart continues to list 25 states with contingent-fee limitations in medical malpractice cases. National Conference of State Legislatures, State Medical Liability Laws Table (2002). 29 Schwartz, supra note 7, at 30. CRS-9 suits in the hope of settling. They also argue that, where there is no dispute as to liability, but only as to damages, there is no contingency and therefore no justification for contingent fees. One study proposed that, if a defendant makes a prompt settlement offer, then counsel fees be "limited to hourly rate charges and capped at 10% of the first $100,000 of the offer and 5% of any greater amounts. . . . When plaintiffs reject defendants' early offers, contingency fees may only be charged against net recoveries in excess of such offers."30 Con. Opponents of limiting contingent fees argue that such fees enable injured persons, faced with medical bills and lost wages, to finance lawsuits that they otherwise could not afford -- especially if their injury has disabled them from working. They argue that lawyers are unlikely to file frivolous lawsuits if they stand to recover nothing if they lose, and that studies have shown that contingent fees do not encourage frivolous lawsuits.31 Finally, they note, "[a]n hourly fee arrangement [such as defendants' lawyers use] can encourage delay, inefficiency, and unnecessary action," whereas "[a] contingent fee is an added inducement for a lawyer to be efficient and expeditious."32 Creating a Federal Statute of Limitations The statute of limitations -- the period within which a lawsuit must be filed -- for medical malpractice suits under state law is typically two or three years, starting on the date of injury. Sometimes, however, the symptoms of an injury do not appear immediately, or even for years after, malpractice occurs. Many states therefore have adopted a "discovery" rule, under which the statute of limitations starts to run only when the plaintiff discovers, or in the exercise of reasonable diligence, should have discovered, his injury -- or, sometimes, his injury and its cause. Plaintiffs would favor allowing a statute of limitations to run only upon discovery of an injury and its cause because it may take additional time after symptoms become manifest to discover that an injury was caused by medical malpractice. Periodic Payment of Damages Traditionally, damages are paid in a lump sum, even if they are for future medical care or future lost wages. In recent years, however, "attorneys for both parties in damages actions have occasionally foregone lump-sum settlements in favor of structured settlements, which give the plaintiff a steady series of payments over a period of time through the purchase of an annuity or through self-funding by an 30 The Manhattan Institute, Rethinking Contingency Fees (1994) at 28, 29. 31 See studies cited in Association of Trial Lawyers of American, Keys to the Courthouse: Quick Facts on the Contingent Fee System (1994) at 4, 5. 32 Id. at 6. CRS-10 institutional defendant."33 "There are many forms of periodic payment statutes throughout the United States. Many of these involve mind boggling calculations, creating barriers for those who use the periodic payment process."34 Proposals concerning the periodic payment of damages have been applied to future damages as well as to all damages.35 An issue that may arise in connection with awards of future damages is whether such awards should be converted to present value. Not to require such conversion "could be a very major change, significantly reducing awards, if it is intended to allow a defendant to pay, for example, a $1 million award over a 10-year period at $100,000 a year. On the other hand, if it requires the jury award to be converted into present value terms -- an annuity with a present value of $1 million -- the reform doesn't mean that much; as a practical matter, the defendant would be paying the same amount as before."36 The defendant, that is, would have to spend $1 million for an annuity that, as it earned interest over the years of its distribution, would yield the plaintiff more than $1 million. Had the defendant paid the plaintiff a lump sum of $1 million, then the plaintiff could have purchased that same annuity. The Uniform Periodic Payment of Judgments Act addresses other issues that Congress might consider if it addresses the matter of periodic payment of future damages. These include accounting for inflation and for the effect of the plaintiff's death on unpaid amounts. Section 5(a) of the uniform act provides that, in a trial, "evidence of future changes in the purchasing power of the dollar is admissible on the issue of future damages." Section 13 provides that "liability to a claimant for periodic payments not yet due for medical expenses terminates upon the claimant's death." Damages for other economic losses, however, except in actions for wrongful death, must be paid to the plaintiff's estate. The House-passed 108th Congress legislation provided that "the court may be guided by the Uniform Periodic Payment of Judgments Act promulgated by the National Conference of Commissioners on Uniform State Laws."37 Pro. "Both defendants and plaintiffs are often benefited by such arrangements: the defendant need not immediately pay out a large sum of money, since the cost of the annuity or other method of payment is less than a conventional lump-sum settlement; and the plaintiff is prevented from dissipating a recovery and is provided a secure, tax-free income for a long period of time without having to assume the costs 33 Annotation, Propriety and Effect of "Structured Settlements" Whereby Damages are Paid in Installments Over a Period of Time, and Attorneys' Fees Arrangements in Relation Thereto, 31 ALR4th 95, 96. 34 Paul J. Lesti, STRUCTURED SETTLEMENTS (2d ed., 1993) at § 21.5. 35 Compare H.R. 5 and H.R. 4280, 108th Congress, with H.R. 3600 and S. 1757, 103d Congress. Regarding the latter, see CRS Report 94-219 A, Medical Malpractice Provisions of the President's Proposed Health Security Act: A Legal Analysis (Mar. 7, 1994). (Out of Print. For copies, contact author at 202-707-7892.) 36 See Schwartz, supra note 7 at 30. 37 This uniform act was promulgated in 1990; it was preceded by the 1980 Model Periodic Payment of Judgments Act. Both appear in volume 14 of the UNIFORM LAWS ANNOTATED. CRS-11 and risks of managing an investment portfolio ."38 "Periodic payment of malpractice awards is nothing more than what lawyers have been doing for years in structured settlements. It is workable and often the only means of providing full compensation for an injured claimant when resources are otherwise unavailable."39 Con. If periodic payments will in fact benefit plaintiffs, then they will agree to them, as they sometimes do, without legislation. Some plaintiffs, however, may prefer to invest their awards themselves and not risk the insolvency of the defendant or the company from which the defendant purchases an annuity. 38 Annotation, supra note 33, at 96. 39 A. Blackwell Stieglitz, Defense Counsel Will Find the President's Medical Malpractice Proposals So Benign as to be Meaningless, National Law Journal (Jan. 17, 1994) at 27. CRS-12 Appendix: Fifty State Survey of Caps on Punitive Damages and Noneconomic Damages The following chart summarizes state laws that impose caps on punitive damages and noneconomic damages in medical malpractice cases. An empty box in the chart indicates that the state apparently imposes no cap in medical malpractice suits, either because the state constitution prohibits caps or because the state legislature has chosen not to enact a cap. We quote (in italics) some, but not necessarily all, state constitutional provisions that prohibit caps. The caps listed in the chart, as well as the entry "punitive damages prohibited," do not necessarily apply to tort actions other than for medical malpractice, though in many cases they do. The term "economic damages" refers to past and future monetary expenses of an injured party, such as medical bills, rehabilitation expenses, and lost wages. "Noneconomic damages" refers primarily to damages for pain and suffering. Economic and noneconomic damages are both compensatory damages; i.e., they are intended to compensate the injured party. Punitive damages (also called exemplary damages), by contrast, are awarded not to compensate plaintiffs but to punish and deter particularly egregious conduct on the part of defendants -- generally meaning reckless disregard for the safety of others, and more than negligence or even gross negligence. Punitive damages are noneconomic by nature, but state statutes that impose caps on punitive damages usually treat them separately from compensatory noneconomic damages. The dollar amount in the right-hand column refers to the cap on compensatory noneconomic damages, except that "total cap" means a cap on all damages -- economic, noneconomic, and punitive damages -- combined. Caps that a state's highest court have declared to violate the state's constitution are not necessarily noted. CRS-13 STATE PUNITIVE DAMAGES NONECONOMIC DAMAGES Alabama § 6-11-21. The greater of three § 6-5-544, which imposes a times compensatory damages or $400,000 cap on "noneconomic $500,000 ($1.5 million if losses, including punitive physical injury), with damages," held to violate state exceptions. Held to violate constitution. Moore v. Mobile state constitution. Henderson Infirmary Ass'n, 592 So.2d 156 ex rel. Hartsfield v. Alabama (Ala. 1991). Power Co., 627 So.2d 878 (Ala. 1993). § 6-5-547. $1,000,000 total cap in wrongful death actions against a health care provider held to violate state constitution. Smith v. Schulte, 671 So.2d 1334 (Ala. 1995), cert. denied, 517 U.S. 1220 (1996). Alaska § 09.17.020. Greater of 3 times § 09.17.010. "$400,000 or the compensatory damages or injured person's life expectancy in $500,000, except if defendant years multiplied by $8,000, was motivated by financial gain whichever is greater," but and actually knew the adverse "$1,000,000 or the person's life consequences, then the greatest expectancy in years multiplied by of 4 times compensatory $25,000, whichever is greater, damages, 4 times financial gain, when the damages are awarded for or $7,000,000. severe permanent physical impair- ment or severe disfigurement." Arizona Arizona Constitution, Art. 2, the amount of damages to be § 31, provides: "No law shall recovered for causing the death or be enacted in this State limiting injury of any person." Arkansas § 16-55-208. The greater of Arkansas Constitution, Art. 5, $250,000 or three times § 32, provides "[N]o law shall be compensatory damages, not to enacted limiting the amount to be exceed $1,000,000, to be recovered for injuries resulting in adjusted as of 1/1/06 and at death or for injuries to persons or three-year intervals thereafter, property . . . ." (No cases found in accordance with the CPI. No on whether this provision affects cap if defendant intentionally the punitive damages cap.) caused injury or damage. California Civil Code § 3333.2. $250,000. Colorado § 13-21-102. The amount of §§ 13-21-102.5, 13-64-302. actual damages awarded, but 3 $250,000 noneconomic cap, but times that amount if the $500,000 cap if court finds defendant continues to act in a justification for more than willful and wanton manner $250,000. Both caps adjusted for during the pendancy of the case. inflation. $1,000,000 total cap in suits against health care providers. CRS-14 STATE PUNITIVE DAMAGES NONECONOMIC DAMAGES Connecticut Delaware District of Columbia Florida § 768.73(1). The greater of 3 § 766.118(2). $500,000, except times compensatory damages or $1 million cap on all practitioners $500,000, except, if wrongful in the aggregate if permanent conduct was motivated solely vegetative state or death, or if, by unreasonable financial gain, because of special circumstances, and unreasonably dangerous noneconomic harm is particularly nature of the conduct and high severe and injury was catastrophic. likelihood of injury were For non-practitioners, above caps known, then the greater of 4 are $750,000 and $1.5 million, times compensatory damages or respectively. For emergency $2 million. No cap where services, caps are $150,000 for specific intent to harm plaintiff. practitioners, $750,000 for non- practitioners, with maximum § 766.207(7)(d). Punitive damages recoverable by all damages prohibited in claimants $300,000 and $1.5 voluntary binding arbitration. million, respectively. Georgia § 51-12-5.1. $250,000. Hawaii § 663-8.7. $375,000 (cap does not apply to intentional torts). Idaho § 6-1604, as amended by 2003 § 6-1603. $250,000 for actions Session Laws, Ch.122. For accruing after 7/1/03, subject to actions accruing after 7/1/03, increase or decrease in accordance the greater of $250,000 or three with the average annual wage. times compensatory damages. Illinois 735 ILCS 5/2-1115. "Punitive None. (Cap in 735 ILCS 5/2- damages are not recoverable in 1115.1 held unconstitutional in healing art and legal Best v. Taylor Machine Works, malpractice cases." 689 N.E.2d 1057 (Ill. 1997)). Indiana § 34-51-3-4. Greater of 3 times § 34-18-14-3. $1,250,000. For compensatory damages or "qualified" health care provider, $50,000. $250,000 total cap. Iowa Kansas § 60-3702(e), (f). The lesser of § 60-19a02(b). $250,000 "by each the defendant's annual gross party from all defendants." income or $5,000,000, but if the profitability of the mis- conduct exceeds such amount, the cap is 1.5 times the profit. CRS-15 STATE PUNITIVE DAMAGES NONECONOMIC DAMAGES Kentucky Kentucky Constitution, § 54, recovered for injuries resulting in provides: "The General death, or for injuries to person or Assembly shall have no power property." to limit the amount to be Louisiana Punitive damages prohibited at § 40:1299.42. $500,000 total cap, common law. exclusive of "future medical care and related benefits" (as defined). "Qualified" health care provider: $100,000 total cap per patient. Maine T. 18-A, § 2-804(b). $75,000 T. 18-A, § 2-804(b). "$400,000 in wrongful death actions. for the loss of comfort, society and companionship of the deceased, including any damages for emotional distress," in wrongful death actions. Maryland Courts and Judicial Proceedings § 11-108. $500,000 if cause of action arises on or after Oct. 1, 1994, increased by $15,000 on Oct. 1 of each succeeding year for causes of action that arise on or after the date of the increase. Massachusetts Ch. 229, § 2. In wrongful death Ch. 231, § 60H. $500,000, unless cases, not less than $5,000 death resulted or "special where punitive damages are circumstances" are found. Ch. appropriate. Punitive damages 231, § 85K. $20,000 total cap if otherwise prohibited at charitable institution. common law. Michigan Exemplary damages "are § 600.1483. $280,000, awardable where the defendant "recoverable by all plaintiffs, commits a voluntary act which resulting from the negligence of inspires feelings of humiliation, all defendants," but $500,000 if a outrage, and indignity. . . . The serious injury enumerated in the purpose of exemplary damages statute occurred. is not to punish the defendant, but to render the plaintiff whole. When compensatory damages can make the injured party whole, exemplary damages must not be awarded." Jackson Printing Co., Inc. v. Mitan, 425 N.W.2d 791 (Mich. 1988). Minnesota CRS-16 STATE PUNITIVE DAMAGES NONECONOMIC DAMAGES Mississippi § 11-1-65. $20 million if § 11-1-60. $500,000 for claims defendant's net worth exceeds filed before 7/1/2011; $750,000 $1 billion; $15 million if it from 7/1/2011 - 6/30/2017; $1 exceeds $750 million but is not million from 7/1/2017. Cap does more than $1 billion; $10 not apply if the judge determines million if it exceeds $500 that a jury may impose punitive million but is not more than damages, and does not limit $750 million; $7½ million if it damages for disfigurement. exceeds $100 million but is not more than $500 million; $5 million if it exceeds $50 million but is not more than $100 million; 4% of defen- dant's net worth if defendant's net worth is $50 million or less. Missouri § 538.210. $350,000 per defendant, subject to increase or decrease each January 1 to reflect inflation or deflation. Montana § 25-9-411. $250,000. Nebraska Punitive damages prohibited at § 44-2825. $1,750,000. common law. Nevada § 42.005. Three times § 41A.031. $350,000, but a higher compensatory damages if award may be made if "gross mal- compensatory damages are practice" or if "justified because of $100,000 or more; $300,000 if special circumstances." If they are less. defendant has insurance of not less than $1 million per occurrence and $3 million in the aggregate, then noneconomic damages may not exceed the amount of the policy after subtracting the economic damages awarded. New § 507:16. "No punitive § 507-C:7. $250,000 cap held Hampshire damages shall be awarded in unconstitutional. Carson v. any action, unless otherwise Maurer, 424 A.2d 825 (N.H. provided by statute." No 1980). statute provides for punitive damages in medical malpractice actions. New Jersey 2A:15-5.14. Greater of 5 times compensatory damages or $350,000. CRS-17 STATE PUNITIVE DAMAGES NONECONOMIC DAMAGES New Mexico § 41-5-6. $600,000 total cap, "[e]xcept for punitive damages and medical care and related benefits," which are not subject to the cap. "Monetary damages shall not be awarded for future medical expenses in malpractice claims." New York North Carolina § 1D-25. Greater of 3 times the amount of compensatory damages or $250,000. North Dakota § 32-03.2-11(4). Greater of § 32-42-02. $500,000. two times compensatory damages or $250,000. Ohio § 2323.43, as amended by 2001 Ohio S.B. 281 (approved by the Governor on Jan. 10, 2003). The greater of $250,000 or three times plaintiff's economic loss, to a maximum of $350,000 for each plaintiff or a maximum of $500,000 for each occurrence. But, if specified serious injuries occur, cap is $500,000 for each plaintiff or $1 million for each occurrence. Oklahoma T. 23, § 9.1. Where reckless T. 63, § 1-1708.1F (added by Ch. disregard, greater of $100,000 390, § 6 (2003)). $300,000 per or actual damages awarded. action regardless of the number of Where intentional and with defendants, but cap applies only in malice, greatest of $500,000, cases involving "[p]regnancy or twice actual damages awarded, labor and delivery, including the or financial benefit derived by immediate post-partum period," defendant. If court finds and "[e]mergency care in the beyond a reasonable doubt that emergency room of a hospital or defendant engaged in conduct follow-up to" such care. Cap does life-threatening to humans, then not apply if judge finds clear and no cap. convincing evidence of negli- gence, or in wrongful death action. Cap terminates July 1, 2008. CRS-18 STATE PUNITIVE DAMAGES NONECONOMIC DAMAGES Oregon § 31.740 (formerly § 18.550). § 31.710 (formerly § 18.560). Prohibited against specified $500,000 cap held to violate health practitioners. Oregon Constitution, Art. VII, § 3, which provides that "no fact tried by a jury shall be otherwise re- examined." But the cap apparently applies in wrongful death actions because there is no right to a jury trial for them. Lakin v. Senko Products, Inc., 987 P.2d 463 (Ore. 1999). Pennsylvania 40 P.S. § 1303.505(d). "Except Pennsylvania Constitution, Art. 3, in cases alleging intentional § 18, provides: "[I]n no other misconduct, punitive damages cases [than those involving against an individual physician employees] shall the General shall not exceed 200% of the Assembly limit the amount to be compensatory damages recovered for injuries resulting in awarded. Punitive damages, death, or for injuries to persons or when awarded, shall not less property . . . ." (Art. 3, § 18 is than $100,000 unless a lower titled "Compensation laws verdict amount is returned by allowed to General Assembly," the trier of fact." which may explain the existence of a cap on punitive damages.) 40 P.S. § 1303.712(c)(2)(i) caps total liability of the Medical Professional Liability Catastrophe Loss Fund at "$500,000 for each occurrence and $1,500,000 per annual aggregate." Rhode Island South Carolina South Dakota § 21-3-11. $500,000 "total general [noneconomic] damages"; "no limitation on the amount of special [economic] damages." Tennessee CRS-19 STATE PUNITIVE DAMAGES NONECONOMIC DAMAGES Texas Civil Practice and Remedies Civil Practice and Remedies § 41.008, as amended by 2003 § 74.301 et seq. (2003 Tex. Gen. Tex. Gen. Laws 204, effective Laws 204), effective 9/1/03. 9/1/03. Greater of (1) two $250,000 per claimant against a times the amount of economic physician or health care provider damages plus the amount of and $250,000 per claimant against noneconomic damages up to a health care institution. If more $750,000; or (2) $ 200,000. than one health care institution is liable, cap against them all is $500,000 per claimant. In wrongful death or survival action against a physician or health care provider, cap on total damages (including punitive damages) is $500,000 per claimant, subject to increase or decrease in accordance with consumer price index. Utah § 78-14-7.1. $400,000, adjusted for inflation. Vermont Virginia § 8.01-38.1. $350,000. § 8.01-581.15. $1.5 million total cap, to increase by $50,000 every July 1 from 2000 through 2006, and by $75,000 on July 1, 2007 and 2008, with no subsequent increases. Washington Punitive damages prohibited at § 4.56.250. Cap derived from common law. formula held unconstitutional in Sofie v. Fibreboard Corp., 771 P.2d 711 (Wash. 1989). West Virginia § 55-7B-8 (as amended in 2003). $250,000 per occurrence, regardless of the number of plaintiffs or defendants, except cap is $500,000 if death or permanent serious injury. Annual increases based on consumer price index. Caps apply only if defendant has insurance of at least $1 million per occurrence. CRS-20 STATE PUNITIVE DAMAGES NONECONOMIC DAMAGES Wisconsin §§ 655.017, 893.55(4), 895.04(4). $350,000 cap held unconstitutional in Ferdon ex rel. Petrucelli v. Wisconsin Patients Compensation Fund, 2005 WL 1639450 (Wis. July 14, 2005). Wyoming Wyoming Constitution, Art. 10, amount of damages to be § 4, provides: "No law shall be recovered for causing the injury enacted limiting the or death of any person." ------------------------------------------------------------------------------ For other versions of this document, see http://wikileaks.org/wiki/CRS-RL31692