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Law Practice,
Ethics/Professional Responsibility,
Civil Litigation

Nov. 18, 2021

Uncapping medical malpractice damages — a law of unintended consequences?

By this time next year, following the November 8, 2022, midterm election, we should know whether the California Changes to Medical Malpractice Lawsuits Cap Initiative has been approved by voters. Should it pass, we as litigators — on both sides of the aisle — may face our own malpractice claims, if we aren’t ready.

Louie H. Castoria

Partner, Kaufman, Dolowich & Voluck LLP

425 California St 21st Fl
San Francisco , CA 94104

Phone: (415) 926-7601

Fax: (415) 926-7601

Email: lcastoria@kdvlaw.com

UC Berkeley Boalt Hall

Louie is a mediator with CourtCall Online Dispute Resolution, a member of the Mediation Society, a mandatory settlement officer with the San Francisco County Superior Court, and an adjunct professor of law at Golden Gate University. He won his first U.S. Supreme Court on July 1, 2021.

By this time next year, following the November 8, 2022, midterm election, we should know whether the California Changes to Medical Malpractice Lawsuits Cap Initiative has been approved by voters. Should it pass, we as litigators -- on both sides of the aisle -- may face our own malpractice claims, if we aren't ready.

As philosopher Gilda Radner noted, "Life is about not knowing, having to change, taking the moment and making the best of it without knowing what's going to happen next." Litigators don't know all that's going to happen if the initiative is enacted by the voters. Assessing whether it should be enacted is not today's topic; we will assume it becomes law and, as Radner put it, "make the best of it."

The initiative is properly known as the "Fairness for Injured Patients Act to Adjust California's Maximum Compensation Cap of $250,000 Set by Politicians in 1975 on Wrongful Death and Quality of Life Damages That Has Never Been Updated." That's a mouthful, so I'll refer to it as "FIPA."

As FIPA's full name states, the California Legislature enacted a law in 1975 setting a $250,000 cap on noneconomic damage awards in medical malpractice cases, the Medical Insurance Crisis Reform Act commonly referred to as "MICRA." The law was in response to rapidly rising medical malpractice insurance premiums, especially in high-risk, high-frequency medical fields such as obstetrics/gynecology and anesthesiology. ("Noneconomic" damages are those that don't have a market value such as pain, suffering, loss of consortium, and loss of "quality of life." In contrast, "special" damages come with a price tag: medical care, loss of income, and other so-called "hard" damages. MICRA set no limit on special damages.)

Slightly more than half the states have laws similar to MICRA, though they vary significantly as to the amount of the caps and breadth of the law. Courts in five states ruled medical damage caps unconstitutional: Florida, Georgia, Illinois, Oregon and Washington.

California courts have upheld MICRA's validity, leaving opponents of the law to resort to the state's initiative process to amend MICRA. In 2014 the voters failed to approve an initiative similar to FIPA, Proposition 46, with 67% voting against it. The campaign spending on Prop. 46 was similarly skewed: $60 million against versus $13 million for. (Amounts based on BallotPedia.org data.)

Thus far FIPA's supporters have raised a campaign war chest of $5 million; the opposition has raised $18 million. With the election a year away, there is still plenty of time for fundraising, and no guarantee that Prop. 46's past is prologue for 2022.

Adjusted for inflation, MICRA's $250,000 cap would be over $1 million, but the law doesn't allow such an adjustment. In today's dollars, the $250,000 cap is worth about $50,000.

FIPA would substantially change MICRA's provisions, repealing some, modifying others, and creating new ones. The most significant changes may be summarized as follows:

Adjusting the cap. On January 1, 2023, the $250,000 cap would be adjusted for inflation based on the U.S. Bureau of Labor Statistics' Consumer Price Index, and readjusted annually. California's Department of Finance would annually publish the new cap.

Catastrophic injury. Judges and juries may award damages above the adjusted cap in a catastrophic injury case, meaning "death, permanent physical impairment, permanent disfigurement, permanent disability, or permanent loss of consortium." Juries must be told they can award such damages above the cap in catastrophic cases.

Certificate of Merit. Attorneys suing a health care provider would be required to file a Certificate of Merit based on the provider's negligence -- in other words, that the provider's medical services fell below the applicable standard of care. The certificate must be filed within 60 days of the filing of the first complaint in the case. Plaintiff's counsel must sign a declaration -- the initiative does not add "under penalty of perjury" -- that he or she has consulted with a medical practitioner in the same discipline as the defendant, whom the attorney believes is knowledgeable in the "relevant issues involved in the case," and that the attorney has concluded there is a reasonable basis to proceed with the case.

Alternatively, the attorney may declare that he or she has tried unsuccessfully to consult with three practitioners. Failure to file the certificate would be a basis for a demurrer or motion to strike; failure to find a supporting consultant would not be such grounds.

Quality of life and survivor damages. The term "noneconomic" damages would no longer be used. Instead, damages could be awarded for "physical impairment, disability, disfigurement, physical pain, mental suffering, inconvenience, emotional distress, grief, anxiety, humiliation, or decrease in the patient-victim's life expectancy, and loss of consortium suffered by a loved one of the patient-victim." "Survivor damages" are defined as "the loss of love, companionship, comfort, care, fellowship, assistance, protection, affection, society, moral support, and the enjoyment of sexual relations, suffered by a loved one of a patient-victim." Jurors would be allowed to hear evidence of these types of damages.

Extended limitations. FIPA states that because of the need for the above certificate, "patients and survivors should have more time to file their cases. This should also save judicial resources and taxpayer dollars by reducing the number of cases filed to meet a shortened deadline." This leads-in to the next change: an extension of the statute of limitations to three years after the date of injury or after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the injury, whichever occurs first. The statute could be tolled in the event of fraud, intentional concealment, or the presence of a foreign body in the patient. There is a different limitation period for plaintiffs who are minors.

Meritless suits. Attorneys who file meritless lawsuits alleging medical negligence would be liable to pay the defendant's attorney fees and costs. A case is "meritless" if it is "wholly without merit or for the sole purpose of harassing an opposing party." If the court determines that an action against a health care provider is meritless, "it shall order the plaintiff's attorney to pay the reasonable expenses, including attorney's fees." However, a negligence action is not "deemed meritless if an attorney has filed a certificate of merit[.]"

Collateral source. The collateral source rule that applies in other civil cases would apply in medical negligence actions; that is, the jury would not take collateral sources into account.

Structured payments. Periodic payments for medical negligence verdicts and judgments would be disallowed.

Plaintiffs' attorney fees. Current restrictions on fee agreements would be loosened. somewhat under FIPA. Contingent-fee percentages established in 1987 would be adjusted to reflect the Consumer Price Index. However, in a catastrophic injury case the court would be required to award reasonable attorney's fees to a prevailing plaintiff, based on criteria that include the results obtained, risk undertaken, costs, complexity, and the degree of skill.

Retroactive effect. If enacted, FIPA would apply to any action "that has not been resolved by way of a final settlement, judgment, or arbitration award" as of its effective date, January 1, 2023.

This is necessarily an abbreviated analysis of a complex proposition.

Potential risks to litigators

FIPA's changes in California law and procedure could create professional liability ramifications. I am not advocating for or against the Initiative; my only opinion is that the Legislature is a better mechanism to correct shortcomings in its handiwork -- though, as we know, the courts may have to weigh in by ruling on future challenges or enforcement actions relating to FIPA. Having not done so, for whatever reason, it leaves We, the voters with an "up or down" decision on a complex, important proposition.

A few potential traps for unwary litigators:

• Applying the longer statute of limitations to pending cases filed before FIPA's effective date places plaintiff's malpractice counsel in a conundrum: "Should I push for an early trial date while my client is alive to testify, or drag the process out to get the benefit of the uncapped quality of life damages?" Defense counsel face an inverse decision: "Should I waive a meritorious appeal before the initiative becomes effective to avoid a higher award after appeal?"

• In a world without structured settlements, how will multi-year minors' compromises or awards to plaintiffs in conservatorships be court-approved?

• Does the imposition of the collateral source rule to medical damages negate the California Supreme Court's decision In Howell v. Hamilton Meats, 52 Cal. 4th 541 (2011), which reduced medical care damages to the reduced amounts actually paid by insurers?

• Is a Certificate of Merit sufficient to block a judge from determining a case to be unmeritorious, even if all the other indicia are met? It would seem not, as the Certificate "deems" the case to be meritorious, rather than "determines" so.

• What's an "inconvenience" in the context of medical care? What isn't?

• If plaintiff's counsel submits a bare-bones Certificate of Merit, relying on his/her belief that the case has merit, may counsel's belief be challenged via a deposition? May counsel be called as an adverse witness at trial? Does this create an attorney-witness conflict, subjecting counsel to possible recusal?

• In a binding medical malpractice arbitration in a catastrophic injury case, does the arbitrator decide the fee award, and if so does the court second-guess it?

• What jury instructions should counsel draft in a case that goes to trial after the election, but before the Judicial Council of California approves pattern instructions in cases governed by FIPA? Should counsel on either side "reach for the Moon," running the risk of reversal?

There are, no doubt, other issues we can't control that will leave us "taking the moment and making the best of it without knowing what's going to happen next." There is no vaccine to fully protect counsel from legal malpractice claims in times of changing laws, but there is a shield: full, written disclosure of the risks at hand and the rationale for counsel's recommendations. 

#365083

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