California damage cap protects medical groups, too

California's $250,000 cap on noneconomic damages in medical malpractice lawsuits got a big boost from a state appeals court in late January when it decided that the Medical Injury Compensation Reform Act applies to a medical group.

In the case on appeal, the plaintiff argued that a medical group should be held liable for more than the $250,000 cap.

But the California Court of Appeal for the First Appellate District Division Five ruled that if a patient tried to hold the physician partnerships liable for negligent acts of its licensed physician employees the cap as well as other MICRA provisions would apply.

The court reasoned that California case law establishes that an employer can't be held vicariously liable for compensatory damages that are greater than the amount for which the employee is held liable. "We see no reason why these settled principles on vicarious liability should not be applied," the court said in its opinion in Lathrop v. HealthCare Partners Medical Group. "HealthCare Partners cannot be held vicariously liable for noneconomic damages in excess of $250,000."

The ruling -- which could still be appealed -- overturns a San Francisco trial court decision that said that MICRA wasn't designed to protect physician partnerships. The latest ruling is a relief to California physician groups that provide care for nearly 80% of managed care enrollees in the state. The California Medical Assn. filed a friend-of-the-court brief in the case.

Physicians in other states have experienced rapidly rising liability rates and a shrinking pool of insurance carriers even as California physicians have enjoyed a relatively stable environment. Doctors believe the California cap put in place nearly three decades ago has been a way to keep medical liability insurance rates under control, and physicians around the country have tried to emulate the cap and other reforms in their own states and at the federal level.