Colorado Senate OKs increase, changes to state's liability cap

Colorado's noneconomic damage cap in medical liability cases is under fire. Physicians say legislation -- approved by the state Senate in late February -- threatens to unhinge the state's stable medical liability climate.

The bill, backed by trial lawyers, would raise the current $300,000 cap by roughly 50%, to more than $460,000, largely to track inflation. More problematic, doctors say, is that injuries classified as physical impairment or disfigurement no longer would be subject to the limit on pain and suffering awards.

Colorado law places a $1 million cap on total awards, which would not change. But judges have the discretion to review economic compensation amounts and override the $1 million limit if they see fit.

Doctors worry that removing physical impairment and disfigurement injuries from the noneconomic damages cap would increase their liability risk and make it more likely that a court would award damages beyond the $1 million threshold.

The Senate voted 18-16 to approve the bill. At press time it was headed to the largely Democratic House. Doctors pledged to continue their fight against a measure they say would imperil access to care. Gov. Bill Ritter Jr., a Democrat and former state district attorney, has not indicated whether he would sign it.

Jeremy A. Lazarus, MD, speaker of the American Medical Association House of Delegates, credited Colorado's reforms, which passed in 1988, with keeping the state's liability climate relatively stable for two decades.

The Senate legislation "would threaten effective reforms that preserve patients' access to care and the courts," Dr. Lazarus wrote to the Denver Post on Feb. 26. "Pregnant women in Colorado have greater access to physicians who deliver babies because obstetricians in the state pay $100,000 less in medical liability premiums than physicians in states without effective reforms."

The measure might encourage more lawsuits, said Colorado Medical Society President David Downs, MD. Because physical impairment and disfigurement are not clearly defined, physicians could be held liable for a surgical scar, for example, and not just serious or life-altering injuries, he said.

Higher premiums ahead?

To offset the legislation's potential impact, carriers would need to raise premiums 12% to 14%, according to an independent study commissioned by COPIC Insurance Co., the state's largest medical liability insurer.

Dr. Downs warned that the increase ultimately would raise health care costs and drive away physicians, particularly in underserved, rural areas.

Doctors agree that patients should be compensated fairly and that inflation adjustments may be necessary. But the legislation does not serve patients' best interests, Dr. Downs said.

The Colorado Medical Society continues to push for a task force to study the possible effects of any changes to the medical liability cap before any legislative action is taken.

Lawyers: Bill helps seriously hurt

Trial lawyers say doctors' concerns are unwarranted and that the changes are necessary to protect patients.

Darin L. Schanker, president of the Colorado Trial Lawyers Assn., said physical impairment and disfigurement refers only to cases in which patients are seriously harmed by medical negligence. Total awards still are subject to the $1 million overall cap, he said.

"These are, unfortunately, cases where people have suffered the greatest," Schanker said. With the new bill, "those [plaintiffs] will get closer to justice and doctors will still have the same access to liability insurance."

Trial lawyers say the bill would apply the same standard held in general liability cases for physical impairment and disfigurement to medical liability cases. It also would restore the tort reform law to its original intent, trial attorneys say.

The 1988 medical liability cap did not specifically address physical impairment and disfigurement under the noneconomic or economic damage limits. Doctors said the courts did not always consider physical impairment and disfigurement awards separately until a 2001 Colorado Supreme Court ruling. Judges in Preston v. Dupont found that the noneconomic damage cap did not limit awards for physical impairment or disfigurement.

The decision prompted lawmakers to amend the statute in 2003 to classify such injuries under the pain and suffering cap.

Colorado Medical Society officials said the ruling led to a jump in doctors' insurance rates by as much as 15%, which also provoked the legislative change. Lawmakers in 2003 also adjusted the cap for inflation from $250,000 to $300,000.

Schanker disputed claims that the Senate bill would drive up premiums and suggested that insurers are to blame for unnecessarily raising rates.

Nevertheless, an amendment added to the bill in the final hours before its Senate passage should alleviate doctors' concerns, he said. The amendment prohibits insurers from raising premiums unless their reserves reach a certain low and they can show the inadequate funds resulted from proposed changes in the bill.

But COPIC Insurance Chair and CEO Ted J. Clarke, MD, said the move would do more harm than good.

He said the measure could put insurers' financial stability at stake if they cannot adjust their rates to cover current and future lawsuit filings and payouts, as well as defense expenses that mount regardless of the outcome of a case.

"The problem is this [bill] makes it so that a company cannot respond to increases in claims frequency and claims severity," Dr. Clarke said. The measure could deter competition if insurers know they have little control over their business, he added.

Despite the amendment, doctors and liability insurance executives say physicians likely would need to carry $2 million in policy coverage, instead of $1 million, which still would mean higher insurance costs.