Challenges to medical liability caps go before Georgia, Maryland high courts

Doctors say the cases threaten to destabilize liability climates and highlight the need for tort reform to be part of federal health system reform.

By Amy Lynn Sorrel — Posted Sept. 28, 2009

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High courts in Georgia and Maryland will decide the fate of caps on noneconomic damages in medical liability cases in each state, two of the latest attempts to undo such award limits.

The Georgia Supreme Court case stems from a February trial court decision rejecting the constitutionality of the state's $350,000 cap. Oral arguments began Sept. 15 in Atlanta Oculoplastic Surgery v. Nestlehutt.

Maryland's Court of Appeals is set to hear arguments Nov. 5 on whether the state's caps apply only to cases that are arbitrated.

Because of the constitutional and public policy issues at play, the two cases went to their respective high courts. Physicians in both states are pledging to defend the caps, which they credit with easing liability insurance costs and keeping doctors in practice.

The cases involve high stakes for patients and physicians, and undermining the reforms "would be a step backward" in access to care gains, said Rebecca J. Patchin, MD, chair of the AMA's Board of Trustees. The Litigation Center of the American Medical Association and State Medical Societies joined the Medical Assn. of Georgia and MedChi, the Maryland State Medical Society, in filing separate friend-of-the-court briefs in their respective state cases.

MedChi CEO Gene M. Ransom III said the cases also highlight the need for federal endorsement of tort reform as part of national health system reform, particularly for states struggling to pass measures to contain unaffordable liability costs. In light of the legal threats to caps, "federal health reform that includes tort reform becomes even more crucial," he said.

But trial lawyers argue that the caps come at patients' expense.

"The appropriate place for decisions on liability and fair compensation is the courthouse, not the Legislature," said Georgia Trial Lawyers Assn. President Chris Clark. The trade organization is considering filing a brief in the Georgia case.

Questioning Georgia's cap

In February, Fulton County Judge Diane E. Bessen ruled that Georgia's noneconomic damage cap infringed on judges' and juries' power to determine awards and violated patients' equal protection rights, with the greatest impact on those severely injured. "The cap so interferes with the determination of the jury that it renders the right of a jury trial wholly unavailable," Bessen wrote in the opinion.

Clark said the award limit precludes legitimate medical liability claims, whose costs often exceed the value of the cap. And judges already have the ability to strike down excessive verdicts, he said.

But doctors say the law strikes a balance between patients' legal rights and ensuring the availability of medical care.

"All patients suffer when you have an access-to-care crisis, so the Legislature said, 'We have to address this problem,' " said Donald J. Palmisano Jr., MAG general counsel and director of government relations. He added that the cap still entitles patients to unlimited compensation for economic damages, such as medical expenses.

Since the statute's passage in 2005, liability insurance rates and claims filings declined by 18% and 39%, respectively, according to MAG. As a result, the state society said, Georgia has seen a net gain of 1,000 doctors and a growth in competition among medical liability insurers.

Meanwhile, the Maryland ruling, if upheld, effectively would abolish the cap there, MedChi's Ransom said.

In an April ruling, Montgomery County Circuit Judge John W. Debelius III concluded that the state's award limit, after being revised in a 2004 special legislative session, applied only to cases that went to arbitration. Because of that, he refused to reduce a $5.8 million jury verdict to the $812,500 wrongful death cap in a medical liability case.

But MedChi's Ransom said that interpretation ignores the two decades in which the cap broadly applied to all medical liability cases since its initial passage in 1986. The ruling also ignores the reason the 2004 special session was called -- to further tighten the cap to rein in soaring liability insurance costs, he said. Lawmakers had reduced the wrongful death cap, frozen the general medical liability cap at $650,000 and instituted other measures, including an insurance rate stabilization program.

Maryland doctors worry that without a broad cap, they will see the return of 30% to 40% premium increases that preceded the 2004 reforms and forced many doctors to cut back services or leave the state.

Ransom said arbitration is voluntary and rarely used, "so for all intents and purposes, this [ruling] eliminates the cap" and further discourages parties from arbitrating cases.

Wayne M. Willoughby, immediate past president of the Maryland Assn. for Justice, said the judge simply stuck to the language in the statute and read it correctly. The trial lawyers group is preparing to file a friend-of-the-court brief in the case, Lockshin v. Semsker.

"For the judge to have reached a different conclusion would have required him to be an activist judge and fill in words the Legislature did not say," Willoughby said.

Plaintiffs may opt for arbitration in less-expensive cases to avoid the time and expense of full civil litigation, he added. "But isn't the whole notion of our system of justice that a verdict should be based on a specific set of facts as determined by a specific jury, rather than having a one-size-fits-all remedy imposed on everyone?"

Such legal threats to caps are not unusual. Physicians are awaiting the outcome of a constitutional challenge pending before the Illinois Supreme Court since November 2008. The AMA Litigation Center and Illinois State Medical Society filed a brief in the case, supporting the state's $500,000 liability cap.

Doctors and other tort reform advocates are optimistic that the measures will survive.

"The trend [among courts] seems to be more of upholding these laws as a matter of legislative authority to look out for the broader health care ramifications, whereas a jury is looking out for a particular individual," said Cary Silverman, co-counsel for the American Tort Reform Assn. The organization, which supports caps and other tort reform measures, joined organized medicine's brief in the Georgia case.

As federal lawmakers debate health system reform, they may consider taking cues from states that successfully used caps and other measures to rein in costs and improve access, Silverman said. "But regardless of what happens at the federal level, you'll continue to see states implement reforms they believe are necessary to further health care access."

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Caps in the courts

Courts continue to see litigation over laws capping damages in medical liability cases. Here are some recent cases in various states.

Lockshin v. Semsker, Maryland Court of Appeals, pending.
Issue: Whether the state's noneconomic damage cap applies only to medical liability cases that go to arbitration. Oral arguments are set for Nov. 5.

Atlanta Oculoplastic Surgery v. Nestlehutt, Georgia Supreme Court, pending
Issue: Whether a $350,000 noneconomic damage cap unconstitutionally infringes on a jury's power, the judiciary's power and plaintiffs' equal protection rights. Oral arguments began Sept. 15.

LeBron v. Gottlieb Memorial Hospital, Illinois Supreme Court, pending
Issue: Whether a $500,000 noneconomic damage cap violates the separation of powers between the Legislature and judiciary, and infringes on plaintiffs' rights to a jury trial. Oral arguments were heard in November 2008.

Van Buren v. Evans, California 5th District Court of Appeal, May
Issue: Whether a $250,000 noneconomic damage cap violates plaintiffs' jury trial rights and whether the award limit holds the same value as it did when it was enacted in 1975. The court backed the law's constitutionality, as well as the Legislature's right to limit damages for public policy reasons.

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