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The New Med Mal Law: Summary and Analysis

INTRODUCTION

In late January of this year, the most substantial changes in medical malpractice litigation in the past twenty years took effect in Pennsylvania. The new provisions are contained in House Bill 2210, officially known as Act 135 of 1996.

This article explains in plain language the content of the Act, and also offers some analysis of its impact. The material in bold print states the new law, whereas the "bullet points" listed immediately thereunder contain analysis and observation, most of which is offered from the plaintiff's perspective.

It should be noted that, just days before its effective date, the Supreme Court suspended certain portions of Act 135 which dealt with procedural, rather than substantive, matters. The basis for the Court's ruling was that, under the Pennsylvania Constitution, only the Court itself has the authority to regulate procedures in the court system. While it suspended these various sections, the Court did request its own Civil Procedural Rules Committee to consider whether some of the matters contained in the suspended sections should nevertheless be incorporated into the Rules of Civil Procedure.

Following is a review of those sections of Act 135 which were not suspended and which are now in effect across the state.

1. INCREASE IN COVERAGE LIMITS -- Current primary limits of $200,000 are increased to $300,000 for policies issued in 1997 and 1998; to $400,000 for 1999 and 2000; $500,000 for years 2001 and thereafter.

The CAT Fund layer of coverage decreases correspondingly from its current level of $1,000,000 to $900,000 for 1997 and 1998; to $800,000 for 1999 and 2000; and to $700,000 for year 2001 and thereafter.

  • The first thing to note is that while there are significant changes in the levels of primary and Fund coverage, the increases in primary coverage are "netted out" by the decreases in Fund coverage. As a result, the total available coverage for a single physician remains at the same level it has been for several years, namely, $1.2 million. Given the fact that virtually no physicians carry individual excess coverage above the Fund, for all practical purposes, a plaintiff still has only a total pool of $1.2 million to collect against any one physician. It is surprising that, given the impact of inflation, the total available coverage is the same as it has been for more than a decade.
  • The upshot of these changes will cause a significant shift in control of the "purse strings" for settlement, the shift going away from the CAT Fund and in favor of the primary carriers. Right now, the CAT Fund controls $1 million of the $1.2 million in available money on any given case. That amounts to almost 85% of the available dollars. That circumstance, coupled with the fact that most malpractice cases worth pursuing have a value in excess of $200,000, means that, for all practical purposes, the CAT Fund has had almost exclusive control over the majority of the good medical malpractice cases. That is now going to change as the primary carriers' coverage limits -- and therefore control of settlement dollars -¬≠increases over the next five years.
  • The effect of this change in coverage limits will be even greater in multiple defendant cases since there are more primary carriers with their individual levels of coverage available.
  • This circumstance of the primary carrier having greater control over settlement will mean that in more cases only one entity needs to be familiar with the case rather than two. In the past, cases often got bogged down after a tender because the individual claims adjuster at the Fund had to start from "ground zero" to familiarize himself/herself with the case before authority could even be sought on a file. Thus, greater control by the primary carriers may speed up certain settlements.
  • It may also mean that defense counsel will stay more involved in settlement negotiations. Currently, defense lawyers often "drop out of the picture" once the Fund gets involved.
  • Because of late tenders and the general manpower shortage, the Fund cannot be as familiar with a case -- both its strengths and weaknesses -- as the primary carrier who has been monitoring the case for a longer time and at a more comfortable pace. Thus, in a good liability case, it may inure to the plaintiff's benefit to have the primary carrier more in control.
  • All things considered, the shift in control to the primary carriers could speed up certain settlements for the plaintiff, particularly for cases that are not on the eve of trial. It has always been more difficult to settle a case where there is a tender but no trial date on the horizon. Those tenders "tended" to get buried because the Fund understandably was allocating their money to cases of more urgency. In contrast, primary insurance companies may try more often to settle cases -- even if they are not on a trial list -- if they think they can do so at a good price.

2. 605 CASES -- Cases that are filed more than four (4) years after the negligence occurred, but for which the statute of limitations has not run, shall be defended by the Fund if the Fund has received a written request within 180 days of when notice of the claim was given to the health care provider or the primary carrier. Where multiple treatments or consultations took place less than four years before notice to the health care provider or carrier, the claim will not be defended by the Fund, but will be the responsibility of the primary carrier.

  • This represents some "fine tuning" of the existing 605 law in that it adds the obligation that the primary carrier, within 180 days of receiving notice of the claim, send a written notice to the Fund. Also, the new law now seems to indicate that "split" cases -- those where some of the treatment occurred within the four year period and some of the treatment outside the four year period -- are not going to be 605 cases, i.e., they are going to be the responsibility of the primary carrier.
  • Again, as with the changes in primary coverage limits, the effect of these changes is to shift more responsibility to the primary carriers because now the Fund will not have Section 605 responsibility unless substantially all of the treatment was outside the four-year period. Previously, the Fund often took 605 responsibility where almost any of the treatment, rather than substantially all of the treatment, was outside the four-year period.
  • One may anticipate that there are going to be "dog fights" between the primary carriers and the Fund over what constitutes "multiple treatment or consultations" since that is a vague and relative term. Such fighting may delay these cases to some extent.

3. AMOUNT OF SURCHARGE -- The surcharge shall be equal to the amount paid by the Fund on all claims during the previous period of September 1 through August 31 plus an additional fifteen (15%) percent of that amount paid.

The surcharge is assessed against each healthcare provider's "prevailing primary premium" which is based on a schedule of occurrence rates approved by the Insurance Commissioner for the Joint Underwriting Association.

  • This provision is helpful to the plaintiffs in that it should result in a substantial increase in the total surcharge because under the former law the surcharge equaled the amount paid by the Fund in the previous year, plus the finite sum of $15 million. Now, the surcharge becomes the amount paid in the previous year plus fifteen (15%) percent of that amount, and given the fact that the Fund annually pays well over $100 million, fifteen percent of the amount paid in the previous year should far exceed a finite amount of $15 million.
  • The requirement for approval of the Insurance Commissioner seems to be in line with the legislature's apparent desire to put greater supervisory controls on the Fund, witness the fact that they created the Advisory Board [See #6 below].
  • The concept of "prevailing primary premium" and the use of the schedule of occurrence rates should remove some of the inequities that have resulted in recent years in establishing primary rates for certain doctors and hospitals. This may mute some of the outrage over insurance costs which were a major impetus for the doctors' recent "push" for reform.

4. BINDING MEDIATION -- Where there are disputes between multiple carriers on a case within the Fund coverage limits, any party may request that the Fund provide a mediator to settle the dispute.

  • It is unclear what this provisions means. Is it referring to a "dispute" that arises only after multiple carriers have tendered and they are arguing how much of the Fund's settlement payment should be allocated to each of them? Does it refer to "disputes" where one primary carrier has tendered and it thinks another primary carrier should also be on board with a tender?

5. DELAY DAMAGES AND POST JUDGMENT INTEREST -- Both delay damages and post judgment interest shall be paid by the Fund and are not to be charged against the annual aggregate of the insured. The primary carrier shall be responsible for its proportionate share of the delay damages and post judgment interest.

  • This provision does not answer whether delay damages and post judgment interest will be paid by the Fund if it means that the Fund is paying out more than its layer of coverage. Under current law, the Fund can be made to pay delay damages even if it means that the Fund is paying out more than its current layer of $1 million coverage on any single insured. See Montgomery Hospital, 668 A.2d 221 (Cmwlth, 1995).

6. ADVISORY BOARD -- There is an Advisory Board made up of the Insurance Commissioner, four people appointed by the legislature, and six people appointed by the Governor. This Board will have the power to review the procedures of the Fund, commission audits of the Fund, and most importantly, have the power to adopt standards governing investigation, evaluation, and settlement of claims.

Additionally, the Advisory Board is to conduct a study of the operations of the Fund and report back to the legislature by September 1, 1997, with recommendations concerning the future existence of the Fund, (i.e., its total elimination or an opt-out provision) and an evaluation of its unfunded liabilities.

  • This represents a major change in existing law for currently there is no such broad oversight of the Fund. It looks like this Advisory Board will have the power to "second guess" the Fund on virtually everything it does. It is unclear whether that will improve or impair the Fund's ability to carry out its work.

7. ANNUAL REPORT TO THE INSURANCE COMMISSIONER -- Sixty (60) days after the end of the calendar year, the Fund must submit a report to the Insurance Commissioner concerning all vital statistics such as the total amount of claims paid, the total amount of reserves set aside for future claims, the identity of the healthcare provider involved in the case, etc. This report shall also be submitted to certain leaders in the legislature.

  • Again, this is another example of more stringent oversight being layered on top of the Fund. The comments in the previous section concerning the impact of the Advisory Board would apply with equal force here.

8. INFORMED CONSENT -- The doctrine applies to: (1) all surgeries, and the related administration of anesthesia; (2) radiation and chemotherapy; (3) a blood transfusion; (4) insertion of surgical device; and (5) experimental drugs/devices.

  • This represents the first time in Pennsylvania we have had a statutory definition of the type of "procedures" to which the doctrine of informed consent applies. Previously, we had common law cases debating what constituted an "invasive procedure", and such cases were not always consistent with one another. In general, the definition contained in the statute is more liberal than that contained in the case law. As such, it will expand the number of cases on which plaintiff can proceed with an informed consent theory, although, as noted below, the proof required to win that case will now be greater.
  • One may expect that there will be some "lag time" before doctors and hospitals become familiar with these new requirements and, therefore, there will probably be an influx of informed consent cases over the next two or three years. Thereafter, we will probably see a leveling off in the number of such claims.

The doctor is required to inform the patient of all risks and alternative that a reasonably prudent patient would want to know about, although the physician is entitled to present evidence concerning what risks and alternatives are typically discussed by a physician acting in accordance with accepted standards.

  • The first half of this provision incorporating the so-called "prudent patient" standard simply codifies the existing common law in Pennsylvania. However, the second clause, which permits a doctor to testify as to the risks that he and other physicians usually discuss, represents a major departure from current law. Presently, evidence concerning what those in the profession typically describe as risks attendant to a particular procedure is irrelevant and inadmissible.
  • This new provision has the potential to confuse a jury. If the standard remains that the patient is entitled to know everything that a prudent person would want to know about an operation, what is the relevance of letting the doctor talk about what he, and others like him, typically discuss in connection with the procedure?

Expert testimony is required to establish that the procedure is one which requires informed consent, and also to identify the risks of the procedure and its alternatives.

  • This merely incorporates existing common law.

In order to ultimately win the case, the plaintiff must prove that receiving the unmentioned information would have been a substantial factor in his or her initial decision whether to undergo the procedure, i.e. plaintiff must prove causation.

  • This represents perhaps the most significant change in the substantive law in all of Act 135. Under well-established case law (Gouse v. Cassel, 615 A.2d 331 (Pa. 1992) being the major decision in the area), Pennsylvania appellate courts had clearly said in the past that, because informed consent was in the nature of a battery, the plaintiff did not have to prove that the failure to inform had an impact on one's decision to undergo the procedure. Thus, under the former law, at least in theory, all the plaintiff had to prove was that a prudent patient would want to know certain information and that a doctor did not impart it to the patient. Now, however, the plaintiff is going to have to prove causation.
  • One could argue that the formal incorporation of a causation element does not really change informed consent cases because jurors would privately consider causation anyway. While there may be some merit to that argument, plaintiffs will no doubt lose more informed consent cases because now the jury will be specifically instructed that the plaintiff must prove causation.
  • It is unclear how the "substantial factor" test will be applied. Clearly the plaintiff does not have to prove "but-for" causation, i.e., that he/she absolutely would not have undergone the procedure if the doctor had mentioned a particular risk. On the other hand, the plaintiff is going to have to show that the information was in some manner material to the decision to have the surgery.

9. PUNITIVE DAMAGES --They may be awarded if the plaintiff shows that the doctor's conduct was willful, wanton or recklessly indifferent. However, gross negligence alone is not sufficient to support an award of punitive damages.

  • This substantially incorporates the present common law.

Punitive damages may not be recovered against a health care provider who is only vicariously liable for the actions of another person, unless the master knew or allowed the conduct of its agent to occur.

  • This represents a change in existing law. The author is aware of no case in Pennsylvania which currently holds that punitive damages may not be awarded against a vicariously liable party.

Procedurally, when the plaintiff claims punitive damages, the defendant may move to strike that portion of the Complaint until the close of discovery, at which time the plaintiff can move to reinstate the claim for punitive damages. A Judge rules on this issue, and if reinstated, the jury shall determine whether the evidence is sufficient to support a claim for punitive damages. Only when the claim is reinstated will the plaintiff have the right to discover the defendant's financial assets.

  • The main impact of this provision is going to be to delay the case. First, there is going to have to be a separate hearing in front of the court to get the punitive damage claim reinstated, and secondly, if it is reinstated, the plaintiff now has to do additional discovery against the defendant to gather information concerning net worth.

The amount of punitive damages may not exceed twice the amount of compensatory damages. Punitive damages shall not be less than $100,000 unless a lower compensatory damage verdict amount is returned by the jury.

  • The "cap" on punitive damages at twice compensatory damages is an arbitrary limitation, although others will say that it is in line with the emerging principle that there should be some rational relationship between the amount of compensatory damages and punitive damages.
  • The second sentence sets a "floor" by saying that punitive damages shall not be less than $100,000 unless the jury returns a compensatory award of less than $100,000.

10. AFFIDAVIT OF NON-INVOLVEMENT -- A healthcare provider may file an affidavit setting forth the facts with particularity which show that the provider was misidentified or otherwise not involved in the patient's care. The filing of such an affidavit tolls the statute of limitations. Furthermore, any party may challenge the affidavit.

  • This appears to be a minor provision since any plaintiff who has "done his homework" is not going to be mis-identifying defendants. On the other hand, if it is abused by defendants, i.e., they try to equate "lack of involvement" with "lack of liability," then there obviously will be a problem.

11. PERIODIC PAYMENTS AND ADVANCE PAYMENTS -- Following any verdict involving future damages, the court, upon motion of any party, may consider that the damages be paid in periodic payments, provided that the terms of such payments are agreed to by all parties. As to advance payment, such payments shall not be construed as an admission of liability and shall not be admissible at trial.

  • It is interesting that the periodic payments provisions applies, at least on its face, only to verdicts and not to settlements.
  • The statute is silent as to attorney's fees, i.e., is one to assume that the plaintiff's share of the recovery can be paid in periodic installments, while the fee is still received in an initial lump sum?

12. MANDATORY REPORTING OF CLAIMS PAID -- Each primary carrier or the Fund which makes payment in a case shall provide to the State Licensing Board the same information currently provided to the federal data bank.

Upon receipt of the report, the Licensing Board shall review the report and conduct an investigation, and, if the investigation warrants, the Board shall promptly initiate a disciplinary proceeding against the health care provider.

  • This is a major extension of current reporting requirements. Presently, the insurance carriers simply send information concerning the settlement or verdict payment to the federal data bank. Now, however, they will be sending it to the State Licensing Board, and, under the literal language of the statute, the Licensing Board is compelled to conduct an investigation.
  • While the involvement of the Licensing Board and the Bureau of Professional and Occupational Affairs may have some positive impact in "weeding out" bad doctors, the prospect of a compulsory investigation may act as an even bigger deterrent to physician consent to settlement than the data bank did when it came into being several years ago. Again, this provision provides not only for reporting of information to the Licensing Board, but it compels the Board to conduct an investigation.
  • If consent becomes much more difficult to obtain, this provision could prove to be more harmful to plaintiffs than any other aspect of House Bill 2210, and ironically it could thwart the legislature's obvious goal of speeding up disposition of claims.

CONCLUSION

In sum, Act 135, viewed from the plaintiff's perspective, has some favorable provisions and some unfavorable ones. Those provisions which one might put in the "favorable" column would include:

Shift of greater settlement authority to the primary carriers, to the extent that speeds up settlement in some cases.

Expansion in the type of procedures to which informed consent applies.

More equitable system for establishing malpractice insurance premiums, to the extent that dissipates demands by physicians for additional tort reform.

On the other hand, those provisions which one might place in the "unfavorable" column would include:

  • Requiring proof of causation for informed consent cases.
  • The cap on punitive damages at twice the amount of compensatory damages.
  • Mandatory reporting of settlements to the state Licensure Board, to the extent that inhibits settlement of claims.

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