Damages Caps v. Pre-Suit Notice and Certification – And the Winner Is?

By Rob Briley

Runaway juries.  Frivolous lawsuits.  Meritless claims.  Defensive medicine.  For years, we have all heard the reasons as to why some action needed to be taken to stem the tide of lawsuits being filed against the medical industry.  Now, by a convergence of forces never before seen in Tennessee, we will have the ability to compare, side-by-side, whether reducing the number of medical malpractice lawsuits or limiting the amount of money that can be awarded in medical malpractice cases will have the greater impact on the single best measure of either’s success – insurance rates.  My money is on reducing the number of lawsuits that are filed.  Here’s why.Watch movie online The Transporter Refueled (2015)

When we say that we are going to reduce the number of “frivolous” lawsuits filed against doctors, nurses and hospitals, what we mean in practice is the development of a system that requires more effort on the front end by a potential claimant to investigate the validity of his claim, and to attempt an early resolution of that claim without filing a lawsuit.  In 2008, the Tennessee Legislature passed a statute that required just that.  In its simplest form, before a claimant can file a medical malpractice lawsuit, he must first notify the medical provider of his intent to do so and then wait for a period of 60 days before filing it.  This period of time is designed to give the parties a chance to work their differences out, if at all possible.  Then, if no resolution is reached, the claimant may file the lawsuit, but only if it comes with a certification by the claimant or claimant’s lawyer that the case has been reviewed by a suitable expert who has opined that a valid malpractice claim exists.

When first passed, some who analyzed the legislation were skeptical that it would have any impact on the number of lawsuits filed, many of which would ultimately have been dismissed on summary judgment because no competent expert would support the claim of malpractice.  One commentator even went so far as to call the pre-suit notice and certification concept “ludicrous.”

Fast forward to today.  As more data becomes available, it becomes more and more clear that the pre-suit notice and certification requirements imposed by the Legislature have been far more successful than anyone imagined.  The year before this statute took effect, there were 644 medical malpractice lawsuits filed in Tennessee.  As of September 30, 2009, the first full year of the new law’s impact, only 263 medical malpractice cases were filed, and in its second full year, only 313 cases were filed.  No matter how one analyzes these figures, no one can dispute the success of this approach on reducing the number of lawsuits filed against medical practitioners in this state.

Now let’s talk about capping damages awards, arguably the “holy grail” of the medical industry in Tennessee for years.  Limitations on damages caps, many argue, are necessary because we can no longer trust the jury system to be fair and reasonable.  Runaway juries are driving up the cost of malpractice insurance, they say.  Now let’s look at the facts.

In 2011, the Tennessee Legislature passed a tort reform law that limits the amount of non-economic damages that one may recover to $750,000 in all cases, including those sounding in medical malpractice.  Let’s see how many times that law would have been triggered during the 5 year period of 2004-2008.  During this time, there were 14,363 medical malpractice claims closed in Tennessee.  Of those, only 26 were closed by final judgment in favor a claimant.  Of that 26, only 4 had an award of $750,000 or greater in non-economic damages.[1]  Even if the limit is reduced to the $250,000 amount proposed by some members of the Legislature, there would only be 8 cases to which it would have applied during this 5 year period.  Those 8 claims represent less than six one hundredths of a percent.  Those to which a $750,000 cap would apply represent less than three one hundredths of a percent.  I think you get the picture, even with a cap of $250,000, limiting the amount of awards will not touch enough cases to produce a measurable impact on the malpractice climate in Tennessee.  Reducing by almost half the number of malpractice cases filed, however, did produce those results.

Now, the ultimate measure of success for either of these plans is the cost of insurance.  That’s where the rubber meets the road.  You reduce claims, you reduce rates.  State Volunteer Mutual Insurance Company represents the lion’s share of the doctors in Tennessee.  If you look at the company’s financial statements for the year following implementation of the pre-suit notice and certification statute, SVMIC reduced its rates by more than 20% and declared a $20,000,000 dividend.  I am anxious to see what type of impact that caps on damages will have after one year, if any.  Of course if premium costs are reduced there should also be a corresponding increase in the affordability and availability of quality healthcare to the citizens of Tennessee. Only time will tell.

[1] The earlier Medical Malpractice Claims Reports did not distinguish between economic and non-economic damages.  Therefore, any award of $750,000 or more is included in this figure.