The Doctor’s Advocate | Fourth Quarter 2017
Government Relations Report

Social Inflation Increases Pressure on Medical Liability Limits

Elizabeth Healy, Assistant Vice President, Government Relations

A significant portion of the Government Relations Department’s time and energy is devoted to efforts to establish reasonable limits on medical liability and protect limits that have already been enacted. The Doctors Company is a leader in the fight to defend limits on noneconomic damages in California, Oregon, and Colorado, and to revive recently overturned limits in Missouri and Georgia, for example.

Supporters of limits on medical liability face many challenges. In court, opponents have attacked limitations on damages on constitutional grounds. In Oregon and Missouri, plaintiffs’ attorneys convinced their state supreme courts that damage limits infringed on the right to a jury trial.

In California, the last direct court attack alleged a violation of the right to equal protection. The test for an equal protection challenge is whether the government has a rational basis for treating one group differently. Despite recruiting Robert Peck, a high-profile appellate attorney specializing in constitutional attacks on damage limits, the state’s trial lawyers failed to convince the appellate court that the rational basis supporting the legislature’s decision to limit damages with the Medical Injury Compensation Reform Act of 1975 (MICRA) was no longer sufficient to justify the limits. They argued that there never was a liability crisis (there was), but that even if there had been, it’s over now (it isn’t). The plaintiffs’ attorneys argued that if you break your arm, you put a cast on it, but you don’t leave the cast on after the arm has healed. The attorney supporting the limit on damages responded by pointing out that if you are trying to stop a river from flooding repeatedly, you build a levee. Once the flooding stops, you don’t tear down the levee. The court was not persuaded by those who would have overturned MICRA.

Another common attack on damage limitations heard in the courts, legislatures, and media is based on the passage of time since a law was passed. Many caps were enacted in the early 1990s; California’s cap is over 40 years old. The argument is that inflation has eaten into the value of whatever limit is on the books, so it should be increased or repealed. The argument ignores the impact of high noneconomic damages on settlements and the prevailing policy limits of the insured, but it resonates with many people unwilling to delve deeper into the issue.

Also complicating the issue: Public attitudes about jury awards in general are changing as the media barrages the public with reports of huge sums changing hands in everything from government enforcement actions to blockbuster class action lawsuits. Jackpot verdicts keep getting bigger, so the amount of damages in any court action that will be viewed as reasonable keeps getting bigger, as if dragged upward by an irresistible force. This constant escalation affects everything from how juries view trial damages to how legislators balance public policy needs.

This appetite for larger and larger dollar amounts affecting courts, juries, and legislators is called social inflation. It’s not a new phenomenon; social inflation was a concern in the early 1970s, as the litigation explosion that prompted MICRA’s enactment reflected the development of a more litigious culture. A similar effect brought increasing liability pressure in the 1990s, giving rise to efforts to pass damage caps in Texas, Florida, Oregon, and many other states.

Now, after being relatively dormant for nearly 20 years, social inflation is on the rise again, and anyone with an interest in liability and damages should be concerned about this trend.

In a June 2017 report titled Social Inflation Is Back!, analysts at Assured Research attributed at least part of this change to a dramatic increase in advertising by plaintiffs’ lawyers. We have all seen television commercials by plaintiffs’ firms looking for those involved in traffic collisions or for people to add to class action lawsuits against drug and medical device manufacturers. Spending on attorney advertising, once viewed as unethical and prohibited by bar associations, now approaches $1 billion on television alone, and it is increasing by about 6 percent every year. The Assured Research analysts reason that if ad spending is on the rise, it must be because plaintiffs’ firms are getting a good return for their money. To take this one step further, we can assume that if television is helping fill the trial lawyers’ bank accounts, advertising on the Internet and mobile platforms will soon become pervasive, with ads closely targeted to the viewers.

Advertising, or paid media, is not the only force pushing this trend. The plaintiffs’ attorneys also benefit from media coverage of outsized verdicts and settlements in the wake of catastrophes like the Deepwater Horizon oil spill, class actions against companies like Uber, and any new threats like toxic mold, lead in toys, or airbag recalls—and the lawsuits that inevitably follow. We are all exposed to constant reporting that huge sums are available to successful plaintiffs. Judges, potential jurors, and legislators get this news, too, and while the most sophisticated among them may be able to view the information critically, many will not. The cumulative effect is to push damages higher—and not just in the biggest cases.

A change in social attitudes toward reasonable damages is a difficult threat to counter. When plaintiffs’ attorney attacks on noneconomic damage caps have failed, it is generally because the supporters of limits have the stronger case. Sensible medical liability reforms genuinely benefit both patients and healthcare providers. The constitutional basis for those reforms is sound, and the public policy balance squarely favors limits. It also helps that the plaintiffs’ attorneys often overreach, proposing changes that make legislators, courts, and voters recoil. But if people get used to the idea of larger and larger sums, eventually the debate stops being about balancing different policy imperatives, and it starts to be about a distorted sense of what is fair.

The Doctors Company will continue to be a leader in protecting and defending the practice of good medicine and in advocating for healthcare providers and access to healthcare for their patients.

The Doctor’s Advocate is published by The Doctors Company to advise and inform its members about loss prevention and insurance issues.

The guidelines suggested in this newsletter are not rules, do not constitute legal advice, and do not ensure a successful outcome. They attempt to define principles of practice for providing appropriate care. The principles are not inclusive of all proper methods of care nor exclusive of other methods reasonably directed at obtaining the same results.

The ultimate decision regarding the appropriateness of any treatment must be made by each healthcare provider considering the circumstances of the individual situation and in accordance with the laws of the jurisdiction in which the care is rendered.

The Doctor’s Advocate is published quarterly by Corporate Communications, The Doctors Company. Letters and articles, to be edited and published at the editor’s discretion, are welcome. The views expressed are those of the letter writer and do not necessarily reflect the opinion or official policy of The Doctors Company. Please sign your letters, and address them to the editor.

Fourth Quarter 2017

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An Ounce of Prevention
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Government Relations Report
Social Inflation Increases Pressure on Medical Liability Limits

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