Caps on court awards may be tough to enforce

By Steve Kanigher (contact)

Friday, Aug. 23, 2002 | 4:09 a.m.

WEEKEND EDITION: August 25, 2002

No one knows for sure whether Nevada will be able to enforce a new law designed to limit the amount of money a medical malpractice victim can receive.

And anyone looking for guidance from other states will find that they are evenly divided on the issue.

When states debate the issue of monetary damages that can be given to injured victims, these discussions touch on three types of awards:

The new law that is coming under a microscope in Nevada has to do with caps on pain and suffering damages in cases involving medical malpractice.

Eight state supreme courts have upheld such caps. Eight others have ruled those caps unconstitutional. Two other courts, South Dakota and Florida, have come down on both sides of the fence and Nebraska has a case pending.

The reason for this is that each supreme court has made its decisions based on their respective state constitutions, and no two constitutions are exactly alike.

In Nevada, local insurers have indicated they will not substantially lower medical malpractice liability premiums -- if at all-- until they are convinced that Nevada's new cap on pain and suffering damages will withstand constitutional muster.

The new law, effective Oct. 1, places a $350,000 cap on pain and suffering with exceptions of up to $1 million in most cases for gross malpractice and "exceptional circumstances" as deemed by the court. There is a good chance that when this law is challenged in court -- and Nevada malpractice attorneys say it will be challenged -- the rulings of other state supreme courts will factor into the arguments both pro and con.

In the states where caps have been upheld -- California, Colorado, Idaho, Indiana, Maryland, Missouri, Virginia and West Virginia -- the high courts generally have argued that legislators acted rationally in an effort to curb insurance costs and preserve health care.

In the states where caps have been ruled unconstitutional -- Alabama, Kansas, Illinois, New Hampshire, Ohio, Oregon, Texas and Washington -- the arguments generally have been that lawmakers trampled on victims' rights and took away decision-making abilities from juries.

Cap supporters such as the American Tort Reform Association in Washington argue that state legislatures have a right to pass such laws to make health care more affordable.

"A lot of judges recognize that this is a public policy issue and that public policy belongs to the state legislatures," association spokesman Mike Hotra said.

"Our concern is that the trial lawyers are using obscure constitutional provisions to nullify the caps and are arguing that the state legislatures have no business interfering in this area. When you have a medical liability crisis, what is your recourse when your policy makers can't act?"

Las Vegas attorney John Cotton, who represented doctors in Carson City this summer when they convinced lawmakers to place caps on damages for pain and suffering, expressed confidence that the new law will withstand constitutional challenges. The doctors pursued caps because they blamed high-dollar jury awards for skyrocketing medical malpractice insurance costs that they said were making it difficult for them to stay in business.

"Frankly, in some states early on there was a rush to put caps on damages when there wasn't an emergency situation," Cotton said. "In our case there was a lot of testimony about the emergency situation here and the fact that doctors were leaving the state. If you had a situation where there was no emergency, I don't see the courts upholding the law. But you have a different situation here."

But Robert Peck, president of the Center for Constitutional Litigation in Washington, said many such caps are overturned because most state constitutions -- including Nevada's -- stipulate that the right to a trial by jury is "inviolate."

Peck's organization, which is affiliated with the Association of Trial Lawyers of America, has succeeded at striking down many of the nation's damage caps by arguing that they restrict the ability of juries to make decisions.

'Inviolate'

"Just about every state has interpreted 'inviolate' to mean that juries have the responsibility to decide the amount of damages," Peck said. "The U.S. Supreme Court has also come to that conclusion.

"The little I know about the Nevada law is that it ought to be held unconstitutional because of the fact that there is an 'inviolate' right to a jury trial."

Las Vegas malpractice attorney Gerald Gillock said there were at least two other reasons to attack Nevada's caps as unconstitutional. Gillock said one weakness is that the $50,000 liability cap enjoyed by University Medical Center and other government-run health care facilities will be extended to physicians in private hospital emergency rooms that serve trauma patients.

"The reason for the original cap was to protect the public treasury while providing a remedy for someone who was injured," Gillock said.

But he said the Nevada Legislature "got overeager when they extended the $50,000 cap" to private hospitals that are financially sound.

"The second problem area is that those who are hurt the worst won't have any pain and suffering damages available to them if their economic damages are $1 million or more," Gillock said.

He said that's because the new law states that damages for pain and suffering may not exceed a doctor's insurance policy, which in most cases is $1 million. Economic damages are always collected first. If economic damages are $1 million or more, no money could be collected for pain and suffering, he said.

But some state supreme courts have ruled that their respective legislatures had compelling reasons to place caps on pain and suffering damages.

Caps upheld

California, which passed its $250,000 cap in 1975, upheld it 10 years later in Fein v. Permanente Medical Group. Plaintiff Lawrence Fein, who suffered a heart attack, sued a doctor and a nurse affiliated with the medical group for misdiagnosing his ailment as a muscle spasm.

In addition to economic damages for medical expenses and lost wages, Fein was awarded $500,000 for pain and suffering by a jury. But the judge reduced the noneconomic damages to $250,000 in keeping with the state law. In upholding the lower court decision, the California Supreme Court stated in 1985 that the cap was fair because victims could still recover unlimited amounts for damages.

The court argued that one purpose of the cap was to "provide a more stable base on which to calculate insurance rates" by eliminating the "unpredictability of the size of large noneconomic damage awards, resulting from the inherent difficulties in valuing such damages and the great disparity in the price tag which different juries placed on such losses."

In examples of other state supreme courts that have upheld caps on malpractice damages:

Scholz challenged the caps on grounds that they resulted in unequal treatment of injured victims. But the high court ruled that Colorado's Health Care Availability Act was not unconstitutional because it "treats different people differently."

"Such observations do not amount to a showing that the HCAA violates the guarantee of equal protection of the laws," the court stated. "Most laws differentiate in some fashion between classes of persons. As a general rule, legislatures are presumed to have acted within their constitutional power despite the fact that, in practice, their laws result in some inequality."

The Idaho Constitution is similar to the Nevada Constitution in that both documents consider a right to a jury trial as being "inviolate." But Chief Justice Linda Copple Trout wrote for the court that that did not mean Idaho couldn't limit damages.

"It is clear that, under Idaho Constitution, the Legislature has the power to modify or repeal common law causes of action as it has done for governmental entities, workers' compensation and skiing activities," Trout wrote.

She added that the law did not violate the right to a trial "because the statute does not infringe upon the jury's right to decide cases. The jury is still allowed to act as the fact finder in personal injury cases. The statute simply limits the legal consequences of the jury's finding."

Caps stricken

Other state supreme courts reached different conclusions by finding fault with caps approved by their respective legislatures.

One of the harshest rebukes of a state legislature that had passed caps on damages for pain and suffering was delivered in 1999 by the Ohio Supreme Court in Ohio Academy of Trial Lawyers v. Sheward.

The court struck down a $500,000 cap and other aspects of a 1997 tort reform law at the request of the trial lawyers, who were joined by labor organizations and consumer advocates.

Ohio Justice Alice Robie Resnick wrote for the majority that the law represented "an attack on the judiciary."

"It marks the first time in modern history that the General Assembly has openly challenged this court's authority to prescribe rules governing the courts of Ohio and to render definitive interpretations of the Ohio Constitution binding upon the other branches," Resnick wrote.

"Fairness and judicial economy, as well as the preservation of judicial independence, require this court to address this cause, which is of the greatest concern to all of the citizens of Ohio. By doing otherwise, this court would become a willing participant in divesting the courts of judicial power and a coconspirator in the abdication of fundamental individual rights and liberties contained in our Constitution."

Other states struck down caps on damages for pain and suffering in personal injury cases that also rendered caps on medical malpractice damages as unconstitutional because they were contained in the same laws. As examples:

The court ruled that the cap was unconstitutional because it penalized severely injured victims and because it violated the separation of powers doctrine. The court deemed the cap to represent illegal "special legislation" because it would not have impacted individuals with minor or moderate injuries.

"The special legislation clause expressly prohibits the General Assembly from conferring a special benefit or exclusive privilege on a person or a group of persons to the exclusion of others similarly situated," Justice Mary Ann McMorrow wrote.

"In the case at bar, we conclude that (the law) undercuts the power, and obligation, of the judiciary to reduce excessive verdicts. The cap on damages is mandatory and operates wholly apart from the specific circumstances of a particular plaintiff's noneconomic injuries. Therefore, (the law) unduly encroaches upon the fundamentally judicial prerogative of determining whether a jury's assessment of damages is excessive within the meaning of the law."

The case involved John Lakin, who suffered brain damage while working on a house when a power nail gun drove a nail into his brain. The high court overturned a lower court decision that reduced the $2 million jury award for noneconomic damages to the cap limit.

In writing the court's opinion, Justice George Van Hoomissen stated that the right to a jury trial dates to English common law and had been part of the state constitution since it was drafted in 1857.

"Limiting the effect of a jury's noneconomic damages verdict eviscerates 'trial by jury' as it was understood in 1857 and, therefore, does not allow the common-law right to jury trial to remain inviolate," Van Hoomissen wrote. "Whatever the right to trial by jury meant in 1857, it meant precisely the same thing today."

The South Dakota Supreme Court has ruled a $1 million cap on all medical malpractice damages to be unconstitutional but has upheld a $500,000 cap on noneconomic damages. The Florida Supreme Court struck down a state law that capped damages for pain and suffering at $450,000 but upheld another law that established caps in medical malpractice cases that go to arbitration.

The Nebraska Supreme Court is reviewing a lower court ruling that deemed unconstitutional the state's $1.25 million cap on all damages.