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Litigation Newsletter

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Tort Reform and Limiting Malpractice Awards

High profile personal injury lawsuits have left many with the impression that juries systematically award multi-million dollar awards in order to punish wrongdoers. Although juries may, and frequently do decide to make such awards, most states have restrictions (caps) on the amount of such awards, resulting in the reduction of damage awards to comply with such restrictions. The general movement of enacting such measures is known as “tort reform.” One of the primary purposes behind tort reform is to contain rising health care and insurance costs.

After first gaining national attention in the 1980’s, the rising costs of insurance policies and premiums recently reappeared as an issue of national prominence. Although experts and lawmakers disagree on how to contain such rising costs, few deny that the problem has reached epidemic proportions, affecting professionals and ultimately consumers. Special attention has been given to health care providers and the rising costs of medical malpractice liability insurance; in 2004, the American Medical Association indicated that at least 20 states were suffering from a medical malpractice insurance crisis.

State Regulations on Tort Reform

During the period between 1984 and 1986, commercial insurance policy premiums essentially tripled. However, in response to reforms limiting exposure to liability, in 1987 the cost of such policies fell by 40%. Thus, many believe that placing caps on personal injury awards (including medical malpractice) will have similar results and reduce premiums in connection to malpractice liability insurance and health insurance. As of 2007, over one-half of the states have some form of restrictions on recoverable punitive damages, and numerous others are considering such legislation.

Some award restrictions limit recoveries to an amount double or triple the compensatory damages award. Other states place restrictions by specifying a fixed sum or amount. Some states that do not have a cap on non-economic damages have caps on punitive damages. Further, some states limit such restrictions to damages awarded to specific types of injuries, e.g., medical malpractice.

Medical malpractice continues to be an area of concern for many state legislatures. During the 2005 legislative session, 32 states enacted over 60 bills, and two states had Supreme Court rulings related to medical malpractice.

Effect of Tort Reform

According to a 2004 Congressional Budget Office (CBO) report, the basic presumption fueling such reforms is that juries tend to award excessive amounts of damages and that, generally, the number of tort claims filed should be reduced. However, the report also indicated that numerous studies, analyzing the effect of such reforms, show that there is “little systematic evidence that any one type of reform [has] had a significant impact…” A 2008 study by Columbia University researchers actually showed that women and infants actually fared worse in states with caps on non-economic damages. Thus, although the effect of such reforms is debatable, the fact remains that many view such measures as a panacea for excessive jury awards.

Lawsuit Considerations: State and Federal Law

The potential award for a victim of a serious injury may vary significantly by state, since state laws regarding caps on damages differ. Congress has considered numerous types of legislation that may eventually affect the validity and impact of state laws regarding caps on damages. If Congress enacts tort reform measures in medical malpractice lawsuits, state laws covering similar issues may potentially be preempted by federal law.

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