The newsletter of the ISBA’s Standing Committee on Women and the Law
Senate Bill 475—Cause for concern or self-generated crisis?
On August 25, 2005, at St. Anthony’s Hospital in Alton, Illinois, Governor Rod Blagojevich signed into law, Senate Bill 475 (SB475) which, among other things, effectively places statutory limitations (caps) on noneconomic damages (e.g. pain and suffering) for plaintiffs who file lawsuits against physicians and hospitals. The legislation limits the amounts paid for noneconomic damages in an action against doctors to $500,000 and $1 million for hospitals. According to the General Assembly’s findings, the caps were necessary due to the increasing costs of medical liability insurance and its resulting financial burdens on doctors and hospitals.1 The increased insurance premiums have also led to reductions in the availability of medical care in portions of the State, and is believed to have discouraged some medical students from choosing an Illinois medical school and pursuing their careers in Illinois.2 This law, with its possible constitutional repercussions, has sent victims of medical malpractice and trial lawyers alike into great despair. Conversely, physicians and hospitals are breathing a sigh of relief. With extremely viable arguments for and against caps, one wonders whether this new legislation is actually cause for concern or merely a self-generated crisis.
Although the entire State of Illinois has been affected by rising insurance premiums for doctors, St. Clair and Madison Counties have felt the brunt of criticism for the increased malpractice lawsuits they yield and the exodus of doctors leaving the area. The American Tort Reform Association (ATRA) has dubbed these counties as the 2004 top 2 ranked judicial hellholes in the country.3 Judicial hellholes, as defined by ATRA, are places that have a disparate and harmful impact on civil litigation.4Purportedly, plaintiffs seek these venues because they harvest excessive verdicts and settlements.
Recently, the St. Louis Post Dispatch reported that tort reform advocates estimate that about 160 physicians, most of them specialists, have fled the Metro East area for states with lower malpractice insurance rates.5 However, the verdicts yielded in both St. Clair and Madison County in recent years do not directly explain the departure of so many doctors. For instance, in St. Clair County, between 1999 and 2004, there were 295 medical malpractice actions filed. Of those 295 cases, only 10 went to trial where a verdict was rendered. Of those 10, eight yielded verdicts for the defendant. One of those verdicts was against a doctor for $760,000 and was not appealed. Of note is the fact that ISMIE Mutual Insurance Co., the state’s largest provider of malpractice insurance, has maximum insurance coverage of $1million for doctors. Hospitals are self-insured. Nevertheless, the other verdict was against a hospital, and that case had nothing to with whether malpractice was committed in that it concerned a dispute over whether a patient had been dropped. Similarly, in Madison County, it has been reported that between 1992 and 2005, the average verdict in medical malpractice actions was $523,333.6
Based on this information, these counties do not appear to be worthy of the judicial hellhole title, at least as it pertains to medical malpractice litigation. If precedent is any indicator of forecasted outcomes, it appears that this new legislation may not be as troublesome as expected. Of important relevance however, is that some contend that the cap on damages still may adversely affect settlements.
Prominent Belleville, Il. plaintiff’s attorney, Bruce Cook agrees that the new law is virtually harmless. “Caps will have little to no effect,” he said. “It will mainly affect very few cases and those will be the truly catastrophic ones. The only thing that this new legislation has done is quelled the complaints of insurance companies. Other than that, no substantial repercussions as it pertains to affecting lawsuits will result.”
Dr. Reginald Allen, a urologist at Gateway Regional Hospital in Granite City, Illinois, stated that he has been in Southern Illinois for approximately a year now. He indicated that the primary reason for him coming to this region is because all of the specialists in his area had exited. Dr. Allen opined that the new legislation really does not matter. “Right now, insurance companies only pay $.30 of every premium dollar for claims. With time, maybe premiums will decrease, but not soon. The new legislation is a step in the right direction, but it is not a magic bullet.” Surprisingly, it was recently reported that this past spring, ISMIE kept level or lowered premiums for most of its policyholders.7
All legal practitioners, including judges and professors of law, can agree with the general concept that injured parties should be compensated for their injuries. After all, that is what the system of justice is designed to promote. However, some express that this new legislation, although it sounds fastidious at first glance, really may prove to be beneficial in some aspects. Former Fifth District Appellate Court Judge, Clyde Kuehn, opined that the uproar about this new law is out of line with reality. “A lot of doctors complain because they may have little to no liability in a case but are named in the complaint anyway and have to bear the burden of obtaining counsel. Caps, along with the additional policing that the statute provides, will reduce that from happening and limit the number of frivolous lawsuits that are filed across the board.”
Amongst other matters that SB475 addresses is the policing and curbing of frivolous medical malpractice lawsuits filed. The legislation makes it a bit more laborious to file these suits by increasing the qualifications of the certifying physician to be in accordance with the expert standards set forth in 735 ILCS 5/8-2501, which was also amended by the bill.8 It also requires identification of said physician where previously he or she remained anonymous. In addition, 735 ILCS 5/2-622 was amended to include language requiring that a separate written report, as opposed to just an affidavit, be filed for each defendant named in a lawsuit. The statute maintains that if the defendant is an individual, the report must come from a physician licensed in the same profession and be within the same class of license as the named defendant.9 However, the statute was amended to reflect that if the defendant is not an individual i.e. hospital, the report must be made by a physician qualified, by experience, with the standard of care, methods, procedures and treatments relevant to the allegations stated in the complaint.10 Moreover, there shall not be an extension for filing the affidavit and report beyond the 90 days given after filing the complaint, except when there has been a withdrawal of the plaintiff’s attorney.11
Notwithstanding the aforementioned additional safeguards instituted by Senate Bill 475, the main attraction remains the statutory limitations on noneconomic damages. Some scholars have expressed vehement discontentment regarding caps. Professor Lucinda Finley, a professor of law at the University of Buffalo Law School and author of “The Hidden Victims of Tort Reform: Women, Children and the Elderly,” indicated that noneconomic damages are misunderstood, and it is easy to misinterpret them and categorize them as a windfall.12 Finley says that “damage caps are de facto discrimination, …and we are moving toward a society where the worst types of harm such as a loss of a child, loss of fertility, or loss of ability to engage in meaningful activities are those least likely to be compensated and toward a society that dispenses justice according to a person’s wage-earning ability, not his or her individual circumstances.”13
Still, proponents of caps assert that they are necessary to ensure that citizens have a sufficient supply of physicians available in their respective regions, and caps would assist in maintaining quality medical care for patients. Fred J. Hellinger, Ph.D. and William E. Encinosa, Ph.D., of the U.S.Department of Health and Human Services, Agency for Healthcare Research and Quality, examined the impact of state legislation that caps damages in malpractice cases on the decisions of doctors about where they practice medicine.14 The authors claim that they are the first to research and examine this correlation. According to the study, the following factors unique to a state, affect the decisions of physicians to settle in a particular state: personal incomes, state unemployment rates, the number of citizens per square mile in a state, state population over the age of 65, and the market for medical malpractice insurance.15 Analyzing these variables using both statewide and county-level data, it was found that states with caps on noneconomic damages have 12 percent more physicians than states that do not have caps.16 It may be some time, however, before Illinois can determine if SB475 will indeed be instrumental in retaining and attracting physicians based upon the aforesaid variables.
Given the intense opposition to SB475, it is certain to be challenged. If so, the fact-finding of the General Assembly will be accorded great deference by the judiciary. A constitutional challenge will not prevail just by showing that the legislature was mistaken in its findings.17 Illinois State Senator James F. Clayborne, one of the sponsors of SB 475, asserts that the legislation was an extraordinary effort to ensure that everyone has access to the same quality of healthcare. “The problem that was facing our citizens is that a lot of the healthcare providers were leaving Illinois, especially in those cities and towns in the Southern region,” he stated. “ For example, there were specialists in Belleville and Granite City who left and went to St. Louis area hospitals as a result of either high premiums, or the intense litigious environment. Quality healthcare and specialists need to be readily accessible and available to the residents.” With regard to critics of caps and the opinions of some that presume that these limitations unjustly discriminates against victims of malpractice, Clayborne added that the legislation was a balance. “The bill is not perfect and proponents and opponents of the bill did not get everything that they wanted, but it was a compromise. That is how laws are perfected.” Moreover, he indicated that there is much more to this legislation than simply the limitations placed on noneconomic damages. “This law also provides for certain economic damages to be awarded to those plaintiff’s who are unemployed and don’t have income by imputing to them an Average Weekly Wage (AWW) as determined by the Illinois Workers’ Compensation Commission. So, there are many facets to this legislation that have been overshadowed by the cap proviso.”
As a comparison, California enacted the California Medical Injury Compensation Reform Act (MICRA) in 1975. This law placed caps on noneconomic damages at $250,000. It has been cited as a model and example of how caps on damages can lower insurance premiums and thus retain fleeing physicians. It was held to be constitutional in 1985 in the case of Fein v. Permanente Medical Group.18 Fein was a medical malpractice action where, plaintiff, a 34-year-old attorney was improperly diagnosed with having chest muscle spasms and sent home.19 It was later determined that the he was actually suffering from a heart attack.20 As a result of the delayed diagnoses, it was opined, through expert testimony, that the plaintiffs’ life expectancy was reduced by one-half.21After trial, the jury returned a verdict compensating the plaintiff for medical expenses, lost wages, future medical, and future wages lost as a result of the reduction in his life expectancy.22 The jury also awarded non-economic damages for pain and suffering and other intangible damages in the amount of $500,000.23 The case ultimately reached the California Supreme Court, where it was asserted that the cap on noneconomic damages, as set forth in the MICRA, was unconstitutional.
The Supreme Court in Fein championed brevity in its analysis of the constitutional arguments presented by the plaintiff. The argument claiming that the statute denied due process to medical malpractice victims because it limits their recovery without giving them an adequate quid pro quo, or something in exchange for the limitation, failed to persuade the court. The court reasoned that there was no vested property right in a particular classification of damages and the “constitutionality of measures affecting such economic rights under the due process clause does not depend on a judicial assessment of the justifications for the legislation or of the wisdom or fairness of the enactment.”24 The court further added that the right to recover noneconomic damages is not immune from reduction by the legislature. Having iterated that fact, the court held that the legislation was rationally related to the legitimate state interest of reducing the cost of medical malpractice litigation and restraining the increase in malpractice premiums.25 Similar to SB475, the court noted that there were numerous provisions in MICRA that affected doctors, insurance companies, and malpractice plaintiffs in the government’s attempt to reduce malpractice premiums.
In addition, constitutional arguments were presented on the grounds of equal protection violations because the law discriminated between malpractice victims and other tort victims by limiting their recovery. It was further contended that the law denied a complete recovery of damages to malpractice victims with noneconomic damages in excess of $250,000.26 These arguments were found to be equally unavailing. The court reiterated that the legislation was rationally related to a legitimate government purpose. The court did not question the reasonableness of the legislature in obtaining cost savings via a reduction in noneconomic damages. The court added that, “just as the complete elimination of a cause of action has never been viewed as invidiously discriminating within the class of victims who have lost the right to sue, the $250,000 limit which applies to all malpractice victims does not amount to an unconstitutional discrimination.”27
In any event, there has been a lot of discussion and contention amongst members of the legal community and even some doctors about the “real” reasons why insurance premiums are so exorbitant. Bad investments made by insurance companies and elevated defense costs are speculated to be two of the primary reasons for the increase in premiums. Critics maintain that if caps are instituted, decreased insurance premiums can only be realized if there is some accompanying insurance regulations. In fact, premiums rose in California by 450 percent in the first 13 years after enactment of MICRA and only decreased when voters passed the insurance reform initiative.28 Judge John Baricevic of the 20th Judicial Circuit acquiesced. “The key is that there be caps on damages in conjunction with insurance regulation,” he stated. Dr. Stephanie Kelly, a Waterloo OB-GYN expressed the same sentiment. Her annual premium has risen to $99,700 up from $55,000 in 2000.29 She indicated that in order for the caps to be effective, “it’s got to be a combination of regulation of the insurance industry, and the reform.”30
Senate Bill 475 does in fact have provisions for increased insurance regulation. 215 ILCS 5/155.18 entitled “Medical Liability insurance; rates; standards” was amended by the bill to reflect increased supervision by the Secretary of Financial and Professional Regulation (Secretary), of insurance companies and their decisions to increase premiums. The additional language states in part:
(2) If …1 percent of a company’s insureds within a specialty or 25 of the company’s insureds (whichever is greater) request a public hearing, (ii) the Secretary at his or her discretion decides to convene a public hearing, or (iii) the percentage increase in a company’s rate is greater than 6 percent, then the Secretary shall convene a public hearing in accordance with this paragraph (2). The Secretary shall notify the public of any application by an insurer for a rate increase ...The Secretary may, by order, adjust a rate or take any other appropriate action at the conclusion of the hearing….(5) The Secretary may request any additional statistical data and other pertinent information necessary to determine the manner the company used to set the filed rates and the reasonableness of those rates. This data and information shall be made available, on a company-by-company basis, to the general public.31
This power to review and override rate increases is unprecedented in Illinois. Moreover, if there is a determination that any violation of the statute was wilful or the company has repeatedly violated any provision of the statute, certain penalties will apply including payment of $1,000 per day by the company for each day the violation endures.32
In addition, there are a plethora of regulations as it pertains to insurance company reporting of malpractice claims, including verdicts, settlements, dismissals of cases and even the dissemination of the outcome of post trial motions and the types of damages awarded.33 All of the aforesaid information is to be made available to the general public via a Web site, with the exclusion of the names and addresses of parties to suits. Certain actuarial information of the insurance company is also to be provided to the Secretary.34 This oversight of physicians and liability insurance carriers is certain to make doctors more cautious and attentive of their actions and hinder avaricious behavior on the part of insurance companies.
Despite the new rules and regulations provided for in this legislation, there are still a myriad of expressions and opinions harbored within the legal profession regarding the feasibility of caps. The intellectualization of this subject is quite enchanting in that it invites various schools of thoughts including the idea to have medical malpractice litigation operate similar to workers compensation. Roy Dripps of the Lakin Law Firm in Wood River, Il, suggests that compensating only for medical expenses incurred and any resultant disability, and eliminating pain and suffering in its entirety, will contain this litigious tort system. The intensity of opinions held by proponents and opponents of caps is quite compelling and there is plausibility and validity to both arguments. While both sides are staunch contenders of their respective positions, there remains the question of whether Senate Bill 475 will indeed pass constitutional muster.
If fidelity to precedent is the measure, opponents of caps are predicting that the new legislation will be held unconstitutional by the high court in Illinois. The Supreme Court in Best v. Taylor Machine Works et al.,35 a product liability case, struck down the Civil Justice Reform Act (Public Act 89-7), which placed caps on compensatory damages for noneconomic injuries in common law actions for death, bodily injury, and property damage. The Court held that the cap violated the special legislation (equal protection) clause of the state constitution in that it was arbitrary and not rationally related to a legitimate government interest.36The Court further held that capping noneconomic damages was a legislative remittitur, which unduly infringed upon the power of the judiciary to reduce excessive verdicts and thus violated the separation of powers clause of the state constitution.37 The overhaul of the entire tort system was the purpose behind Public Act 89-7 and not just the medical and health care industry. Public Act 89-7 intended to promote consistency in jury awards for all negligence and product liability claims, promote and protect the economic climate of the state, and reestablish the credibility of the civil justice system.38 Revamping medical malpractice litigation was not the foremost concern as is in the instant case, but the reduction of the systemic costs of tort liability, which covers a wide array of litigation as it pertains to negligence and product liability claims.
In its defenses to the constitutional challenges presented in Best, proponents of this new legislation most certainly will discern the issues and concentrations of Public Act 89-7, with the findings and purpose behind Senate Bill 475, which is directed solely toward renovating medical malpractice litigation and keeping quality healthcare in Illinois. However, there are still other constitutional challenges to capping noneconomic damages that were not addressed in Best, which may render SB475 unconstitutional, such as the right to trial by jury and the right to remedy and justice. But even these challenges could yield a different result than that in Best if the high court deems that the new law is indeed rationally related to the legitimate state interest of retaining an adequate supply of quality healthcare in Illinois by lowering insurance premiums for doctors.
The proclivity of the Illinois Supreme Court is uncertain at this juncture. The court, for its perusal, has the impacting persuasive authority of the Supreme Court of California ruling in favor of the constitutionality of medical malpractice caps. There is also the recent decision of the Supreme Court of Wisconsin ruling against the constitutionality of its $350,000 cap. In Ferdon v. Wisconsin Patients Compensation Fund et al.,39 the plaintiff was injured at birth, which resulted in him suffering from a partially paralyzed and deformed right arm. After trial, the jury awarded $700,000 in noneconomic damages. The defendant later moved to have the award reduced in accordance with a Wisconsin statute that placed limitations on noneconomic damages at $350,000.40The trial court reduced the award and the appellate court subsequently affirmed. On appeal to the Supreme Court, the plaintiff challenged the statute on several constitutional grounds, specifically to-wit, violation of equal protection, violation of right to trial by jury violation of due process, violation of separation of powers, and violation of the right to a remedy.41 The court only addressed the violation of equal protection challenge and performed a thorough dissection of the legislation and found the statute to be unconstitutional.
The court noted that caps on damages were not per se unconstitutional, as it had previously upheld a cap on noneconomic damages for wrongful death in medical malpractice actions.42 In its review of the statute using a rational basis standard, the court intensely scrutinized, and “probed beneath the claims of the government,” to decide if the law was rationally related to the legitimate government interest of maintaining professional liability insurance, reducing the medical costs of consumers, maintaining adequate medical services and ensuring physician availability in the state.43 The court determined that the greatest impact of the statute fell on the most severely injured victims. Unlike California, where there was a complete deference to legislative findings, Wisconsin did not yield to the legislature as vigorously and conducted an independent review of the documents submitted to the legislature. In doing this, the court found that malpractice claims did not affect insurance premiums and did not reduce overall health care costs for consumers.44 Moreover, after conducting its own inquiry, the court concluded that caps did not adversely affect the economic status of the respondent insurance company, and was not related to physician migration. As such, it was held that the legislation was arbitrary and not rationally related to a legitimate government interest, and thus unconstitutional.
The prevailing opinion around courthouses is that Senate Bill 475 will be held unconstitutional. Although the Supreme Court, in Best, has already ruled that a cap on noneconomic damages in all tort cases is not rationally related to a legitimate government interest, Senate Bill 475 is much more isolated in topic. If Southern Illinois is any indicia of the statewide medical crises, it would be unwise to summarily rule out the possibility that the bill may in fact be held constitutional. In any event, SB475 will, for a long time, be a savagely debated topic. Justice Holmes once described judges as interstitial legislators, not promulgating the law, but making certain that it does not offend well-settled maxims. As learned in grade school, the legislative branch makes the laws, the executive branch enforces the laws, and the judicial branch interprets the laws. Scholars have noted that the role of judges is not to legislate, but to function as historical investigators who administer law according to the intent of those who make it.45Accordingly, the Court in Best has already ruled that it will not judge the skill and good judgment of the legislature and it will not balance the advantages and disadvantages of an enactment. It will instead determine the meaning and effect of the constitution in light of this new legislation.46 Once this is done, then and only then will we know whether Senate Bill 475 is a dagger to the heart of the citizens or just a glancing blow that will ultimately benefit them.