The latest issue of Medical Liability Monitor does a good job of summarizing the latest Texas tort reforms that went into effect September 1, 2011.  These reforms, known as House Bill 274, are connected to 2003′s House Bill 4, legislation that put Texas on the leading edge of medical liability tort reform.  The following reforms are part of HB 274: 

• Adopts rules allowing a defendant to move for dismissal of a case before discovery begins.
• Loser pays provisions related to a motion to dismiss, allowing the prevailing party to recover costs and reasonable attorney fees from the losing party under certain scenarios.
• Removes several impediments to obtaining interlocutory appeal.
• Several provisions designed to encourage settlement.
• Eliminates an existing provision allowing defendants to identify, and plaintiffs to join, a responsible third party after the statute of limitations has ended.

Will these reforms allow claims that have merit to reach a judgment more quickly?  Will they reduce medical liability insurance costs?  Will they reduce health care costs?  Are there other reforms that should be implemented?  Should other states follow Texas’ lead?  Let us know what you think.

Mandatory and binding arbitration clauses are included in a large proportion of consumer contracts.  These arbitration clauses are being challenged in various courts throughout the country on a daily basis.  A couple of the key attacks on the clauses are:

• The two parties, the business and the consumer, are not on equal footing, and;
• The clauses are not valid in cases where the person signing the agreement has died and the estate has pursued liability actions against a third party. 

Actuaries rely on stable legal environments when analyzing historical claim reporting and settlement patterns to produce reasonable loss reserve estimates and to price their insurance products adequately.  Invalidating these clauses may substantially disrupt the legal environment.

The uncertainty related to enforcing these contracts and the arbitration provisions weigh heavily on business.  On the other hand, injured parties need to have reasonable access to recover for damages caused by a third party.  Every year there is proposed federal legislation to limit or eliminate arbitration clauses in contracts, and many lawyers contend that consumers are being abused by these clauses. 

What do you think: Are outcomes for consumers worse under arbitration than under a traditional liability suit?  Are arbitration clauses a reasonable way to produce tort reform when other tort reform approaches like capping non-economic damages are not palatable?  Should there be more clarity for businesses to fully understand that these agreements are enforceable and are valid for living persons as well as the estates of deceased persons?  Should people have the free right to sign contracts with arbitration provisions if those same people are deemed to be on unequal footing with the party with whom the contract is signed? Let us know what you think.

On March 22, 2010 the Georgia Supreme Court, in Atlanta Oculoplastic Surgery v. Nestlehutt, struck down as unconstitutional Georgia’s statutory limitation on non-economic damages in medical malpractice actions.     Georgia had adopted a cap of $350,000 on non-economic damages in any action (including wrongful death) for medical malpractice cases as part of its 2005 tort reform statute. (S.B. 3).   

The 2005 bill enacted a number of measures intended to reduce both the incidence of and decrease the cost of litigation.  In addition to the $350,000 cap on non-economic damages, the bill also included increased standards of proof for certain medical malpractice claims, and a loser-pays offer of judgment rule.

The Court upheld the ruling of the trial court, that the statute was unconstitutional in light of Georgia’s constitutional provision that “[t]he right to a trial by jury shall remain inviolate.” (Ga. Const. of 1983, Art. I., Sec. 1, Par XI(a)).   The Court’s opinion, which was unanimous, looked to prior Georgia cases intepreting Georgia’s unique “right to trial” provision, finding that they prohibited statutory limitations on the right to trial in cases where the common law had permitted a plaintiff to have a trial.  The Court found that a cause of action for medical malpractice was well-established prior to the adoption of Georgia’s Constitution and was, therefore, a right that could not be limited by statute.

Earlier in the month, the Georgia Supreme Court upheld two provisions of the state’s 2005 tort reform statute.  In Smith v. Baptiste the court upheld an offer of judgment rule (codified at O.C.G.A. 9-11-68) that allows a defendant in a tort case to ‘shift’ its attorneys fees to the plaintiff if the plaintiff refuses to accept an offer of settlement and ultimately fails to recover more than the amount offered.    And in Gliemmo v. Cousineau the court upheld the Georgia statute’s limitation of liability for emergency room doctors which limits liability only to claims resulting from “gross negligence only as shown by clear and convincing evidence.”

Merlinos & Associates can help you assess the effects of tort reform rulings in your business, including reserving and pricing issues.  See our Areas of Expertise for more details.