11/29/2004

Texas Tort Reform - Tort reform as it pertains to Health Care

From Common Ground Common Sense comes a disaster warning:

Texas Tort Reform - Tort reform as it pertains to Health Care

Texas Tort Reform Primer for Insurors

In the 1994 Texas state legislative elections, numerous candidates ran for office on a platform commonly referred to as 'tort reform.' As a result, Texas residents were inundated with information regarding alleged lawsuit abuse within the state. Governor George W. Bush made tort reform a centerpiece of his successful 1994 Texas gubernatorial campaign.

Bush pointed to alleged flaws inherent within the system which led to huge jury awards disproportionate to awards in the rest of the country.

When the 1995 state legislative session opened, there was already a groundswell of support for comprehensive tort reform within the legislature itself (due, no doubt, largely to the success in the recent elections of tort reform advocates). As early as January 11, 1995, a large number of bills dealing with many areas of tort reform were introduced in the Texas Senate.. The tort reform battle lines were drawn primarily between two distinct camps. Representing the advocates of tort reform were primarily two groups -- Texans for Lawsuit Reform, the primary lobbying group behind tort reform, and Citizens Against Lawsuit Abuse, a more "grassroots" lobbying group. The primary player on the other side of the reform issue was the Texas Trial Lawyers Association, the primary lobbying group opposing many of the proposed reform measures, and Alert Texas, a public awareness lobbying group also opposing many of the proposed tort reform measures.

When the smoke finally cleared on the tort reform battle, seven new bills were passed and the judicial landscape had been dramatically altered. The state legislature passed bills revising various aspects of governmental liability, medical liability, punitive damages, and joint and several liability. The legislature also passed bills altering the venue laws, establishing a statute for dealing with frivolous lawsuits, and reforming the Deceptive Trade Practices Act and Article 21.21 of the Texas Insurance Code. The following is an analysis of the changes wrought in tort reform and a discussion of how these changes will impact insurers involved in litigation in this new legal climate.

II.

Tort Reform Summary

The following are brief summaries of the seven bills that constitute Texas tort reform. These bills are all effective September 1, 1995. However, as explained in the following chapters, some of the new statutes only apply to cases that "accrue" after September 1, 1995. The new laws do not define when a cause of action "accrues", but the Texas Supreme Court has previously held that a cause of action "accrues" at the time facts come into existence which authorize a claimant to seek judicial remedy. With certain exceptions, an action accrues at the date an injury occurs regardless of whether the injured party is aware of the injury at that time. All of the new statutes apply to all cases filed after September 1, 1996, regardless of when the cause of action accrues. Accordingly, for cases filed between September 1, 1995, and September 1, 1996, we can expect numerous disputes regarding when particular actions "accrued" and whether the new statutes will be applicable. In part, the new bills that constitute tort reform make the following changes in Texas law:

1. Punitive Damages

The new Texas punitive damages law greatly expands the types of cases in which punitive damage awards will be statutorily limited or "capped." Previously, the only instances where a cap could be placed on punitive damages were cases in which the only allegation was negligence. The new law caps punitive damages at the amount of noneconomic damages (up to $750,000), plus two times the amount of economic damages or $200,000, whichever is greater, in almost every case in which punitive damages are sought. Further, punitive damages can only be awarded upon a showing of fraud or malice as specifically and narrowly defined by the statute. In cases involving punitive damages, defendants now have a statutory right to request separate trials, one to determine liability and actual damages, the second to determine punitive damages. Also, punitive damages now cannot be awarded unless there is "clear and convincing evidence" that they are justified, and the new law specifically describes the kind of evidence a jury can consider when awarding punitive damages.

2. Venue

Previously, Texas venue laws were very liberal and allowed plaintiffs to file suit in any county where some "part" of the action took place. The new law now generally limits the places in which suit can be filed to the county in which all or a "substantial part" of the events or omissions took place, where the defendant resides, or if neither of those locations are applicable, where the plaintiff resided at the time his or her injury occurred. More importantly, the new venue laws also have a significant impact on where corporations can be sued. Formerly, plaintiffs could bring suit against a corporation in any location where it had an agency or representative. Under the new law, unless the above provisions apply, the plaintiff would be forced to sue where the corporation had its principal office. Furthermore, the new statute for the first time gives defendants the right to immediately challenge a court's ruling on mandatory venue issues without having to wait until the final conclusion of trial.

3. Proportionate Responsibility

The new law now applies to all tort actions (as opposed to just negligence claims), and prevents a plaintiff from recovering if he is more than 50% responsible for his damages. Texas lawmakers have also limited the amount of liability individuals and corporations will incur for the acts of co-defendants through a curtailment of the doctrine of joint and several liability. Now, defendants will be held jointly and severally liable only if they are found more than 50% responsible for the plaintiff's damages. This is a big change from the former statute, under which defendants with slight responsibility (as little as 11% under some circumstances) would often end up paying the entire amount of the judgment. Also, a defendant will now be held jointly liable in environmental pollution and toxic tort claims only if his portion of responsibility is 20% or greater (as opposed to the former law, under which a defendant could be held jointly liable, and thus responsible for the entire amount, if he was only 1% responsible for the damages). Defendants (as opposed to just the plaintiff) will now be able to add other defendants who are also responsible for the harm caused the plaintiff and juries will be able to deliberate on the percentage of responsibility that should be attributed to all parties involved, not just those that the plaintiff chose to sue. These new changes will certainly have a significant impact upon defendants' choices on who to add to their lawsuits, and how those suits will be decided.

4. Texas Deceptive Trade Practices-Consumer Protection Act (DTPA) and Texas Insurance Code Article 21.21

The new changes to the DTPA were designed to limit the types of lawsuits in which this cause of action can be plead. Pursuant to the recent changes to the statute, the DTPA can no longer be used to recover for damages "based on the rendering of a professional service." Therefore, professionals such as lawyers, attorneys, architects, CPAs, insurance agents, etc., will, for the most part, no longer be sued under the DTPA. The statute will also no longer apply to personal injury or death cases, consumer transactions involving a written contract in excess of $100,000 if the consumer is represented by counsel, or transactions that exceed $500,000. The statute also puts into place a new damages scheme that separates damages into "economic" and "mental anguish" damages and makes "mental anguish" and multiple damages more difficult to recover. Furthermore, the statute now requires the plaintiff to have "relied" on the alleged misrepresentation to obtain multiple damages and greatly strengthens the notice requirement of the statute. The statute also now allows either party to compel mediation shortly after suit is filed.

Many of the changes to the DTPA were also incorporated in Texas Insurance Code Article 21.21 including the new notice and mediation provisions and the removal of automatic trebling upon certain findings. Plaintiffs can no longer sue for unfair claims settlement practices as defined by Insurance Department Board Orders, although many of the provisions out of the old Board Orders are now specifically recited in the statute.

5. Frivolous Lawsuits

In an effort to discourage parties from filing meritless claims, the new Texas law essentially adopts the Federal Court rule that allows for the imposition of penalties against those who file lawsuits merely to harass another party. When parties are forced to defend against frivolous lawsuits, they may recover their fees and expenses.

6. Medical Liability

The new law discourages frivolous medical malpractice claims by requiring plaintiffs to come forward with expert medical testimony establishing the validity of their claims at an earlier point in the suit. Those plaintiffs unable to come up with enough expert medical testimony will have their claims dismissed. The law also clearly establishes standards for what will constitute "expert testimony," and provides for the imposition of sanctions against parties who file frivolous claims.

7. Governmental Liability

A $100,000 limit has been set as the amount of damages for which certain governmental employees may be personally liable. This limit applies only when the individual is insured under the governmental entity's policy. This will allow the employees to be "protected" if the entity chooses to provide insurance or indemnification, while allowing injured parties to recover against employees who might have been protected previously from judgment due to a lack of assets.

And add to it: Voters were conned into voting for cheaper premiums which never materialized...

http://releases.usnewswire.com/GetRelease.asp?id=38849
To: National Desk, Health Care Reporter

Contact: Douglas Heller of the Foundation for Taxpayer and Consumer Rights,
310-392-0522 ext. 309

SANTA MONICA, Calif., Oct. 26 /U.S. Newswire/ -- The nation's largest medical malpractice insurer, GE Medical Protective, has admitted that medical malpractice caps on damage awards and other limitations on recoveries for injured patients will not lower physicians' premiums.

The insurer's revelation was made to the Texas Department of Insurance (TDI) in a regulatory filing obtained by the Foundation for Taxpayer and Consumer Rights (FTCR). The revelation was contained in a document submitted by GE Medical Protective to explain why the insurer planned to raise physicians' premiums 19 percent a mere six months after Texas enacted caps on medical malpractice awards. In 2003, Texas lawmakers passed a $250,000 cap on non-economic damage compensation to victims of medical malpractice caps after Medical Protective and other insurers lobbied for the change.

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