Tort Reform in Georgia

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The tort reform legislation that passed the Georgia legislature in 2005 involved an unfortunate clash between the medical and legal professions. Then just a rank and file attorney handling catastrophic personal injury and wrongful death cases in metro Atlanta, and a back row member of the State Bar Board of Governors, I had no real leverage to do anything but join in futile protest. Some of my conservative friends in the legislature said they didn’t like the bill either, but were unable to do anything but go along with party discipline.

But I felt at the time that there could have been consensus legislation, on which both sides could have signed off, if the right things could have been done a year or two earlier.  Friends on the other side of the divide expressed the same sentiment. Unfortunately, we had a political train wreck in which the bill that passed was loaded with some provisions that were contradictory or unconstitutional.

One of the provisions is to cap "noneconomic damages" (pain, suffering, loss of quality of life, etc.) at $350,000 in medical malpractice cases. The economic reality is that people who suffer catastrophic noneconomic damages, but without large economic loss, generally cannot hire a lawyer capable of competently handling their case. This is because it takes $50,000 to $100,000 of out of pocket expense, mostly for expert testimony and dealing with the other side’s experts, to properly prepare a medical malpractice case for trial. Because few victims of malpractice can fund that kind of expense, lawyers typically have to front the expense. It is not a sane business decision to risk $100,000 of one’s own money on a case where the maximum recovery is $350,000, as for the death of a homemaker or retiree due to malpractice.  A 40% contingent fee in a $350,000 recovery would be $140,000. The statistical probability of success at trial in even the most meritorious medical malpractice case is maybe 20%.  Even if a lawyer were willing to take that risk, and were successful, the net benefit to the hypothetical client would be only $110,000 out of $350,000, hardly an attractive proposition for lawyer or client.

Thus, the $350,000 cap on noneconomic damages effectively denies access to justice in cases where a person’s life is destroyed or devastated, but the provable economic loss is relatively small.  If the legislature intended to deny justice to victims of catastrophic injury due to medical malpractice who are of modest means, there could have been more straightforward ways to do it. 

Yesterday the Georgia Supreme Court heard oral arguments in the case of Nestlehutt v. Alanta Oculoplastic Surgery, PC,  in which a trial court judge had held the cap unconstitutional.  Mrs. Nestlehutt was a real estate agent who found she was losing business to younger competitors, so she consulted a plastic surgeon about removing bags under her eyes and age lines around her mouth. The surgeon recommended simultaneous CO2 resurfacing and a full facelift. This was particularly risky in a patient of her age and complexion. To make a long story short, her face essentially fell off, leaving her with horrible permanent disfigurement such that she could hardly leave the house. The jury awarded $900,000 for the devastation of her quality of life.

Fulton State Court Judge Diane Bessen held that the $350,000 cap is unconstitutional because it violates right to trial by jury, equal protection of laws, and separation of powers.

At the Supreme Court, attorney Michael Terry argued for Mrs. Nestlehutt that the most egregious aspect of the cap is that it hurts the people who are injured the most. “No frivolous cases are affected by the cap,” said Terry. “This makes no sense. It is not rational.”

Defense attorney argued that, “The Legislature found there was a crisis” that justified the caps, Peters added, referring to lawmakers’ findings that limits on medical malpractice awards were needed to help health care providers secure affordable malpractice insurance coverage."

Questions from the members of the Supreme Court gave little clue how they may be leaning, according to Alyson Palmer of the Fulton County Daily Report.

Perhaps the best outcome would be if the court unanimously held the damages cap  unconstitutional, and sent everyone back to the drawing board to come up with a different form of medical liability compensation system involving a genuine tradeoff between the legitimate concerns of doctors and patients.

The insurance industry always winds up blaming injury victims and their lawyers for premium increases that result from investment losses and hurricanes.  However, there is a revealing article this week in the Atlanta Journal Constitution.

Increases of car and insurance rates of 5% to 11% in Georgia this year are — accordnig to insurance industry sources and experts — attributable to:

  • the recession
  • investment losses by insurance companies
  • hurricanes
  • rising cost of auto repairs

There is no mention of liability claims losses as a factor in rising premiums.

But I bet by the time of the next legislative session the insurance industry lobbyists will invent a way to blame all premium increases on injury victims, lawyers and juries.

My learned colleague and fellow Atlantan, Jonathan Wilson, writing on the Manhattan Institute’s PointofLaw.com blog, has responded to my earlier comment about the "stay of discovery" provision of the legislation recently passed as HB 29.

I had commented earlier, in part, that the legislation as passed would prompt a "rash of frivolous motions to dismiss as a stalling tactic" but will eventually become "much ado about nothing." He responded that this was "an outcome that’s hard to dispute, although I seem to have missed the plaintiff’s bar using that argument in favor of H.B. 29 before it was passed."

In the…

As an attorney representing people with serious injury cases in Georgia, I have to keep an eye on the solvency of the insurance companies that are contractually obligated to pay legitimate liability claims against their policyholders.  For most of my career, the solvency of insurers was seldom if ever a big concern.

In today’s economy, however, we can’t take anything for granted.  With the giants of industry and finance in deep trouble, insurance companies are not immune.  Heavily invested in stocks and commercial real estate, insurers are vulnerable to the downdraft in those sectors.

Reinsurers face similar problems. Reinsurance is a means by which an insurance company can protect itself with other insurance companies against the risk of losses. Insurance companies offset some of their risk exposure by selling it to reinsurers.

Due to the recession, the bear market and the credit crisis, more insurance companies are looking to reinsure more of their books of business in order to free up capital. But the reinsurance companies are facing all of the same problems, plus in some cases poor international currency exchange rates.

Reuters reported on April 1 that reinsurance rates for property catastrophe insurance rose by an average 8% worldwide based on January renewal rates. Reuters also reported in the same news release that reinsurance costs for US catastrophe risks rose by as much as 40% in 2008. So, it is clear that insurers around the world, and especially in the US, are struggling to find ways to reduce their risks in this very bad economic and financial time.

In this highly integrated world economy, everything is intricately interrelated. Problems in financial markets and real estate hurt insurance companies, which in turn hurts anyone who relies upon payments by insurance companies.

And when insurance companies experience financial problems, even in relatively ordinary times, they typically blame people who have been catastrophically injured for running up "frivolous" lawsuits, and push for new rounds of "tort reform."  In other words, bad things roll downhill.

So what are mere mortals to do about this?  I have my own ideas, but don’t choose to publish them and give the other side of my cases a window into my mind.

Daubert v. Merrell Dow Pharmaceuticals was a U.S. Supreme Court decision in 1993 that led to a sea change in standards for admitting expert testimony into evidence. Setting out a set of factors to be considered by courts in such decisions, it spread from questions of cutting edge science to the most mundane forms of expertise. 

The Daubert factors include consideration of whether the theory or technique can be and has been tested, whether the theory or technique has been subjected to peer review and publication, the potential rate of error, and general acceptance in the relevant scientific community.

Many …

At the beginning of the current legislative session, the Governor announced plans for a "frivolous litigation" to require that any plaintiff who loses a motion to dismiss to pay the defendant’s attorney fee, and to have an automatic and indeterminate stay of discovery while a motion to dismiss is pending.

As of yesterday, the bill was watered down by removing the attorney fee provisions, which are duplicative of not less than five other "loser pays" provisions in existing Georgia law, and to limit the automatic stay to 120 days with earlier discovery permitted regarding the basis of the motion to dismiss.

I testified briefly at the Senate Judiciary subcommittee that took up the bill.  While I expressed appreciation for withdrawal of the attorney fees provision, I pointed out that a defendant may already file a motion for protective order or motion for stay of discovery.  The bill does nothing positive that cannot be done under existing Georgia law.  Current law is not broken on this point, and that the "law of unintended consequences" is in full force and effect. 

The potential for frivolous motions to dismiss being used for purposes of delay, and for "accidental" destruction of evidence during the automatic stay is troubling.

If this bill becomes law, plaintiffs’ attorneys faced with a motion to dismiss will need to immediately conduct aggressive discovery about the basis of the motions including exhaustive 30(b)(6) depositions of corporate defendants regarding the basis of their motions,  serve notices to withdraw the frivolous defenses under existing attorney fee statutes, and schedule an expedited hearing to get the court to rule on the motions.  We would do well to have targeted discovery and briefs ready to meet any frivolous motions to dismiss. 

The new law, if enacted, will just add another layer of complexity, expense and delay, while accomplishing virtually nothing that the proponents say they want .