August 2005
Initiative 330 — The Medical Malpractice Initiative
Rendering the Service of Preserving the Right to Trial by Jury, Due Process, and Equal Protection of the Law
by Ron Ward, WSBA President
Initiative 330 is a measure on the November general-election ballot sponsored by the Washington State Medical Association (WSMA), which characterizes it as an act relating to healthcare liability reform.
On June 3, 2005, presentations on this initiative were made before the Washington State Bar Association Board of Governors by Thomas J. Curry, CEO of the WSMA; John Connelly, president-elect of the Washington State Trial Lawyers Association (WSTLA); Mike Kreidler, insurance commissioner of the state of Washington; Jeff Frank, president of the Washington Defense Trial Lawyers (WDTL); and Barbara Flye, former executive director of Washington Citizen Action. Following discussions of the merits, the Board of Governors concluded that the elements encompassed in Initiative 330 are within GR 12,1 i.e., they relate to, or affect, the practice of law or the administration of justice, and that the WSBA could take a position on the initiative. After extensive debate, the Board voted 12-0-1 to oppose Initiative 330.
Effect on the Practice of Law, the Administration of Justice, and the Public Interest — a Synopsis of Selected Provisions from I-330
Even cursory scrutiny of the provisions of I-3302 conclusively establishes that it is well within the purview of GR 12, in that it will have a dramatic impact on the practice of law, the administration of justice, and most importantly on the public interest related thereto. This is particularly true with regard to the interests and rights of injury and medical-negligence victims and their families, and also of the civil justice system as a whole.
The WSMA initiative is as far reaching a tort-reform measure as I have ever read. It imposes caps on non-economic damages in all personal-injury actions. A cap is imposed in all healthcare liability cases involving medical-negligence victims and on derivative claims, such as injury to the parent-child relationship and on spousal consortium, all of which are subsumed under a single damage-limit cap of $350,000. Plaintiff attorney contingent fees are capped, but not those of defendant attorneys. It shortens the statute of limitations for adults and minors, and contains what is, in effect, a three-year statute of repose and provides that “the tolling provisions of RCW 4.16.190” do not apply to “this section.” Therefore, the statute of limitations is not tolled by a personal disability such as minority, incompetence, disability, or imprisonment. Agreement by a prospective patient to binding arbitration in any subsequent medical-negligence action arising out of treatment is made a condition of receipt of medical care. Other changes mandate periodic payment of judgments over $50,000; repeal the ostensible agency doctrine; make dramatic modifications to hospital and healthcare provider vicarious liability and “vulnerable adult” nursing-home claims; and eliminate or modify joint and several liability in medical-negligence cases in a manner demonstrably different and more adverse to patient rights than is existent in current law. If enacted, I-330 would conflict with no fewer than five prior Washington State Supreme Court decisions. Even a summary of the measure would run several pages, so by way of example, I have chosen some illustrative excerpts, found at the end of this article.
Point/Counterpoint — with Regard to Initiative 330
Contentions of the Medical Profession and the Insurance Industry
The medical profession contends that “runaway” medical malpractice lawsuits and “out-of-control” jury verdict awards are responsible for astronomical malpractice insurance rates that some doctors say are driving them out of business and causing large numbers of physicians to leave practice in Washington. The “holy grail” they cite as a panacea for this phenomenon is to impose caps on both the “non-economic” monetary damages awarded to injury/negligence victims (i.e., compensation for the pain and suffering that accompany any loss of normal functions, e.g., blindness, paralysis, sexual dysfunction, lost bowel and bladder control, loss of a limb or eyesight, inability to engage in daily activities or to pursue hobbies, disfigurement, loss of fertility); and caps on the attorney fees of the lawyers who provide representation to these patients. They allege that caps have worked in reducing premiums in other states where they have been imposed. The Washington State Medical Association claims that Washington state will face “unlimited healthcare costs” and a “crisis in healthcare access” if laws are not changed to limit the legal rights of injured patients to seek compensation.
Contentions of Citizen Consumer Organizations, Injury/Negligence Victim Groups, and Lawyers
Citizen consumer organizations, injury/negligence victim groups, and lawyers have long contended that increases in malpractice insurance premiums for some healthcare providers is not a long-term problem, nor has it been caused by the legal system. They claim it is a short-term problem triggered by a brief spike in medical malpractice insurance rates for some physicians. This periodic spike in rates is a result of the cyclical economics of the insurance industry and investment losses caused by the country’s economic slowdown. Further, it is contended that insurance-industry management and underwriting practices are the chief culprit for what has been a decades-long ongoing cyclical swing in rates charged to doctors and healthcare providers. Other arguments made are that caps not only do not work in premium reduction — premiums have increased in many states after caps have been imposed. Caps are punitive in their impact on an already vulnerable segment of the citizenry and will radically reduce access to justice for injury and negligence victims. There is no “crisis in healthcare access” attributable to the legal system. Taking away people’s legal rights, as is proposed under I-330, would only decrease deterrence and reduce the quality of care.
Is There a Medical Malpractice Insurance Crisis in Washington? Not According to the Washington State Insurance Commissioner
The most credible, objective, and authoritative source on this subject in Washington is a report released in March 2005 by the Washington State Office of the Insurance Commissioner.3 This is an exhaustive and comprehensive 10-year study of claims closed from July 1, 1994 through June 30, 2004, authored by the office that regulates insurance in this state. The report concluded that purported “runaway” lawsuits” and “out-of-control” jury verdict awards are not responsible for rising malpractice insurance rates. One news media report4 set out the findings and conclusions of the insurance commissioner’s report as follows:
Increases in medical malpractice claims over 10 years. While claims have increased over the past 10 years, they have done so gradually, about five percent a year. Likewise, the amount insurance companies paid to injured patients increased about four percent a year during that period. The amount insurance companies spent to defend doctors rose about six percent annually. [Note: One advocacy group quoted in the report noted that when population growth and inflation are factored in, there has been no significant increase during the 10-year period in claims, payments to injured patients, or costs to defend doctors.]
The above numbers are averages. During some years, costs actually declined. And the number of closed insurance cases has dropped from its peak in fiscal year 2002, according to the report.
Fifty jury verdict awards over 10 years. Meanwhile, 73 percent of 10,073 malpractice claims filed over the decade went nowhere; patients and their lawyers got nothing. Only 50 cases (five per year) resulted in a jury verdict award over the 10-year period.
Amount of jury verdict awards over 10 years. When injured people did get something from insurance companies, 65 percent of the time the payout was $100,000 or less. The number has held steady over the past decade.
Frequently, cap advocates paint a picture of a system run amok, where greedy lawyers and their sleazy clients strike it rich from frivolous lawsuits, destroying medical careers and bankrupting the healthcare industry. In fact, only 1.6 percent of insurance-company payouts to patients in Washington over the past five years were for $1 million or more, a number down from 1.7 percent for the first five years of the analysis.
The findings mean that there is no medical malpractice crisis in the state, Insurance Commissioner Mike Kreidler said. Kreidler, who also happens to be a doctor of optometry and a former state legislator, stated: “Changes happen on a gradual basis.”
The data above comes directly from the state’s five biggest medical malpractice insurance companies and represents about 90 percent of the market. It is limited in that it does not include the remaining 10 percent, largely physicians who self-insure. Kreidler said he is certain the findings are accurate for the companies covered.
The report will likely have a significant impact on the state and perhaps even the national medical malpractice debate, because it undermines a key argument used by physicians and insurance companies trying to cap pain-and-suffering damages to patients: their assertion that the malpractice system is in crisis.
Other Pertinent Information Bearing Directly on the Issues Herein
In 2003, the Medical Liability Monitor, an insurance-industry publication, reported that every state in the country experienced medical malpractice insurance rate increases that year — whether or not damages were capped. For example, three states that have implemented caps, Hawaii, Texas, and Florida, saw rate increases of more than 20 percent. New Mexico has caps — rates went up there more than 30 percent. Virginia has caps — rates went up more than 40 percent. In Washington state, without caps, rates increased only 8.35 percent.
The state’s largest insurer of doctors has posted record profits and is cutting 2005 rates — in some cases to levels resembling those paid in 1985. The lower premiums, combined with the dwindling number of doctors now asking for help finding malpractice insurance, signal a turnaround in the market, says State Insurance Commissioner Mike Kreidler.
Physicians Insurance, which covers about 70 percent of Washington’s doctors — who own the mutual company,has asked for a 7.7 percent reduction of malpractice premium rates for 2005. In addition, Kreidler said, it reported record profits, called net income for this type of company.5
In a March 6, 2005, news article titled “Gouging, numbers belie medical malpractice ‘crisis’ claims,” it was reported that State Insurance Commissioner Mike Kreidler announced . . . that he had ordered the state’s largest medical malpractice insurer, Physicians Insurance and its affiliate, Western Professional Insurance Company, to refund more than $1.3 million plus interest in excess premiums charged in 2003 . . . . The $1.3 million refund order came just one day after Kreidler’s office released a report analyzing a decade’s worth of medical malpractice claims. The report appears to give lie to allegations of a “crisis” in medical malpractice.6
Doctors across Washington have argued that the high cost of malpractice insurance is crippling their financial viability and driving them from the state, although neutral-party counts of physicians in Washington don’t support the claim that physician numbers are plummeting.7
The Washington State Medical Association has advertised anecdotes regarding physicians who, it claims, may abandon their practices or leave the state if medical malpractice insurance premiums continue to increase.8 Statistics reveal that — far from an exodus of doctors — Washington continues to experience a steady and significant increase in the number of doctors.9
The number of in-state practicing doctors in Washington has jumped 3,270 over the last decade, from 15,533 in 1993 to 19,253 in 2003. This is an overall increase in doctors of 23.9 percent, or 2.4 percent per year. In comparison, Washington’s overall population experienced an annual average increase of 1.7 percent, from 1993 to 2002.10 This means the number of doctors increased at a rate of 37.3 percent faster than the rate of population increase during this period.
Musings in Conclusion
Jurors. Why is it that we can entrust 12 lay people as jurors to decide what’s fair for businesses suing businesses, or to make the ultimate decision as to whether someone lives or dies in a criminal matter, yet we are expected to buy the patently spurious allegation that they’re too dense to decide what’s fair for injury or negligence victims?
Accountability. Everyone should be responsible and accountable for their actions. This includes people, government, lawyers, and doctors. There should be no special class of beneficiaries of less or no accountability.
Doctors and lost opportunities. I have enormous empathy toward doctors. I love my own. There is absolutely no doubt that doctors are being squeezed from every direction, including grossly inadequate federal Medicare and state Medicaid treatment reimbursement rates; the increasingly prohibitive cost of complying in one’s medical practice with insurance-industry bureaucracy and its accompanying documentation focused on procedural and fiscal scrutiny of a doctor’s every action; and yes, the rising cost of liability insurance premiums.
But it’s also fair to note that in the last two Washington legislative sessions, bills were introduced that would have gone far toward addressing many of the problems faced by doctors. These included increases in government medical program reimbursement rates; establishment of an excess liability fund which would have placed a ceiling on the monetary exposure a doctor could sustain in a medical negligence action; and a voluntary medical malpractice arbitration program for all claims under $1 million (the overwhelming majority of claims made fall into this category), which was drafted by both plaintiff and defendant attorneys working together to find more effective solutions for reduction of litigation costs and smoother, more expeditious resolution of these unfortunate cases. The total value of the legislative proposal in the session immediately pre-dating the 2005 Legislature approximated $33 to $35 million — a significant amount in a state as budget-deficit strapped as Washington was during that period. Unfortunately, the Washington medical profession decided to reject these proposals in the interest of continuing the quest for caps on damages and caps on attorney fees. I would respectfully submit that patients, patients’ rights, and the public (the real ultimate stakeholders with regard to these issues) did not benefit from that decision.
Politics, partisanship, division, and “collegiality” v. standing up. I have personally been advised that an issue such as I-330 is “too political,” “too partisan,” and “too ideologically divisive” for the Washington State Bar Association to take a position. My response is the following: First, the position the Association is taking now on the principles and concepts underlying I-330 is exactly the same as has been taken on similar legislative proposals dating back a number of years. Bad public policy is bad public policy in whatever form it takes. Second, I hope that I never see the day in this profession when the placement on any measure of the label “political” or “partisan,” or interest in the protection of some nebulous concept of “collegiality” within the ranks, prevents principled lawyers on both sides of counsel’s table from speaking out on issues which affect fundamental rights, the practice of law, the administration of justice, and most importantly — the public interest related thereto. I’m not articulate enough to state how proud I am of this particular Board of Governors with whom I have been privileged to serve over these last three years.
In my very first October 2004 Bar News effort — First, Let’s Bless All the Lawyers — I said something with regard to the legal profession that I think fits the issue addressed in this article and that would be appropriate to end the time I have been privileged to spend with you in this column:
Contemporarily, “reform” is the rubric being used in an attempt to establish a double standard in the American legal system, i.e., a discriminatory one that applies to injury/negligence victims who seek redress in the courts, and another for everyone else. One of the most hallowed traditions in democracy and the American legal system is equal protection of the law. It is a legal standard. It is not based on partisan political cant, or dogma of various and sundry types. It applies to ALL elements of society. Any time fundamental principles such as trial by jury, due process, the right to freely contract, and equal protection of the law are threatened or contravened, by whatever the artifice used, lawyers and bar associations must speak up — politics, or ideology, or economics notwithstanding. If we don’t, who will? We cannot risk relevancy suicide by stating “we don’t have a dog in this fight”: not when the ultimate victims are fundamental rights and the justice system.
A president’s last column at the end of his or her term in September is ordinarily devoted to looking back over events (and hopefully accomplishments) of the year in office. Mine next month will follow that tradition. It has been my privilege to render service as an officer of your Washington State Bar Association.
The question is not whether we can; it is whether we will. We can and we will because, working together, there is nothing we cannot change for the better.
Ron Ward may be reached at rrw@joneswardlaw.com. If you would like to write a letter to the editor on this topic, please e-mail it to letterstotheeditor@wsba.org or mail it to WSBA Bar News, Attn: Letters to the Editor, 2101 Fourth Ave., Ste. 400, Seattle, WA 98121-2330.
NOTES
1 General Rule 12(c), adopted by the Board of Governors Oct. 22, 2004. GR 12(c) provides in relevant part:
(c) Activities Not Authorized. The Washington State Bar Association will not:
. . .
(2) Take positions on political or social issues which do not relate to or affect the practice of law or the administration of justice; . . . .
2 Initiative 330 — An Act relating to healthcare liability reform; amending RCW 4.56.250, 7.70.020, 7.70070, 7.70.100, 4.16.350, 7.70.080, 74.34.200, 4.22.070, and 4.22.015; adding a new section to chapter 4.56 RCW; adding a new section to chapter 7.04 RCW; adding new sections to chapter 7.70 RCW; and creating new sections.
3 State of Washington Office of Insurance Commissioner, Rates and Forms Division, A Report to the Insurance Commissioner: Medical Malpractice Closed Claim Study, Feb. 2005.
4 M. Alexander Otto, No malpractice crisis, report says, The News Tribune, Mar. 2, 2005.
5 Carol M. Ostrom, Key doctors insurer cuts ’05 rates, The Seattle Times, Jan. 10, 2005.
6 Thomas Shapley, Gouging, numbers belie medical malpractice ‘crisis’ claims, Seattle Post-Intelligencer, Mar. 6, 2005.
7 Carol M. Ostrom, Key doctors insurer cuts ’05 rates, The Seattle Times, Jan. 10, 2005.
8 Washington State Medical-Education and Research Foundation, The Impact of Medical Malpractice Insurance and Tort Law on Washington’s Health Care Delivery System, Sep. 2002; Carol M. Ostrom, Malpractice Ad Enlists Doctor With Rocky Past, Seattle Times, March 14, 2003.
9 Medical Quality Assurance Commission, Department of Health, Washington state, data obtained via e-mail April 18, 2003.
10 U.S. Census Bureau, State Population Estimates: April 1, 2000 to July 1, 2002, and State Population Estimates Annual Time Series, July 1, 1990 to July 1, 1999, <www.eire.census.gov/popest/data/states.php>.
Section 1: Non-Economic Damage Cap for All Personal Injury Actions
Section 1 contains the first of two non-economic damage caps contained in the initiative. Although I-330 is primarily a healthcare-liability initiative, Section 1 contains a damage cap that applies to all personal-injury actions. The cap on damages is identical to that which was held unconstitutional in Sofie v. Fibreboard Corp., et al., 112 Wn.2d 636, 771 P.2d 711 (1989), on the ground that such a cap violates the right to a trial by jury guaranteed by the Washington State Constitution. All derivative claims such as injury to the parent-child relationship and spousal consortium claims are subsumed under the single damage cap of $350,000.
Section 2: Non-Economic Damage Cap for Medical Negligence Actions
Section 2 contains a $350,000 non-economic damage cap applicable solely to healthcare actions. As in the Section 1 damage cap, all derivative claims are also subsumed under a $350,000 single cap. The cap on how much insurance companies would pay applies to all cases, regardless of how bad the negligence, or how serious the injury. There are no exceptions.
Section 4: Cap on Contingent Fees
Section 4 contains a cap on attorneys’ fees for plaintiffs’ attorneys in medical negligence cases. The cap is 40 percent of the first $50,000; 33 1/3 percent of the next $50,000; 25 percent of the next $500,000; and 15 percent of any amount that exceeds $600,000. The fees are calculated on the net sum after payment of costs that have usually been advanced by the attorney. There is no cap on attorney fees for defendants’ attorneys. This provision contravenes the right to freely contract without interference.
Section 6: Statute of Limitations Modifications
Section 6 shortens the statute of limitations (the time in which one must file suit, or lose all rights) for medical malpractice cases (RCW 4.16.350) to three years from the date of the malpractice or one year from the date of discovery, whichever occurs first. The current statute provides three years/one year, whichever occurs later.
Section 6 also contains what is, in effect, a three-year statute of repose, in that no action (other than those involving minors) may be brought more than three years from the date of the act or omission (absent, again, fraud, concealment, and foreign-body exception). Section 6 also provides that “the tolling provisions of RCW 4.16.190” do not apply to “this section.” Therefore, the statute of limitations is not tolled by a personal disability such as minority, incompetence, disability, or imprisonment. In Gilbert v. Sacred Heart Medical Center, the Washington State Supreme Court held that an attempt to shorten the time period in which a minor has to bring a medical negligence claim was ineffective, as it did not repeal the general minor tolling provision contained in RCW4.16.190. Yet another of the Court’s decisions, DeYoung v. Providence Medical Center, held that an attempt to enact an eight-year statute of repose for medical negligence claims was unconstitutional as violating the privileges and immunities clause of the Washington State Constitution.
With respect to cases involving minors under the “full age” of six years, the action must be commenced within three years or prior to the minor’s eighth birthday, whichever is longer. If there is proof that the “minor’s custodial parent or guardian and the defendant or the defendant’s insurer have committed fraud or collusion in the failure to bring an action on behalf of the minor,” the statute of limitations is one year from the date the patient or the patient’s representative received actual knowledge of the fraud or collusion, or one year from the date of the minor’s 18th birthday, whichever is longer.
Section 8: Binding Arbitration
Section 8 provides that a contract for healthcare or related services may be made subject to mandatory binding arbitration, assuming that the contract contains certain language advising the claimant that by signing the contract both parties “are giving up their constitutional rights to have a dispute decided in a court of law before a jury . . . .” If the contract is signed by a minor’s parent or legal guardian, it may not be disaffirmed. This provision would permit HMOs, insurance companies, and hospitals to make prospective patients sign a contract before they can obtain any medical care or a prescription. This also applies to residents in nursing and veterans’ homes.
Section 10: Periodic Payments of Judgments
Section 10 permits periodic payments of judgments in excess of $50,000. This provision allows the insurance industry to pay a monetary judgment they owe to a victim out over 20 or 30 years, or even longer.
Section 11: Repeal of Ostensible Agency Doctrine
Section 11 repeals the doctrine of “ostensible agency” as established the case of Adamski v. Tacoma General Hospital (20 Wn. App. 98, 579 P.2d 970 (1978)). That doctrine holds that a hospital is liable for the negligence of a physician, who although not an employee of the institution and who is not selected by the patient, is provided by the hospital to the patient.
Section 12: Modification to Hospital Vicarious Liability
Section 12 provides that a hospital is not liable for the negligence of a healthcare provider granted privileges, unless the provider is the actual agent or employee of the hospital and was acting within the scope and course of the employment/agency at the time of the care in question. This provision essentially overrules decisional authority of Pedroza v. Bryant (101 Wn.2d 226, 677 P.2d 166 (1984)), which established the doctrine of corporate negligence in Washington state and which created an action against hospitals for negligence in the credentialing process.
Section 13: Modification to Other Healthcare Provider Vicarious Liability
Section 13 overrules both Adamski and Pedroza, and provides that no other healthcare provider shall be liable for the act or omission of any other healthcare provider, unless the negligent provider was the actual agent and employee, or acting under the “person’s” direct supervision and control at the time of the act or omission.
Section 14: Vulnerable Adult Nursing Home Claims
Section 14 makes changes to RCW 74.34.200, which creates an action for damages against nursing homes on behalf of “vulnerable” adults who are abandoned, abused, financially exploited, or neglected. Section 14 eliminates the attorney’s fee and expert witness fee recovery provisions from the statute.
Section 16: Changes to the Law of Joint and Several Liabilities
Section 16 makes changes to RCW 4.22.070 in that it eliminates joint and several liability in medical negligence cases, unless parties were acting in concert or were the actual agent or servant of the party, or were acting under the party’s direct supervision or control. It requires a jury, in its apportionment of liability, to include “empty chairs,” i.e., entities which are immune, released (except in workers compensation situations), or have entered into covenants not to sue or execute.
