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TORT REFORM: Caps averted liability crisis but was the price diminished accountability?

Microsoft PowerPoint - WereNotinFayette2 [Read-Only]A lengthy special-session rumble at the Mississippi Capitol in late spring 2004 gave the state a civil justice revamp the Wall Street Journal called “the most comprehensive tort reform law” any state had passed.

That comprehensive change came despite the absence of any give anywhere. Compromise was as elusive as a roadrunner, participants on both sides of the issue recall.

After the bell sounded at the close of the final round, Democratic House Speaker Billy McCoy went home to Prentiss County on a Friday evening only to suffer a series of strokes that night, said Republican Rep. Jeffrey Smith, who at the time was a Democrat and key lieutenant to McCoy.

So intense was the fight that Neely Carlton, a key staffer to Gov. Haley Barbour who was pregnant with triplets and having complications, could not escape for an afternoon of bed rest. A banging on her door at 3 p.m. on a rainy Thursday turned out to be a white-coated obstetrician from Cleveland who insisted she return to the Capitol and resume swinging away on behalf of capping medical malpractice awards.

» READ MORE: Tort reform has made a significant impact on Mississippi

Barbour ultimately prevailed in the special session he had called after trying unsuccessfully to get the civil justice changes through during the regular session. Lawmakers sent him the final bill on June 2 and he signed it on June 16.

Rep. Smith, who became a Republican after failing to unseat McCoy as speaker a few years after the special session, said he thinks to this day the extended brawl and what many view as stringent restrictions on personal injury lawsuits could have been avoided. Circuit judges in about 11 counties were neglecting their duties and letting juries hand down outlandishly high awards that in many cases far exceeded amounts plaintiffs sought.

“If judges had done their jobs over the previous 25 years we would not have been where we were,” Smith told a luncheon gathering at the Stennis Capitol-Press Forum Monday.

Smith held special blame for the Circuit Court in Fayette County. There, he quipped, plaintiffs typically outnumbered the people living there.

Neely-Carlton-hs_rgbCarlton, a former state senator and current counsel to the Mississippi State Medical Association, told the Stennis luncheon audience it is a bogus retelling of history to say a medical crisis did not exist in Mississippi leading up to the 2004 special session.

Malpractice premiums had soared out of reach, especially OB/GYNs, she said.

“Seven Delta counties had no OB services,” she said, and added that in 2003, 518 Mississippi physicians did not renew their licenses.

The state at one point had to briefly step in and create a risk pool to provide the physician coverage, she said.


Early Steps

Though still controlled by Democrats, Mississippi had not entirely ignored civil justice reforms in the previous two decades. In 1993, it amended its joint and several liability statute to prevent any one defendant in a lawsuit with multiple defendants from liability for more than 50 percent of the damage award. Liability was to be assigned only in proportion to a defendant’s degree of fault.

WeÍre not in Fayette anymoreThe ’93 changes ended the liability lawyers’ targeting of single deep pocketed defendants, Rep. Smith said.

“Back in the old days,” he said, “if you were 1 percent guilty you could be liable for all of it.”

In 2002, in a lengthy special session called by Democratic Gov. Ronnie Musgrove, legislators adopted a medical malpractice cap of $500,000. The caps had award accelerators and cap exclusions under certain conditions. The caps also applied only to suits related to acts that occurred on or after Jan. 1, 2003.

The reforms further set a two-year statute of limitations and required that the malpractice lawsuit be filed in the county in which the alleged malpractice occurred.

Still, the escalating malpractice premiums and exodus of medical professionals continued in the year that followed.


Turning of the Tide

The turnaround in premiums came with the more sweeping 2004 overhaul that firmed up the medical malpractice caps and set a $1 million limit on non-economic general liability awards.

Did the caps bring down premiums?

Yes, and decisively, according to the Medical Assurance Company of Mississippi, a membership-based physician insurance pool established in 1978.

“From the standpoint of premiums, they definitely made a difference,” said Michael Houpt, president of the Medical Assurance Company since its inception.

“Rates paid in 2013 were close to what was paid in the early 1990s,” he said in a recent interview.

Since December 2005, the end of the first full year of enactment of the malpractice caps, physician members’ premiums have dropped yearly, Houpt said. And with the declining rates have come annual refunds of 25 percent of each premium, he added.

For 2013, rates dropped 10 percent and members received the 25 percent refund, according to Houpt.

The Medical Assurance Company classifies physicians from Class 1 to Class 5, with the higher classes paying higher premiums based on their medical specialties.

A family practitioner, a Class 1 category, pays around $4,000 a year for $1 million of coverage and is eligible for a 25 refund of that amount, according to Houpt. At the height of the crisis in malpractice premiums before 2004, “I would suspect that same coverage was at least $10,000,” he said.

For the riskiest category, a Class 8 first-year surgeon, the annual premium for $1 million in coverage is still over $40,000, “which gives you an idea of what they were paying at the height of our crisis,” Houpt noted, putting the pre-cap rates at $80,000 to $100,000 annually.

“I would attribute a lot of the success we’ve had to tort reform,” he said, though he emphasized insurance is a cyclical business with many factors influencing it.

Precisely how much credit the caps should receive for the declining premiums is not known, Houpt said. “We know what it did but we can’t quantify it.”

Houpt said he does not think further reductions in caps or other new restrictions on medical practice suits are needed, at least for now.

“Based on the success we are having it wouldn’t make sense to ask for more,” he said. “There are things out there that could make this whole thing fairer, but I don’t want to get into that discussion.”


Lawyers & Plaintiffs

Balch & Bingham partner Paul J. Decambre Jr.  has been practicing law on the Mississippi coast since 1976, mostly defending clients against personal injury suits. He has observed since the sweeping changes of 2004 that lawyers do decline the more speculative cases and must think further ahead.

“From a plaintiff standpoint they are expensive to prepare,” he said of personal injury suits.

On Decambre’s side of the courtroom, the revamp of 2004 has provided a certainty that means “everybody is not running away out of fear.”

Today, he said, if found at fault “you’re not sitting there” wondering if the award is going to be in a range from zero to unlimited.”

The last 10 years have shown Mississippi legislators accomplished what they set out to do, Decambre said. “It has been effective.”

The personal lawyers whom Decambre might face in court would likely agree the tort changes have been effective — but only at significantly lowering the number of personal injury suits filed and keeping victims form recovering damages they would otherwise have received.

OLYMPUS DIGITAL CAMERALance Stevens, a Jackson lawyer specializing in personal injury litigation, calls the 2004 law “a colossal failure for Mississipians.”’

It failed to reduce medical insurance premiums for consumers, it did not reduce medical costs for consumers and nor did it protect manufacturing jobs, said Stevens, former president of the Mississippi Association for Justice (formerly the Mississippi Trial Lawyers Association).

“Negligent, and even evil, individuals and businesses can now kill Mississippians with impunity and with negligible accountability,” Stevens charged.

“This is especially true when the victims do not generate economic damages, like small children, the elderly and stay-at-home moms.  It’s exactly what the consumer groups warned us of during 2002 and 2004.”

Oliver Diaz, a Jackson lawyer and former legislator and state Supreme Court judge, said he regularly turns away individuals who have strong personal injury cases. “I have to tell them ‘no’,” Diaz said, citing the high up-front costs he would have to bear, the damage caps and the likelihood the Mississippi Supreme would overturn any award won.

Jackson personal injury lawyer Cliff Johnson provided data from a presentation titled “Dorothy, We’re Not in Fayette Anymore: How Law Practice and Legal Education Are Changing.”

His data showed that in 2004, the year the state enacted the damage caps and other restrictions, tort filings in Mississippi’s circuit courts totaled 9,174. By 2009 they fell to 4,031 and in 2012 to 3,551.

“Don’t assume this lack of litigation is all good news,” said Johnson of the firm Pigott & Johnson.

Jackson liability lawyer Philip Thomas would say the lack of litigation points to a decline in accountability. “When injured people are not allowed to recover 100 percent of their harms, then by definition, there is not full accountability,” Thomas said.

“Sold to the public as a response to frivolous lawsuits, Mississippi’s version of tort reform was the opposite. It prevents the most injured victims from getting a full recovery.”

Thomas said that while he thinks some legislators want more liability law restrictions, Mississippians appear to have had enough. “More tort reform is not an easy sell in Mississippi at this time because defendants are winning most civil trials, there are few large jury verdicts and the Mississippi Supreme Court will step in and reverse a jury verdict that is not supported by the law or facts of the case,” he said.

Sherra Hillman Lane, a retired lawyer and current member of the Mississippi House, said she spent a lot of time at the Capitol during the 2002 and 2004 special sessions on the civil justice overhauls. “I saw a lot of people with white coats… but what you did not see because there was no impetus for it, was victims,” said Rep. Lane, speaking from the audience at Monday’s Stennis Capitol-Press Forum.

“You did not see the people who are losing some of their rights,” she added.

“People believe in Second Amendment rights, and I do, but what about your rights to a trial by jury? Why has the Legislature got the right to say this jury can only do so much? Why is that a fair thing for the Legislature to put caps on?”

Lane’s question may eventually get an answer from the Mississippi Supreme Court.



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