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After tort reform, support costs of litigation get a hard look from lawyers

In anticipation of state legislators passing tort reform, Mark McGrath and his law partner, George Podgorny, started reviewing medical malpractice cases for filing about eight months ago. With the new tort reform law taking effect Oct. 1, the triage of what to fast-track and what to drop continues unabated at McGrath Podgorny in Research Triangle Park, N.C…

Every new case coming in is probed: How many medical experts are needed to present the case? How much research will be required? What’s the chance of settling the case or winning a jury verdict if it goes to trial? Is the patient at the center of the case a child or a nursing home resident?

These questions would have come up in any case review. But the $500,000 cap on damages for pain and suffering that North Carolina’s new tort reform law sets is forcing medical malpractice plaintiffs’ lawyers like McGrath to scrutinize more closely the costs to work up a case, and the litigation support it will need. The effect is that it will be more difficult to find a lawyer willing to take on complicated and challenging cases, especially when they involve plaintiffs who aren’t of wage-earning age.

“If it looks like a coin toss, we’ll probably take a pass,” McGrath said. Already, he added, he turned down cases he would have taken a year ago.

Tort reform has been a contentious political issue for more than 20 years.  Advocates include service providers who frequently get sued, such as physicians and hospitals, but also companies whose products may cause harm, such as toymakers and drug manufacturers. Physicians and hospitals argue that frivolous lawsuits and large jury verdicts force them to request tests and procedures that have no other purpose than to manage medical malpractice risks.

“There’s a tremendous hidden cost of medical malpractice litigation,” said Steve Keene, general counsel for the N.C. Medical Society who lobbied for the newly enacted cap in noneconomic damages.

Opponents, such as consumer advocates and plaintiffs lawyers, argue that damage caps and procedural filing limits tamper with a system that evolved over hundreds of years and relies on a group of community representatives to determine compensation.

“It’s antidemocratic,” said Tyler Lee, a personal injury lawyer with McWhirter, Bellinger & Associates in Columbia, who is opposed to the punitive damage cap state legislators approved this summer. “Any time the power of the community to set verdicts is tampered with, you’re taking sovereignty away.”

Lawmakers in the Carolinas joined elected officials in 19 other states to pass tort reform laws this year, according to the American Tort Reform Association. Nationwide, the new laws include damage caps, liability waivers, filing limits, protections for sellers and charities in product liability cases, and additional requirements for class action lawsuits.

The pieces of legislation that became law in North Carolina and in South Carolina differ in scope, but both new laws have the potential to cut lawyers’ pay and winnow the number of cases filed.

South Carolina Gov. Nikki Haley signed the Fairness in Civil Justice Act into law July 26. The most significant section of law, which takes effect Jan. 1, caps punitive damages in tort cases. Legislators supporting the caps argued that limiting product liability risk in South Carolina will attract more companies and jobs to the state.

The caps do not apply in cases in which the defendant was intoxicated, intended to injure the plaintiff, or was already convicted of a felony as a result of the wrongful action at the center of the suit. Punitive damages in most remaining cases are capped at $500,000 or three times compensatory damages, whichever is greater.

In the most egregious cases, punitive damages are capped at $2 million or four times compensatory damages. Only a few South Carolina tort claims fall into that category every year, Lee said, but they are “the few cases where [punishment] really matters.”

One of those cases in which punishment was the point involved a teenager who suffered brain damage in a rollover accident in a Ford Bronco II, which resulted in a $31 million verdict against the carmaker, including $15 million in punitive damages. The plaintiff’s lawyer blamed the accident on a design defect Ford knew about but didn’t fix. The verdict was one of about a dozen involving cases in which Ford vehicles had rollover accidents. Juries nationwide ordered the company to pay more than $500 million in damages.

Ford appealed the $31 million verdict to the S.C. Supreme Court and last year won a new trial.

“We didn’t need punitive damage caps,” said John E. Parker, a civil litigator and president of Peters, Murdaugh, Parker, Eltzroth & Detrick in Hampton. “This is just big corporations trying little by little to do away with the tort system.”

North Carolina’s new tort reform became law July 25 after state legislators overrode a veto by Gov. Beverly Perdue. The most significant section of the law caps noneconomic damages in medical malpractice cases at $500,000, unless a plaintiff can prove a physician did harm intentionally. The cap applies to all other cases filed after Oct. 1.

“We believe the cap is reasonable and will help juries translate harm that didn’t cost money into dollars and cents,” said Keene of the N.C. Medical Society.

He added that jury verdicts have been inconsistent in cases that sought mostly damages for pain and suffering and had little or no medical expenses or compensation for lost wages. (Such cases could, for example, involve the death of a child in a hospital emergency room or the death of a nursing home resident.)

The inconsistency didn’t help lower the number of defensive medical procedures, which physicians perform solely to insulate themselves against potential lawsuits, Keene said.

In the past five years, different studies have pegged the annual cost of defensive medicine in the U.S. at $100 billion and at $200 billion. A more recent study estimated the cost at $45.6 billion with about 85 percent borne by hospitals and 15 percent borne by physicians. That’s still a lot of needless medical tests and procedures, but as a cost it represents only about 2 percent of total U.S. health care spending.

N.C. Advocates for Justice, which lobbied against limiting noneconomic damages, argued that the number of medical malpractice cases filed in the state has already decreased annually — from 646 in 2003 to 438 in 2008, according to numbers of the N.C. Administrative Office of the Courts. About 4 percent of the 6,299 medical malpractice cases filed in North Carolina courts from 1998 to 2008 resulted in a jury verdict and plaintiffs won in only 51 of those cases.

The biggest jury verdict was $10,437,093, which included $10 million in noneconomic damages. The case involved a pre-teen who was treated at Wake Forest University Baptist Medical Center for arm and shoulder injuries. During the treatment, he suffered internal bleeding in his spine and brain, which resulted in permanent damages.

But the median jury award in all 57 medical malpractice cases that plaintiffs’ won during the 10-year period was $373,750.

McGrath, the RTP plaintiffs’ attorney, recalled a recent case that he settled for $1 million. The case involved a nursing home resident who died from complications following impacted bowels. Records showed that nursing home attendants had failed to monitor the resident’s bowel activity, McGrath said.

The damages were all noneconomic, because the plaintiff was retired and died without incurring medical expenses for the injury.

It took nine expert witnesses — nurses, geriatricians and surgeons — to prepare the case. Just getting the presentation ready for mediation took two weeks and hundreds of hours of legal and staff time, McGrath said. In the end, costs for expert witnesses and other expenses totaled about $100,000, for which he was reimbursed out of the noneconomic damages. His fees for two years of work were about $400,000. The remaining $500,000 of the settlement went to the plaintiff’s family.

A $500,000 cap on noneconomic damages would have cut his fee in half and the family of the plaintiff would also have received about $200,000. Reducing expenses would have meant fewer experts and fewer hours spent on documentation, measures that may doom more challenging cases.

“The days of spending $100,000 for a [noneconomic damages] case are gone,” McGrath said.

Medical malpractice defense attorneys, lawyers hired by insurance companies to defend physicians and hospitals facing lawsuits, worry that the new North Carolina cap will reduce the number of cases filed in the long run. That could reduce their caseload and their pay.

“We have yet to see how this will play out,” said Bonnie Refinski-Knight, a medical malpractice defense attorney with Harris, Creech, Ward & Blackerby in New Bern who until mid-June served as president of the N.C. Association of Defense Attorneys. The association did not take a position on the tort reform law.

“Five hundred thousand dollars is still not as low as some states,” Refinski-Knight said. But there’s a chance that fewer cases will be filed in coming years, she said, especially cases that are iffy.

Fact is, however, that the tort reform law passed, she added. “We have to deal with it.”

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