Other States laws/regulations;

OLR Research Report

November 6, 2002




By: John Kasprak, Senior Attorney

You asked for information on recent medical malpractice reforms in other states, including California.


Certain parts of the nation are experiencing significant problems with the medical malpractice system, including rapidly increasing insurance premiums and the departure of many insurance companies from the medical malpractice market. Interested parties to the debate and the sources of possible solutions include health care professionals (especially physicians), health care facilities such as hospitals, insurance companies, and trial lawyers.

States are taking a variety of reform initiatives to help alleviate the problems. Some of these include (1) capping the amount that can be awarded for damages for malpractice; (2) amending “collateral source” rules that prevent providers from introducing evidence that the injured person's expenses have been reduced by payments from third parties; (3) modifying statutes of limitation to decrease the time injured parties have to file a claim; (4) limiting “venue shopping” for malpractice cases; (5) implementing alternative dispute resolution systems such as arbitration;

(6) focusing on patient safety initiatives, including reporting and analyzing serious events and incidents and implementing patient safety plans in health care facilities; (7) funding or encouraging the creation of associations or plans designed to help pay malpractice liability premiums; and (8) establishing tax credits for insurance premiums.

In addition to examining California's law, we focused on recent state activity on these issues. We identified in particular, legislative and other initiatives in Pennsylvania (a variety of reforms addressing legal, patient safety, and mandatory coverage issues); Mississippi (cap on noneconomic damages and limits on venue); Nevada (creation of a medical liability association, damage caps, and other reforms); Washington (voluntary market assistance plan); and West Virginia (tax credit for premiums paid by health care providers).


Two recent pieces of legislation adopted in Pennsylvania attempt to stabilize the medical malpractice insurance market in the state (Act 13, (HB 1802) and SB 138). Act 13, signed into law on March 20, 2002, includes legal reforms, patient safety initiatives, and a phase-out of the state's excess malpractice liability insurance fund.

Legal Reforms

The legislation requires that future damages of more than $100,000 for medical and noneconomic loss must be made in periodic payments rather than in a lump sum. It also modifies the “collateral source rule” by barring a plaintiff from recovering money for past medical costs or lost earnings already covered by insurance or other sources.

The act changed the statute of limitations for filing a medical malpractice lawsuit. Previously, a patient had two years to file a claim after the date he should have known of the injury. Under the new law, the plaintiff must file the claim within seven years from the date of the alleged incident of malpractice.

A provision that would have eliminated “joint and several liability” for noneconomic damages to the extent they exceed $ million was cut from the final version of the bill that passed. (“Joint and several liability” is designed to protect victims in cases where more than one party is found liable or responsible for the injuries by holding that each is completely responsible for the damages if any other party fails to pay its portion.)

But an “ostensible agency” provision was included that in effect makes it more difficult to bring a hospital into a lawsuit against an independent provider that is not employed by the hospital (e.g. a radiology practice) just because it is located in the hospital.

The new legislation establishes standards that a person must meet to qualify as an expert witness in a medical professional liability action. A medical expert must be a physician engaged in active clinical practice or teaching and experienced in the care at issue. Experts on the standard of care must be of the same or similar specialty as the defendant and be board certified in the same or similar specialty.

Act 13 created a joint judicial/legislative commission charged with recommending legislative and procedural changes by September 1, 2002 to address problems associated with “venue shopping” in malpractice suits. This commission's work resulted in passage of SB 138 in October 2002, which provides that a medical malpractice claim against a health care provider can be brought only in the county in which the cause of action arose. Under prior law, cases could be moved to another county for a variety of reasons. The Pennsylvania Trial Lawyers Association opposed this new venue limit, arguing that it would further complicate and delay complex medical malpractice cases involving patients who were transferred from a rural medical facility to an urban center (see BNA's Health Law Reporter, October 17, 2002, p. 1481). The trial lawyers group also raised constitutional questions about the new venue rule, arguing that (1) venue questions have traditionally been the prerogative of the judicial branch and (2) new venue rule violates the equal protection clause of the state constitution because it only applies to medical malpractice cases but not other types of personal injury cases.

The new law permits defendants to seek a reduced verdict. The court would consider the impact of the verdict on the availability of or access to health care in the community. A court may also limit the amount of security that must be posted on appeal to the amount of the available insurance coverage, if the court finds that additional security would effectively deny the right of appeal.

Patient Safety

Act 13 creates a Patient Safety Authority responsible for contracting with an organization to collect, analyze and evaluate reports of serious events and incidents. This includes identifying patterns and directly advising medical facilities of immediate changes they can institute to reduce serious events and incidents. The authority is funded through surcharges on medical facility licensing fees. To assist the authority, the state Department of Health is required to review and approve all medical facility patient safety plans and investigate serious events and infrastructure failures. .

The law requires medical facilities to develop to develop patient safety systems that allow health care workers to report medical errors without fear of retaliation. Facilities must also report to the Health Department and the authority within 24 hours on confirmed medical errors or serious events and infrastructure failures. The new law mandates that physicians report to the state (1) all civil complaints filed against them and (2) if they have been subject to disciplinary action in another state.

Mandatory Coverage Changes

Beginning in 2003, Act 13 reduces physicians' total required malpractice coverage to $1 million from $1.2 million. This change is part of a gradual phase-out of the state-administered excess coverage layer. Under the new law, physicians must have $500,000 in basic insurance coverage and $500,000 in excess coverage through the state-administered Medical Care Availability and Reduction Error Fund (MCARE). This fund replaced Pennsylvania's Medical Professional Liability Catastrophic Loss (CAT) Fund on October 1, 2002. This change is expected to affect surcharges for the excess coverage over the next several years as claims with the lowered limit work their way through the court system.

Immediate discounts are available to physicians on the excess coverage surcharge under the MCARE Fund. For 2002, the discount is estimated at 7 to 8% for hospitals and high-risk physicians (e.g. OB/GYNs, orthopedic surgeons, neurosurgeons) and 2.5% for all others. For 2003 and 2004, the discounts are estimated at 14 to 16% for hospitals and high-risk physicians and 5% for all others. The state is subsidizing these discounts and the longer-term phase-out of the state-administered excess coverage layer with funds from its Auto Catastrophic Loss Fund (“Auto CAT Fund”). This fund is financed from speeding tickets and other traffic violations. The total subsidy, over 10 years, is estimated at $400 million.

Physicians coming out of residency programs receive an additional discount on the annual excess coverage surcharge for the first four years of practice.


Since 1975, California has had a $250,000 cap on nonmonetary damages. Nonmonetary damages are defined as compensation for pain, suffering, inconvenience, physical impairment, disfigurement, and other non-pecuniary injury. The cap applies whether the case is for injury or death, and the law allows only one $250,000 recovery in a wrongful death case.

California also limits the amount attorneys in a medical malpractice case can collect under a contingency fee arrangement to 40% of the first $50,000, 33 and 1/3 % of the next $50,000, 25% of the next $500,000 and 15% of any amount that exceeds $600,000 (Cal. Bus. And Prof. Code, 6146). This limit applies regardless of whether the recovery is by settlement, arbitration or judgment. If the contingency fee arrangement is based, in part, on an award of periodic payments, the court must place a total value on the payments based on the projected life expectancy of the claimant and then calculate the contingent fee percentages. (For medical malpractice cases resulting in judgments of future damages exceeding $50,000, either party may request the court to order periodic payments.)

In California, a medical malpractice action must be brought within one year from the date the claimant discovered the negligent act, but no more than three years from the date of injury (Cal. Civ. Proc. Code 340.5).

California follows a pure comparative negligence rule, that is, a claimant's negligence reduces, but does not bar, recovery.

On the issue of vicarious liability, California law holds a hospital liable for the acts of a physician if he is an actual or ostensible agent of the facility. An “ostensible agent” is established when a principal causes a third person to believe another is an agent. State court cases have held that when hospital holds out a physician as an employee, a patient may reasonably assume that the physician is an employee without making an inquiry on the subject.

California does not bar evidence of collateral source rule. It allows defendants in medical malpractice actions to offer evidence of the claimant's receipt of payments in connection with the injury in the form of Social Security benefits, workers' compensation benefits, health insurance, accident insurance, or any other contract providing for health care.

California allows health care providers and their patients to contract for the arbitration of disputes (Cal. Civ. Proc. Code, 1295).

Finally, California does not have a patient compensation fund or a program of state-sponsored liability insurance for physicians.


Mississippi recently passed legislation (HB 2) that puts limits on medical malpractice lawsuits. This law, which takes effect January 1, 2003, caps noneconomic damages (“pain and suffering”) in medical malpractice cases at $500,000, increasing incrementally to $1 million by 2017. The cap would not be adjusted further for inflation. Another significant provision of the new law requires that lawsuits be filed in the county where the alleged injury occurred.

The Mississippi State Medical Association, as well as nursing groups and hospital administrators, supported the legislation which was a compromise measure following a month-long standoff between the Mississippi Senate and House. The Mississippi Trial Lawyers Association did not believe that the legislation addressed the immediate malpractice insurance crisis in the state (see BNA's Health Law Reporter, October 10, 2002, p. 1453-54).


Medical Liability Association

In March 2002, the Nevada Board of Examiners approved $250,000 in start-up costs to set up the Medical Liability Association of Nevada, which was expected to provide coverage soon after. Emergency regulations were approved by the state insurance commissioner establishing procedures and requirements for a risk sharing plan to provide basic liability insurance for eligible medical professionals on a self-supporting basis. The association is not intended to compete directly with the voluntary market and is considered to be a 'temporary solution” (see BNA's Health Law Reporter, April 18, 2002, p. 565). Nevada is considered one of a half dozen states with the highest malpractice premiums.

The St. Paul Companies, a leading malpractice insurer nationwide, withdrew from the market in December 2001. That company insured about half of Nevada's doctors, and no other insurer had expanded its business to make up the difference according to the insurance department (see BNA, April 4, 2002, p. 525).

Cap on Damages and Other Reforms

The Nevada Legislature passed legislation (AB 1) in an August 2002 special session to cap jury awards for pain and suffering in medical malpractice cases. The state's only trauma center closed in July because physicians refused to work without insurance. The legislation sets a cap of $350,000 and gives plaintiffs three years after an injury to file a lawsuit against a health care provider.

Another provision of the law allows judges the authority to (1) order that awards be paid periodically and (2) grant awards that exceed the cap if they find clear and convincing evidence for a higher award. It also would cap total awards, including economic and noneconomic damages, at $1 million (the coverage limit per incident that Nevada physicians must carry).

Other provisions of the legislation establish an expedited process for medical malpractice cases and strengthened reporting requirements for disciplinary action against physicians.


In May 2002, Washington insurance commissioner Mike Kreidler announced the creation of a voluntary market assistance plan (MAP) to help health care providers obtain medical liability insurance coverage. This program will consist of various insurers that provide medical malpractice insurance. When insurers pull out of the medical malpractice market and providers find themselves without coverage, the providers may submit a single application to MAP and then wait to receive quotes from the best-suited insurers participating in the plan.

This plan is expected to promote a competitive market and drive down malpractice insurance premiums. According to the Office of the Insurance Commissioner, 60% of the market for medical liability insurance has agreed to participate.

The commissioner has also established a secondary plan in the event that the voluntary system does not get the necessary number of insurers to operate effectively. (see Reforming the Medical Malpractice Insurance Market, NCSL State Legislative Report, Volume 27, No. 13, July 2002).


Legislation adopted in 2001 (HB 601) established a tax credit for medical liability insurance premiums paid by health care providers. The purpose of the legislation is to decrease the cost of medical liability insurance premiums on physician's services in order to encourage them to continue practicing in the state. These insurance payments qualify for the tax credit if they are made to ensure against medical liabilities arising out of, or resulting from, services provided by a physician while practicing in service to, or under, the organizational identity of an eligible taxpayer organization, or as an employee of an eligible taxpayer organization. Such insurance would have to cover the medical liability of: (1) the eligible taxpayer organization, (2) one or more physicians practicing for or under the organizational identity of the eligible taxpayer organization, or as an employee of the eligible taxpayer organization, or (3) any combination.