IMPORTANT
INFORMATION FOR HEALTH PLANS AND HMO'S
(Archives - continued)
$250,000 MICRA Limit Increased
In Salgado v. County of Los Angeles, the California
Supreme Court unanimously held that the statutory $250,000 limit on non-economic damages
in medical malpractice cases applied to limit only the present cash value, and not the
gross value, of future pain and suffering awards.
In Salgado, the jury awarded a medical malpractice plaintiff $10,000 for
past pain and suffering plus $550,000 for future pain and suffering. Under
MICRA,
the trial court found that the $250,000 limit on non-economic damages reduced the jury's
award for pain and suffering to the $10,000 for past pain and suffering plus $240,000 for
future pain and suffering. The court then ordered the $240,000 paid in equal yearly
payments over the 66.8 year life expectancy of the plaintiff under MICRA. The
annuity purchased by defendant to fund the periodic payments ordered by the trial court
cost defendant only $61,785.
However, the Supreme Court held that the $250,000 limit applied only to limit
defendant's liability and concluded that the plaintiff would be entitled to periodic
payments over his lifetime based upon a present cash value of $240,000 for his future pain
and suffering. Accordingly, defendant was liable for either a $240,000 lump sum
payment, or an annuity for plaintiff that cost defendant $240,000, not $61,785, for
plaintiff's future pain and suffering.
The Court suggested that future jury verdicts in medical malpractice cases specify both
the present cash value and the gross value of future damage awards to clearly establish
the amount in periodic payments owed to plaintiff.
In our opinion, Salgado has greatly expanded the $250,000 MICRA cap on
recoveries for pain and suffering in cases involving catastrophic injuries. For
example, the insurer in Salgado thought that the $250,000 MICRA cap reduced its
liability for the plaintiff's future pain and suffeirng to $61,785. Instead, the
Supreme Court reinterpreted the $250,000 cap under MICRA to expand the insurer's liability
for plaintiff's future pain and suffering to $240,000.
The $250,000 limit previously limited awards for past and future pain and suffering to
a total of $250,000. The $250,000 limit now applies only to limit awards for past
pain and suffering plus the present cash value of future pain and suffering, to a total of
$250,000.
Parties who wish to settle a medical malpractice case will have to identify the present
cash value of a plaintiff's future pain and suffering before determining whether the
$250,000 limit on past and future pain and suffering awards under MICRA is
applicable. Defendants who are found liable for medical malpractice verdicts that
include an award for future pain and suffering must determine whether the periodic payment
schedule requested by the plaintiff can actually be funded by an annuity.
Delbert Gee, December 1998
No Arbitration For Consumer Protection Act Violation
In Broughton v. CIGNA (98 CDOS 5215), a health plan was sued for medical
malpractice and for violation of the California Consumers Legal Remedies Act arising out
of the birth of plan member's son. Pursuant to the terms of the plan, the court
severed the malpractice cause of action and compelled the plan member to arbitrate the
dispute. However, the court refused to order the cause of action for breach of the
Consumers Legal Remedies Act to arbitration.
The Act was designed to protect consumers against unfair and deceptive business
practices. The Second Appellate District held that the court could not compel
arbitration because the plan member sought injunctive relief under the Act and such relief
could not be provided by the arbitrator under the terms of the plan.
Health plans seeking arbitration of disputes should consider language in its plan
documents which provide arbitrators with the power to provide and enforce injunctive
relief.
Delbert C. Gee, July 1998
Courtesy Defense Entitled to Cumis Counsel
In Mosier v. SCPIE (98 CDPS 3574), an uninsured physician was provided a
courtesy defense by the insurer of two other codefendant physicians in a medical
malpractice case. The attorney hired by the insurer had been regularly retained to
defend their insureds in other cases.
The attorney recommended that the uninsured physician admit liability at trial and the
jury found him to be 70% at fault. The uninsured physician filed for bankruptcy and
sued the insurer for breach of fiduciary duty and fraud, claiming that his attorney acted
to protect the insuredsí interests and not his own. The Second Appellate District
held that when the insurer agreed to provide the uninsured physician with a courtesy
defense, it created a Cumis relationship that supported the lawsuit against the insurer.
The jury reallocated the uninsured physicianís percentage of fault for the malpractice
at 40%. However, the Court held that the uninsured physician had not been damaged
because he would have declared bankruptcy even if the jury in the malpractice case had
allocated his fault at 40% rather than 70%.
Nevertheless, this opinion is significant because if an insurer is to provide an
uninsured defendant with a courtesy defense, it must retain independent counsel to
represent the uninsured defendant.
Delbert C. Gee, July 1998
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