Medical Malpractice News

Are Caps on Non-Economic Damages a Thing of the Past?

Tags: | Comments: 0 | April 30th, 2014

Economic Damages CapsOn Thursday, March 13th, Florida became the latest in a growing list of states whose supreme courts have struck down caps on non-economic damages.  In Florida’s case the court argued in a 5-2 ruling that the caps “arbitrarily” and “illogically” limited damages, particularly in cases where there are multiple claimants.  The court found that by having a single cap irrespective of the number of claimants, thus reducing the amount each claimant could receive in a multiple claimant case, the provision violated the equal protection clause of the Florida Constitution.  The court also cited other states that had ruled similarly and offered some pushback to the arguments that caps are necessary to prevent runaway juries and skyrocketing malpractice insurance premiums.

As noted, Florida is the latest in what is getting to be a long list of states where the court has overturned caps on non-economic damage awards (i.e. pain and suffering).  Illinois, New Hampshire, Missouri, Georgia, and others have seen similar decisions.  A few states have re-written laws capping damages after a court overturn of an initial version, including Texas, Kansas, Ohio and Wisconsin.  But for other states like, Kentucky, Arizona, Pennsylvania, and Wyoming, caps are explicitly forbidden in the language of their state constitutions.  The trend definitely seems to be toward states moving away from these caps on non-economic damages.

Strangely, while the logic of how caps should keep malpractice insurance premiums down is fairly straightforward, we haven’t seen huge spikes in premiums in most states where they have been overturned.  There are several possible explanations for this.  It could just be that not enough time has elapsed yet.  Malpractice claims are notorious for dragging on, sometimes for years, and then there is the appeals process.  It’s possible that in a few years, as cases that are being filed now begin to wrap up, these states that are removing the caps will see rates start to soar again.

On the other hand, it’s also possible that the market is just in a good spot right now for rates to remain steady and relatively low.  But why might that be?  Well, in many of these states non-economic damage caps were put in place roughly a decade ago in the midst of very turbulent malpractice markets, skyrocketing premiums, and in some cases, like Florida and Missouri, a doctor shortage crisis.  One can speculate that the caps, which usually formed part of a broader tort reform package, along with the development and founding of new insurance companies in the suddenly more stable markets where risk could be assessed more accurately, created the conditions we enjoy now.  In other words, it seems likely that these caps, along with other reform elements that remain in effect, did work, and did bring stability and competition back to the market.

However, saying that they worked doesn’t necessarily entail that when they are overturned everything will return to the way it was before they were enacted.  It may be that they created the space for a stable and competitive market to develop, and that now, even if/when they go away, the increased number of providers, and thus competition remains.  This doesn’t mean we’re happy to see caps overturned, we think it’s risky considering the way things were in many states prior to enacting them.  But we are cautiously optimistic.  Hopefully the markets are stable and competitive enough now that removing one of the elements that brought order won’t lead to chaos or collapse.

If you are looking for malpractice insurance be sure and check out our Get a Quote page.  eQuoteMD can put you in contact with someone that will shop the market and find you the best policy at the best value available no matter what your specialty or what state you practice in.  We’re glad to help you find the coverage you need.  You can also call us at 1 (855) 857-8746 or email us at info@equotemd.com with any questions you have.

This post was written by Justin Donathan.
Justin at Google+