Category: Medical Malpractice

Termination of the Designation of Trial Counsel for Medical Malpractice Defendants: Presumptive But Not Automatic

The highly respected and distinguished judge Wilfred H. Jayne made the following observation in Amo v. Genovese, 17 N.J. Super. 109, 85 A.2d 529 (App. Div. 1951), certif. denied, 9 N.J. 181, 87 A.2d 576 (1952):  “It is exceedingly desirable, if not imperative, that in the disposition of the modern quantity of litigation, expedition must supplant languor, but never at the expense of justice.”  With the issuance of its 2014 Omnibus Rules Amendment Order at the end of July, the New Jersey Supreme Court found a way to balance the clamor for administrative efficiency and calendar control regarding medical malpractice litigation with the administration of justice in individual cases.

The Court adopted a modification of the recommendation made by its Civil Practice Committee for an amendment to Rule 4:25-4.  Since 1964 the Rules of Court have provided that a party in a civil lawsuit may notify the court that a particular lawyer is designated to try the case.  If there is no attorney designated as trial counsel in accordance with the Rule, then the court and opposing counsel have the right to expect any partner or associate to proceed with the trial when the case is reached on the trial calendar.  By its terms, the Rule applies to counsel for plaintiffs and for defendants.  A subcommittee of the Civil Practice Committee reviewed data concerning significant backlogs in the disposition of medical malpractice cases and find that on average such case took almost four years to reach a trial date and such cases had the highest frequency of trial date adjournments.  The Report asserted that trials were “routinely adjourned” on the basis of the unavailability of designated trial counsel and noted that there were a “limited number of defense counsel permitted to try these cases.”  After due consideration, the Civil Practice Committee proposed an amendment that continued the designation of trial counsel procedure but revising the Rule so that such designation “shall expire” in all medical malpractice cases “pending for more than three years.”  The Committee’s Report adopted the subcommittee’s proposal for “the automatic expiration” of the designation of trial counsel.  It recommended that the amendment not go into effect until January 1, 2015 to allow time to accommodate the impact on already existing cases.  No type of case other than medical malpractice matters would be affected by the proposed amendment to terminate trial counsel designation.

The Supreme Court received comments from various bar organizations, some law firms, and stakeholders such as the Medical Society of New Jersey.  While the Supreme Court accepted the deferred effective date rather than using the September 1, 2014 date for most of the approximately 50 rule amendments in the Omnibus Order, it changed the language of the amendment to R.4:25-4.  As implemented by the Supreme Court, designation of trial counsel “shall presumptively expire” in medical malpractice cases that have been pending for more than three years.  The changed language sets an expectation regarding the ready status of a case but continues to repose in the bench – whether the presiding judge for the county or the actual trial judge – the need for the exercise of judicial discretion.

The defense of physicians in medical malpractice claims frequently present issues that will require the careful exercise of this discretion.  While meritorious claims are advanced against physicians, there are many cases that are either without merit or that present substantial defenses and answers to the asserted wrongdoing and liability.  But the only way for a physician sued for malpractice to avoid permanent harm to a professional career and reputation is to litigate the lawsuit to a successful conclusion.

Physicians must report to both the Federal Government’s National Practitioner Data Bank (NPDB) and the State Medical Practitioner Review Panel any settlements of malpractice suits filed against them as well as the entry of judgments against them resulting from a malpractice lawsuit.  Such collateral consequences of being sued and having a resulting judgment or settlement in tort cases are virtually unique to health care providers.  This reporting alone has a significant adverse impact on a physician’s professional career and reputation. Reports to the NPDB are accessed by health plans and insurance carriers; hospitals; nursing homes; and other healthcare entities.  Based on the information reported health plans may terminate participation agreements; hospitals may undertake a review of the circumstances of the settlement and take negative actions; privileging and credentialing may be negatively impacted; healthcare entities may revoke privileges or use the settlement as a basis not to privilege or employ the physician in the future.  Reports to the State Medical Practitioner Review Panel may result in investigations or disciplinary proceedings that could jeopardize one’s license but in any event will cause a disruption in one’s practice and life.  The compulsory change of defense lawyers from a previously designated trial counsel can result in a switch from a lawyer familiar with the matter to one who comes to the case late with the risk of lesser preparation and insight.  This heightens the potential for an adverse outcome in a case that could be won and increases the pressure to accept a settlement in a matter that should be taken to verdict.  Even the settlement of a case without merit must be reported by physicians. In fact, the only way for a physician to avoid harm to his/her professional career and reputation is to litigate to a successful conclusion.

In many instances physicians can and do choose an individual attorney, not a firm or the defense bar, to represent them in malpractice cases. The choice is frequently personal and is based on trust in that individual’s skill to bring the matter to a successful conclusion. The choice may be based on prior experience with the attorney, the recommendation of a trusted colleague, or the attorney’s successful record with similar cases. The bond between the physician-client and attorney grows throughout discovery and preparation for the trial. The physician-client puts his professional career and reputation in the hands of the designated trial attorney the same way a patient puts his health in the hands of a surgeon.  Thus, two important bonds are at risk here: the physician-patient relationship which is the subject of the litigation, and the attorney-client relationship which is crucial in the eyes of the physician to ensure that he/she has the counsel who has prepared the case and who will handle the trial to its conclusion.  In its case law the New Jersey Supreme Court frowned on “ghost surgery” where another surgeon was substituted for the individual who had been engaged and expected to do the operation.  A similar dynamic is presented by an automatic waiver of designated trial counsel status.

In addition to the trust that the physician has placed in his/her trial attorney, that attorney is best prepared to try the case. The attorney will know facts and medical and legal issues better than another attorney who is brought in simply to move the calendar. In fact, the designated trial attorney may be able to move the case more quickly, once the trial has started, than a newly designated one.

The need to move the calendar and to bring malpractice cases to a timely resolution is a mutually shared objective of all parties to the litigation. The pendency of a lawsuit has negative ramifications for all parties involved.  The toll of protracted litigation is significant in terms of the time required to defend and the emotional strain when a patient has suffered a bad outcome and believes that the physician did not exercise the appropriate standard of care. However, the need for trials to commence in an appropriate amount of time and the physician’s right to proceed at trial with his/her choice of counsel must be balanced against each other and assessed in light of reasons for delay.

The “presumptive” waiver of designated counsel after three years should not become “automatic” without taking into consideration the reasons that counsel is unavailable or whether counsel was available prior to reaching the three-year benchmark.  Judges should have discretion to consider all the reasons for delay, including the late identification of additional defendants and the need for additional discovery extending the time to get trial-ready as well as the continuing impact of prolonged judicial vacancies, on the trial schedule. Judges must have the discretion to weigh the potential harm to a physician of going to trial with a new attorney against the need to move the calendar.

It is the duty of the court to consider and determine issues before it so that the rights of the parties may be fairly protected in an orderly manner. It is as much an abuse of judicial discretion in refusing to exercise such discretion when warranted by the facts before the court, as it is to exercise that discretion improperly by means of a decision that is clearly erroneous on the facts or under the law.  But whether “presumptively” becomes “automatically” and the discretion is exercised in favor of mandatory waiver remains to be tested in the crucible of the trial calendar call.

Affordable Care and the Continuing Debate on Malpractice Damages Caps

The Affordable Care Act contains only a passing reference to malpractice tort reform in a section providing the “sense of the Senate” as well as establishing funding for pilot programs at the state level.  Lobbying efforts to achieve any significant tort reform measures were unsuccessful.  Those efforts included the pursuit of a federal cap on medical malpractice awards.  Such efforts at both the federal and state levels can be traced to the 1975 innovation in California with its passage of the Medical Injury Compensation Reform Act (“MICRA”) limiting noneconomic damages to $250,000.  California’s MICRA has withstood court challenges to its constitutionality.  A number of other states followed similar paths to that taken in California, enacting various iterations of the MICRA model; no such legislation has been enacted in New Jersey although such bills have been introduced in the legislature.   While some state courts around the country have upheld such legislation against constitutional attacks, there are several states that have found the legislation to violate several different constitutional guarantees.

The intensity of the debate over damages caps waxes and wanes.  Renewed activity is likely to be sparked by a March 24, 2014 ballot initiative in California to raise the cap amount from $250,000 to $1.1 million and an opinion filed March 13, 2014 by the Florida Supreme Court.  In Estate of McCall v. United States, 2014 WL 959180 (Fl. 2014), the court ruled that that state’s statutory cap enacted in 2003 limiting the wrongful death noneconomic damages that could be recovered in a medical malpractice case was an unconstitutional violation of the equal protection clause of the Florida constitution.  Five of the seven justices agreed with that conclusion but fractured over the reasoning to get to it.  The opinion for the court was actually a plurality decision rather than a majority.  There were two justices who dissented as to the entirety of the decision and who would have deferred to the legislature’s policy choice of enacting a cap of $1 million on noneconomic damages in medical malpractice cases involving death as being rationally related to legitimate state interests of decreasing medical malpractice insurance rates and increasing the affordability and availability of health care in Florida.

The issue in the case arose out of the prenatal care given to a patient at a United States Air Force clinic who was suffering from preeclampsia.  There was an extended delay in performing an emergency cesarean section.  Although a healthy baby was born, the mother went into shock and cardiac arrest.   The woman never regained consciousness and died four days later.   A lawsuit was filed under the Federal Tort Claims Act which provides that damages are determined by the law of the state where the tortious act was committed.  Sitting without a jury in accordance with the Federal Tort Claims Act, the trial judge determined that the economic damages for financial losses were in the amount of $980,462.40 and that there were noneconomic damages of $2 million in favor of the surviving family members.   The trial judge then proceeded to reduce the noneconomic damages recovery to $1 million pursuant to the Florida statutory cap for medical malpractice matters.   The trial judge rejected challenges to the constitutionality of the damages cap.  On appeal, the Eleventh Circuit rejected several components of the plaintiff’s constitutional challenges.  Estate of McCall ex rel McCall v. United States, 642 F.3d 944 (11th Cir. 2011).  These included the alleged violations of the Fourteenth Amendment’s Equal Protection Clause.  (The United States Supreme Court had declined to review constitutional challenges to California’s MICRA in Fein v. Permanente Medical Group, 474 U.S. 892 (1985) dismissing the appeal “for want of a substantial federal question.”). With regard to state constitutional challenges, the Court of Appeals concluded that there was inadequate state precedent and it used an available procedure to certify questions directly to the Florida Supreme Court.   It identified four questions to be addressed but the Florida Supreme Court chose to answer only one, which it rephrased in terms of the wrongful death noneconomic damages and equal protection.  Since the court found the constitution was violated, it did not need to address the remaining alternative grounds of challenge.  It emphasized the wrongful death claim as being of statutory nature and unknown at common law.  It did not address the constitutional status of the damages cap in a non-wrongful death context.

The equal protection deficiencies with damages caps have been articulated in various ways.  These include an arbitrary distinction between injured victims of medical negligence and persons injured through other forms of negligence or tortuous conduct and distinguishing the recovery available for a slightly injured person from that available for a severely injured person.  Interference with the right to a jury trial to resolve the extent of any damages award has also been involved.  The assessment of governmental purposes of reducing costs and assuring access to care has been subject to differing levels of scrutiny, affecting the conclusion reached by various courts.

While New Jersey does not have a statute generally applying to recoverable damages in medical malpractice cases, it has long had a statute limiting recoverable damages in malpractice claims against nonprofit hospitals.  N.J.S.A. 2A:53A-8.  As originally enacted this limit was $10,000.  The statute was amended in 1991 to increase the recoverable amount to $250,000.  This limitation only applies to the institution and not to employees or agents who can be identified as culpable actors.   The constitutional validity of N.J.S.A. 2A:53A-8 was challenged but upheld in Edwards v. Our Lady of Lourdes Hosp., 217 N.J. Super. 448 (App. Div. 1987).  The court noted that the limitation on the hospital liability was an exception to the complete immunity afforded to charitable institutions in a preceding statutory provision.  The constitutionality of the statute was again challenged in Johnson v. Mountainside Hosp., 239 N.J. Super. 312 (App. Div.), certif. denied, 122 N.J. 188 (1990).   Plaintiff argued that the statute was “special legislation” and violated the due process and equal protection clauses of the federal constitution and the comparable protections of the New Jersey constitution.  The intermediate appellate court upheld the statute’s constitutionality and further review was denied by the New Jersey Supreme Court.

There currently are bills pending in the New Jersey legislature that would cap recoverable noneconomic damages in a professional negligence action against a “health care provider” at $250,000.  Similar bills have been introduced in prior sessions but not been released from committee.  There is substantial literature looking at the impact of tort reform with damages caps on lowering direct and indirect costs of medical care and the access to health care.

Engaging in an analysis of malpractice tort reform – whether in the form of damages caps or otherwise – is likely to be critical to the full implementation of the Affordable Care Act.

Limitation On Medical Malpractice Insurers’ Ability to Cancel Coverage

In a precedential opinion filed on January 22, 2014 in DeMarco v. Stoddard, the intermediate appellate court of the New Jersey Superior Court ruled that a malpractice insurer could not deny coverage for an insured who had made material misrepresentations in obtaining his insurance policy.  This is the first published opinion in New Jersey addressing broadly the implications of the mandatory nature of medical malpractice insurance in the state.

While physicians have long obtained professional liability insurance coverage as a matter of prudent financial planning, such coverage was not required in New Jersey until 1998 when the Legislature enacted a statutory requirement that a physician with an office in the state and having patient care responsibilities was to be covered by malpractice insurance or a posted letter of credit.  See N.J.S.A. 45:9-19-17.  In 2004 N.J.S.A 45:9-19-17 was amended to require a specific amount of malpractice insurance as a minimum – $1 million – to be maintained by a physician with patient responsibilities.

In DeMarco the court dealt with a malpractice claim that was brought by a patient against a podiatrist.  The defendant podiatrist had obtained insurance coverage through the Medical Malpractice Joint Underwriting Association of Rhode Island encompassing the period of 2007 through 2011.   Dr. Stoddard was licensed in both Rhode Island and New Jersey.  He had a Rhode Island office address that was included in his application.  He also indicated that “at least 51%” of his practice was generated in Rhode Island.  That statement was false.  The false statement was repeated in renewal applications.

In September 2010 Dr. Stoddard performed surgery on the patient DeMarco in New Jersey.  The patient had difficulties and his condition worsened.  He came under the treatment of another provider and eventually filed suit in October 2011.  Dr. Stoddard forwarded notice of the suit to the Rhode Island JUA for defense.  It responded that it would not provide a defense if more than half his practice were in New Jersey and considered the policy void because of the misrepresentations.  The patient’s attorney sought a declaratory judgment as to the JUA’s obligation to defend and indemnify Dr. Stoddard.  This was granted in the patient’s favor by the trial judge.

The Appellate Division affirmed. The court viewed the statutory requirement for medical malpractice insurance as the equivalent to the financial responsibility provisions of mandatory automobile insurance in New Jersey. The court noted that New Jersey requires that doctors carry malpractice insurance of at least $1 million coverage per occurrence, or if insurance coverage is not available, doctors must demonstrate their financial responsibility with a letter of credit of at least $500,000.   There is a similar requirement for podiatrists found in N.J.S.A. 45:5-5.3(a).  It quoted the legislative history that these laws were enacted to “ensure the citizens of the State that they will have some recourse for adequate compensation in the event that a physician or podiatrist is found responsible for acts of malpractice.”