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Encouraging good faith negotiation: Delegate floats med-mal cost-shifting rule

stethoscope_mainA Virginia legislator says the state’s medical malpractice cap can prolong litigation and force needless trials in some cases. Representatives of doctors and trial lawyers have agreed to study a possible remedy for potential action next year.

Del. Greg Habeeb, R-Salem, said his proposal is designed to encourage settlement for cases in which the patient’s damages far exceed the allowable recovery under the cap.

If stakeholders can agree on a fix, the change would be the first tweak to the medical malpractice cap plan hammered out in 2011. The cap statute approved that year set a 20-year schedule of annual increases in the limit on medical malpractice recoveries.

Habeeb said his recent experience representing a patient in a difficult case, and reports of similar problems from other trial lawyers, prompted him to craft a cost-shifting penalty. If a health care provider rejected a below-cap demand and then was hit with an above-the-cap verdict, the provider would be on the hook for the plaintiff’s trial costs.

Such a penalty would encourage hospitals to negotiate in good faith, even when a patient’s damages are far in excess of the maximum recovery, Habeeb reasoned.

The delegate said hospitals and other medical malpractice defendants have little incentive to settle when they believe their exposure is far below the actual damages.

Habeeb wrote to W. Scott Johnson, counsel for the Medical Society of Virginia, and John D. Ayers, general counsel of the Virginia Trial Lawyers Association, to outline his idea. After discussion, the group agreed it was a possible issue for the 2018 General Assembly.

Although he had a draft bill in hand, Habeeb said he would not introduce legislation in the session that starts Jan. 11.

In his letter, Habeeb took pains to avoid any suggestion he would rock the boat on the compromise that produced the current medical malpractice cap structure. He said most observers would likely agree that the cap has helped keep malpractice premiums affordable, provided certainty to providers and insurers and maintained a “certain level of access to care.”

But he said “we must also acknowledge that there are costs associated with the cap.

“Some individuals injured by health care providers in Virginia are precluded from fully recovering for their injuries which shifts substantial costs to the rest of society.”

Habeeb and colleagues at the Roanoke firm of Gentry Locke recently struggled to settle a medical malpractice case where a potential verdict was millions more than the cap imposed by Virginia’s medical malpractice law. See “Hospital settles case amid spoliation dispute,” page 1.

The patient – injured in a fall at a private hospital – received extensive follow up care at taxpayer expense from a Veterans Administration facility, Habeeb said.

In such cases, Habeeb wrote, providers might have little concern about allowing claims to go to trial.

“[T]hey are actually incentivized to ‘roll the dice’ and try a case they would otherwise have sought to settle but for the cap,” Habeeb said.

“This is totally inconsistent with the goals of the cap and our public policy towards encouraging settlement,” he continued.

Habeeb drafted a bill to make a health care provider responsible for the plaintiff’s costs if the provider rejects a demand under the cap and the plaintiff then obtains a verdict in excess of the limit.

“This modest change would incentivize resolution of this small group of cases without creating exposure in excess of the cap,” he said.

Johnson – representing Virginia doctors – said his organization agreed to talk in good faith after the 2017 session. The VTLA also is on board, according to President Stephanie Grana.

“We will be happy to work with those interested,” Grana said.

Doctors and other providers will want to know if the change would force any increase in insurance premiums, Johnson said.

Johnson said a lot of other stakeholders will need to be at the table, including medical malpractice insurers, hospital and nursing home associations and large practice groups.

Defense lawyers hope to have a say, also, one leader said.

Habeeb’s proposal seems like a one-sided offer-of-judgment rule, said Randy Wimbish, the immediate past president of the Virginia Association of Defense Attorneys.

He said a fairer approach would be to craft a cost-shifting rule – not just for med-mal cases – that would penalize any party that did not negotiate in good faith.

“I don’t know why there should be a carve-out for a particular type of case,” Wimbish said.

He noted that an insurance policy limit could have the same effect in reverse, discouraging negotiation on the part of a plaintiff.

“We’d like to learn more details and have a seat at the table,” Wimbish said.

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