Indiana Law Review


Indiana Law Review
Volume 37 2004 Number 3

NOTES

The Constitutional and Economic Implications
OF A National Cap on Non-Economic Damages in

Medical Malpractice Actions

Kevin J. Gfell*

Table of Contents

Introduction 775

I. Background 778

A. The Role ofMedical Malpractice Awards in the National
Healthcare "Crisis" 778

1

.

Proponents of Caps: Arguments Advanced by Healthcare

and Insurance Industries 778

2. Opponents of Caps: Arguments Advanced by Trial Lawyers

and Consumer Advocates 779
B. Two Key Problems 781

1

.

Constitutional Uncertainty 781

2. Economic Uncertainty 782

C Where the State Stands 782
II. Constitutional Challenges to a National Cap on Non-Economic

Damages in Medical Malpractice Actions: Lessons Learned
from the States, the Federal Experience, and Potential

Outcomes 783

A. The Seventh Amendment Right to Trial by Jury 783
1

.

Importance of Challenges Under Analogous State

Constitutional Provisions 784

a. Finding caps violated a right to trial byjury 784

b. Upholding caps over trial byjury challenges 785

2. Federal Law and Experiences 786
3. Summation: Constitutionality and Legislative Concerns

Regarding the Seventh Amendment Right to Trial
by Jury 788

B. The Constitutional Separation ofPowers 788

1 . Importance of Challenges Under Analogous State

Constitutional Provisions 788

* J.D. Candidate, 2004, Indiana University School of Law—Indianapolis; B.S., 2001,
Indiana University, Bloomington, Indiana. The author would like to thank Amy Ford and Gerard
Magliocca for their advice, constructive criticism, and support throughout the note writing process.



774 INDIANA LAW REVIEW [Vol. 37:773
i

a. Finding caps violated state separation of powers

provisions 788
b. Upholding caps over state separation of powers

provisions 789
2. Federal Law and Summation 789

C. Equal Protection Guarantees 790
1

.

Importance of Challenges Under Analogous State
Constitutional Provisions 792

a. Finding caps violated state equal protection guarantee . . . 792

b. Upholding caps over state equal protection challenges . . . 793
2. Federal Law and Experience on Equal Protection Grounds . . . 794
3. Summation: Constitutionality and Legislative Concerns on

Fifth Amendment Equal Protection Grounds 795
D. Due Process Rights 795

1

.

Importance of Challenges Under Analogous State

Constitutional Provisions 796
a. Finding caps violated state due process rights 796

b. Upholding caps over state due process challenges 797

2. Federal Law and Summation 798
E. Drafting Lessons 798

1

.

Make Any Cap Waive-able by the Judiciary 798
2. Economic Data—Show a Rational Relationship 799
3. Narrowly Tailored 799

4. Quid Pro Quo 799
III. Expected Economic Effect: Is a National Cap on Non-Economic

Damages in Medical Malpractice Actions Economically
Desirable? 799

A. Potential Direct Effect on the Health Care Industry 800

B. Effect on Malpractice Insurance Premiums 800
C. Other Economic Effects on Society as a Whole 805

rV. Alternatives: Potential to Solve the Problem and Retain

Compensation 806

A. Loser Pays: Limiting Frivolous Cases Without Punishing

the Most Severely Injured 806
B. Periodic Payments: Easing the Burden ofLarge Awards 807
C Fully Utilizing the Judiciary 's Powers ofRemittitur andAdditur

and Waive-able Caps 807
D. Scheduling: Making Risks Calculable Yet Permitting

Compensation 808

E. PCF—The Potentialfor Government Subsidization to Regulate
Insurance Industry Management 808

Conclusion 809

Table 1 810

Table 2 810



2004] MEDICAL MALPRACTICE ACTIONS 775

Introduction

Imagine waking in a hospital bed. As you gain consciousness, you attempt
to move and stretch out. At this moment you realize that your left leg has been
completely removed from your hip down. After overcoming the shock of what
has happened, you come to realize that your leg had to be removed as the result
of medical malpractice on the part of the hospital and doctors that were treating

you. Feeling that you have been the victim of a great injustice, you turn to the
legal system for compensation for having been robbed of your leg for the

remainder of your life.

This is similar to the story of Gilford Tyler. After a one week jury trial in a
Maryland court, Mr. Tyler was awarded $4.5 million in non-economic damages
to compensate for the loss of his limb, his permanent disfigurement, and the pain
and suffering he would endure for the rest of his life as a result of medical
malpractice. However, the court reduced Mr. Tyler's non-economic damages
award to only $5 1 5,000 as called for by the Maryland Medical Malpractice Act's
cap on non-economic damages. The trial judge noted, "The thought that the
injuries sustained by the Plaintiff" are, in any way, compensated by $515,000 is,

facially abhorrent.'"

The tragic effect of medical malpractice caps upon some of society's most
severely injured individuals is only one aspect of the problems facing America's

health care system. It is readily apparent that the system has problems which

must be addressed. No scholarly note is needed to recognize that the cost of
health-care is ever rising. Medical malpractice insurance premiums continue to
increase as well. Physicians and hospitals are constantly calling for reform.

Another travesty is the story ofthe physician who worked hard to become a good
health care professional, but is then forced to quit the practice of medicine all

together or move to another state because he or she cannot afford the climbing
cost of medical malpractice insurance coverage. Caps on damages in medical

malpractice actions have been hailed by many to be the answer to the problem,
shifting the burden from hospitals and physicians to the few who are severely and
tragically injured by their malpractice.

In the last thirty years, many states have passed similar legislation imposing
caps on non-economic damages in medical malpractice actions.^ Such caps have

been passed in response to increases in medical malpractice insurance premiums

which have been argued to be at the source of a perceived health-care crisis.^

1. American Trial Lawyers Association, ATLA Press Room, Fact Sheet: Who Pays For

Cap^?,ar http://www.atla.Org/ConsumerMediaResources/Tier3/press_room/FACTS/medmal/One%

20Pagers/medmal.cap.examples.aspx (last visited Jan. 13, 2002).

2. Carol A. Crocca, Annotation, Validity, Construction, andApplication ofState Statutory

Provisions LimitingAmount ofRecovery in Medical Malpractice Claims, 26 A.L.R. 5th 245 ( 1 995).

3. Patricia J. Chupkovich, Comment, Statutory Caps: An Involuntary Contribution to the

Medical Malpractice Insurance Crisis or a Reasonable Mechanism for Obtaining Affordable

Healthcare?, 9 J. CONTEMP. HEALTH L. & Pol'Y 337, 337 (Spring 1993) (citing Daryl L. Jones,
Note, Fein v. Permanente Medical Group; The Supreme Court Uncaps the Constitutionality of



776 INDIANA LAW REVIEW [Vol. 37:773

These measures have come under heavy attack for being unconstitutional and
having questionable economic impact, largely due to the inherent inequity in

burdening the most severely injured victims ofmalpractice."* The results ofthese
attacks have been mixed.

^

Since 1995, the U.S. House of Representatives has passed legislation seven
times that would impose a national cap on non-economic damage awards in
medical malpractice actions, but such measures have failed to pass through the

U.S. Senate.^ Most recently. The Help Efficient, Accessible, Low-Cost Timely
Healthcare Act of2003, which would have capped non-economic damage awards
in medical malpractice actions at $250,000, was passed by the United States
House of Representatives in March of 2003, but in July, a similar measure was
blocked by a filibuster in the Senate.^ The vote on these measures has generally
come down along party lines, with the most recent pieces of legislation being
backed by President George W. Bush.^

President Bush placed a national cap on non-economic damages in medical
malpractice actions at the forefront of his domestic agenda, addressing his

proposal for such a cap in his State of the Union Addresses in 2003 and again in
2004.^ With the nation turning its attention to the 2004 election, medical

malpractice caps will likely be a hotly debated issue again this year. As the
political stimulus to pass a national medical malpractice cap grows, it is important

to analyze the merits of such a measure. If the state experience with caps serves

as any indicator, any national cap is sure to face constitutional challenges, as well

as attacks under economic theory. This Note will analyze the constitutional and

economic implications of a national cap on non-economic damages in medical

Statutory Limitations on Medical Malpractice Recoveries, 40 U. MIAMI L. REV. 1 075, 1 078 ( 1 986)

(explaining that physicians, the insurance industry, and legislators referred to the phenomenon of

increases in malpractice claims as a "medical malpractice crisis"). The frequency of medical

malpractice claims rose from about one per one hundred doctors in 1960 to seventeen per one

hundred doctors in the mid 1980s. Paul C. Weber, Medical Malpractice on tiual 94 (1 991).

4. Crocca, supra note 2, at 245.

5. Id.

6. See Help Efficient, Accessible, Low-Cost Timely Healthcare (HEALTH) Act of 2003,

H.R. 5, 1 08th Cong. (2003); Help Efficient, Accessible, Low-Cost Timely Healthcare (HEALTH)

Act of 2002, H.R. 4600, 107th Cong. (2002); Balanced Budget Act of 1997, H.R. 2015, 105th

Cong. (1997); Health. Coverage Availability and Affordability Act of 1996, H.R. 3160, 104th

Cong. ( 1 996); Common Sense Product Liability Legal Reform Act of 1 996, H.R. 956, 1 04th Cong.

( 1 996); Balanced Budget Act of 1 995, H.R. 249 1 , 1 04th Cong. ( 1 995); see also Perry H. Apelbaum

& Samara T. Ryder, The Third Wave ofFederal Tort Reform: Protecting the Public or Pushing the
Constitutional Envelope, 8 CORNELL J.L. & PUB. POL'Y 591, 630-31 (Spring 1999).

7. Sheryl Gay Stolberg, Senate Refuses to Consider Cap on Medical Malpractice Awards,

N.Y. Times, July 10, 2003, Late Edition, at A20.

8. Id

9. Associated Press, Bush Stumpsfor Cap on Malpractice Suits, INDIANAPOLIS STAR, Jan.

17, 2003, at A6; Major Points in President Bush's State of Union Address, Jan. 26, 2003, at

http://www.nbcl7.com/news/1941889/detail.html (last visited Jan. 28, 2003).



2004] MEDICAL MALPRACTICE ACTIONS 777

malpractice actions, discuss the feasibility of such a cap to achieve the goals of

its proponents, and suggest alternative solutions with the potential to achieve the

goals of proponents of medical malpractice caps without forcing the most

severely injured victims of malpractice to shoulder the burden.
^^

Part I of this Note provides the background necessary to understand the

debate surrounding medical malpractice caps on damages. This part briefly

surveys the history of the national healthcare "crisis," the role medical

malpractice litigation has played in it, and the theoretical arguments advocated

by proponents and opponents of caps on medical malpractice non-economic
damages. The constitutional and economic questions are analyzed in later
sections, and a brief summary of the present status of state law on damages caps
is provided.

Part II of the Note analyzes the case law relevant to determining the
constitutionality of a national cap on non-economic damages in medical
malpractice actions. The right to trial by jury, the constitutional separation of
powers, the guarantee of equal protection, and due process rights are each

analyzed. In subpart 1 of each of these sections, the Note first summarizes the
importance of state constitutional rulings on caps for non-economic damages in

medical malpractice actions in order to provide support for the federal analysis

by revealing the key arguments that have already been made in this area. Then,
subpart 2 of each section discusses any relevant decisions based on the federal

constitution. Finally, subpart 3 ofeach section analyzes the potential outcome of

the constitutional challenge and note the key concerns for legislators under each

attack. This section concludes with some drafting suggestions to minimize the
likelihood that a national cap might be found unconstitutional.

Part III discusses the economic effect of a national cap in terms of the

potential of a national cap to fulfill its legislative purpose or the goals of the tort

law system, as well as the potential impact a cap may have on areas outside the
health industry. Part IV discusses the viability of alternative solutions and the

potential to remedy the crisis without forcing the most severely injured victims

of malpractice to shoulder the burden for all of society. Finally, this Note

concludes that while a national cap on non-economic damages in medical

malpractice actions is likely to pass constitutional muster. Congress would be

wise to attempt less invasive limitations first. Congress should seek out better

economic data, upon which to base their decisions, and ensure the crisis will be

averted with minimal negative consequences.

1 0. It is important to note at the onset that the sole focus ofthis note is non-economic damage

caps in medical malpractice actions. Any discussion or analysis of other types of damages (i.e.,

punitive damages and economic damages, etc.) and other types of actions (i.e., personal injury,

wrongful death, workers' compensation, etc.) is mainly incidental and used for purposes ofanalogy

or distinction.



778 INDIANA LAW REVIEW [Vol. 37:773

I. Background

A. The Role ofMedical Malpractice Awards in the
National Healthcare "Crisis

"

The increasing cost of healthcare has been one ofthe most pressing problems
in America in the last half century. Scholars, politicians, and industry experts
have pointed fingers at many factors that could be the source ofthe problem and
proposed many solutions to solve the perceived crisis. One of the most oft
referred to culprits of the increasing cost of healthcare is increased insurance

premiums for healthcare professionals and facilities. Medical malpractice
insurance premiums and overall healthcare insurance costs have risen
dramatically since the 1970s.'' The alleged source of the increasing cost of
medical malpractice insurance has been the tort system. As the argument goes,
medical malpractice claims have increased in frequency, and jury awards have

become excessive. Some commentators have argued that the medical malpractice
crisis is very real and tort reforms are essential to ameliorate it, while others argue

there is no real crisis at all and tort reforms will only compound the problem.'^
"In 2002 alone observers say, healthcare costs could jump by as much [as]

13 percent. . . . Without adequate malpractice insurance, many healthcare
providers are either abandoning certain high risk procedures or leaving their

practices altogether."'^ Those observers seemed to hit the mark. Medical

malpractice insurance premiums are increasing, and it is having a marked effect

on the provision of healthcare services. The most recent illustration of this was
the well-publicized physician strikes in Florida, West Virginia, and New Jersey
in late 2002 and early 2003, where surgeons walked out in an effort to urge state

policy makers to do something about the increase in medical malpractice

insurance premiums.
'"*

1. Proponents ofCaps: Arguments Advanced by Healthcare and Insurance
Industries.—It is no surprise that the American Medical Association (AMA) and

1 1. Richard A. Posner, Trends in Medical Malpractice Insurance, 1 970-1985, 49 LAW &
CONTEMP. Probs. 37 (1986).

1 2. Compare Patricia M. Danzon, The Effects ofTort Reforms on the Frequency andSeverity

ofMedical Malpractice Claims, 48 OHIO ST. L.J. 413, 416 (1987), with Richard L. Abel, The Real

Tort Crisis: Too Few Claims, 48 Omo ST. L.J. 443, 446 ( 1 987), and Marc Galanter, Real World
Torts: An Antidote to Anecdote, 55 Md. L. Rev. 1093, 1 120-26 (1996).

13. Council of Insurance Agents & Brokers, Medical Malpractice Costs Skyrocket, at
http://www.insworld.com/web/broker/assurex_global/archive/ebmay02.asp (last visited Nov. 30,

2002).

14. Associated Press, Doctors Take to Streets to Win Malpractice Reforms, at http://www.

cnn.com/2003/HEALTH/02/01/doctors.distress.ap/index.html (last visited Mar. 3, 2003);

Associated Press, Surgeons Strike in West Virginia, at http://www.cbsnews.com/stories/

2003/01/02/national/printable535018.shtml (last visited Jan. 7, 2003); CNN, N.J. Doctors Stage

Work Stoppage: Medical Workers Protesting Rising Malpractice Premiums, at http://www.cnn.

com/2003/HEALTH/02/03/nj.doctors/index.html (last visited on Mar. 3, 2003).



2004] MEDICAL MALPRACTICE ACTIONS 779

insurance industry lobbyists are leading the push towards a national cap on
medical malpractice damages. Less damages mean less payouts, which means
lower insurance premiums. Proponents cite to increasing costs of medical

malpractice litigation, "[a]verage jury awards in medical malpractice cases have

increased by 43 percent, from $700,000 in 1999 to $1 million in 2000."*^ They
further argue that the reason jury awards have increased so much is the increased
willingness ofjuries to irrationally overcompensate victims of malpractice with

excessive jury awards for pain and suffering and other non-economic damages.

They argue that with caps on these damages, "real" losses, i.e., economic
damages, are still compensated. From this perspective, non-economic damages
are problematic because it is difficult to place a dollar value on them; therefore,

they should be less essential to a fair system of compensation.'^ It is also argued

that many malpractice claims are frivolous, and caps would discourage such
claims, with less likelihood ofplaintiffs obtaining substantial windfalls. Statistics

show that plaintiffs prevail less in medical malpractice suits than any other tort
or personal injury claim.

'^

2. Opponents ofCaps: Arguments Advanced by Trial Lawyers & Consumer
Advocates.—^According to opponents ofcaps, the limitations are unfair and likely
to breed more malpractice:

These tort reform measures have four things in common: insurance
companies save money; incompetent doctors avoid blame and any

meaningful form ofdiscipline; patients and their families, who have been
destroyed in the process, are prevented from obtaining financial

compensation, the only kind ofjustice available to them; and, the general

public is left unprotected from doctors who may maim and kill their
patients.'^

The American Trial Lawyers' Association (ATLA) and consumer groups lead
the charge against caps. These groups often accuse proponents of

mischaracterizing statistics and accuse insurance companies of practicing bad

business. Opponents of caps argue that not enough malpractice claims are filed:
"A study done by the Harvard Medical Practice Study Group determined that for
every [eight] instances of medical malpractice, only [one] claim was actually
filed."'^ They argue that the low winning percentage for plaintiffs in medical

15. Bush Stumpsfor Cap on Malpractice Suits, supra note 9.

1 6. Martha Chzimallas, The Disappearing Consumer, Cognitive Bias and Tort Law, 6 ROGER

Williams U.L REV. 9(2001).
17. Id. (citing U.S. Dep't OF Justice, Bureau OF Just. Stats., TortTrials and Verdicts

IN Large Counties, 1996 (Aug. 2000)).
18. Dr. Harvey F. Wachsman, Individual Responsibility and Accountability: American

Watchwordsfor Excellence in Healthcare, 10 ST. JOHN'S J. LEGAL COMMENT. 303, 317 (Spring

1995).

1 9. ATLA Press Room, Fact Sheet: Don 't Believe the Insurance Companies ' Excuses:
Lawsuits Are Not the Cause of Rising Medical Malpractice Insurance Rates, at

http://www.atla.org/ConsumerMediaResources/Tier3/press_room/FACTS/medmal/One%20Pag



780 INDIANA LAW REVIEW [Vol. 37:773

malpractice suits is not evidence of frivolous suits, but is really evidence that

doctors are already over-protected by the inherent difficulty in getting expert
medical testimony against a practicing physician.

^°

Opponents of caps also argue that the real problem lies with the insurance
companies' mismanagement and unethical practices. "In 1999, . . . [medical
malpractice insurers] garnered 14.2% profit, while property/casualty [insurers]
made 8.2%."^^ A letter written by Robert Hunter, advisor to President Ford
during the medical malpractice insurance crisis in the 1 970s, to President George

W. Bush, criticized a Department of Health and Human Services report.^^ He
found that the Department's report provided inaccurate and erroneous

information to the President blaming high jury awards for escalating medical

malpractice rates.^^ He asserted that "the economic cycle of the insurance
industry and the industry's own business practices" were the real culprit as was
the case in the 1970s and 80s.^'* Because of these practices, opponents would
warrant caution in considering caps because there are no guarantees that

physicians and consumers will see any impact as insurers are the ones who get all
the savings.^^

Another key argument against such caps is that by subsidizing the cost of
insurance for physicians who practice bad medicine, society loses. It is argued
that the likelihood ofa high jury verdict for malpractice is a key motivating factor

for physicians to practice "good" medicine.

[T]he American people need reforms that protect the public, not reforms

that blame the injured, the disabled, and victims of medical ineptitude

and neglect. The reforms advanced by tort reform proponents,
purportedly in the public interest, are actually in the interests of the

thousands of physicians who will be allowed to practice bad medicine,
undetected, undeterred, and untroubled by their conscience.^^

It is also often cited by opponents of caps that "[t]he direct total cost of the

ers/dont%20blame%201awsuits%20new.aspx (last visited Nov. 30, 2002) (citing Harvard Medical

PmcticcStady Group, Patients, Doctors, andLawyers: Medical Injury, Malpractice Litigation, and

Patient Compensation in New York, Harvard University (1990)).

20. Id

21. ATLA Press Room, Fact Sheet: Lawyers Are Not the Cause of Rising Medical
Malpractice Insurance Rates, at http://wvy^.atla.org/medmal/notcause.pdf (last visited Nov. 30,

2002) (citing Nat'l Ass'n of Ins. Comm'rs, Profitability by Line by State in 1999 (2001)).

22. Consumer Fed'n of Am., President 's Medical Malpractice Plan Based on Biased,

Inaccurate Information CFA Identifies Insurer Practices as Cause of Soaring Rates, at

http://www.consumerfed.org/073 1 02medmalrelease.html (released to press on July 3 1 , 2002) (last

visited Nov. 30, 2002).

23. Id

24. Id

25. US House Passes Bill to Cap Malpractice Awards, at http://health_info.nmh.org/

HealthNews/reuters/NewsStory092600236.htm (last visited Nov. 18, 2002).

26. Wachsman, supra note 1 8, at 324.



2004] MEDICAL MALPRACTICE ACTIONS 78

1

malpractice system is less than one percent of total health care expenditures."^^

Therefore, it is argued that claims by proponents of caps that they will decrease

the overall cost of healthcare or remedy the perceived national healthcare crisis

are simply irrational.

Nonetheless, as Benjamin Disraeli once said, "[T]here are three kinds of lies:

lies, damned lies and statistics. "^^ Statistical information can be cited in support
of both opponents and proponents of caps. Nonetheless, several things are clear

and are discussed in more detail in the economic analysis of this Note in Part III:
medical malpractice costs are increasing; remedying the cost of medical

malpractice insurance will not, in and of itself, solve the problem of increasing

health costs; caps on damages may reduce malpractice insurance premiums; and,
many unwanted side-effects could result from such caps. The economic effects
of caps are at the source of the problems that they present.

B. Two Key Problems

[C]aps on non-economic damages in medical malpractice are most unfair

because of the nature of the claim. . . . The problem ... is that
individuals suffer loss so that society can control medical costs and

encourage physicians to stay in business[,] . . . [c]aps in medical

malpractice cases punish those who suffer the most . . . [seriously injured
and the young]. . . caps on non-economic damages are unfair because

they affect the poor and economically disadvantaged most severely.
"^^

The inherent inequity burdening the most severely injured victims of malpractice
is the catalyst for the constitutional and economic problems concerning caps on

non-economic damages in medical malpractice actions.

7. Constitutional Uncertainty.—The Supreme Court has not made a
definitive ruling on the constitutionality ofdamage caps, and state court decisions
are all across the board. A national cap on non-economic damages in medical
malpractice actions will present the Court the opportunity to clear up confusion

in this area of the law. This Note undertakes the academic endeavor of sorting

out the constitutional arguments made for and against caps on non-economic
damages in an effort to determine if such a cap would be found constitutional by
the nation's high court. The constitutional arguments against state caps have
come down on a variety of grounds. Some challenges have come on grounds of
state constitutional provisions that have no analogous federal provision. Others,

more notably, have dealt with right to trial by jury, the separation of powers,
equal protection, and due process clauses and will be helpful in consideration of

27. ABA, Legislative and Governmental Priorities 2002: Healthcare Accountability:

Medical Malpractice, at http://www.abanet.org/poladv/priorities/medmal.htm (last visited Nov. 1 8,

2002).

28. The Oxford Dictionary of Quotations 249 ( 1 992).

29. Kathleen E. Payne, Linking Tort Reform to Fairness and Moral Values, 1 995 Det. C.L.

Mich. St. U. L. Rev. 1207, 1228 (Winter 1995).



782 INDIANA LAW REVIEW [Vol. 37:773

the constitutionality of a national cap. This section goes beyond determining the
potential for constitutionality to discuss how a cap could be drafted to ensure its
constitutionality.

2. Economic Uncertainty.—There are several economic concerns that need
to be considered by policy makers in this arena. The first consideration is simply
the potential for caps to achieve their purported economic goals. The Texas
Supreme Court noted that a state commission could not conclude there was any
correlation between a damage cap and the legislative purpose of improved
healthcare as data was insufficient, while an independent study concluded there
was no relationship between a damage cap and increased insurance rates, because
less than 0.6% of all claims brought are over $100,000.^° Furthermore, while
other studies have concluded that caps do decrease malpractice premiums,^ ^ the
overall effect to the system may be unexpected. There is evidence that the
irrationality stemming from insurance company risk calculations could lead to
higher actual payouts overall.^^ The impact that caps can have on settlement
negotiations and welfare benefit programs may result in other economic impacts
that need ftirther consideration. The goal of this Note is to identify these
constitutional and economic pitfalls in an effort to suggest the proper course of

action from an overall policy making perspective, as opposed to an isolated

analysis of solely malpractice insurance itself

C. Where the States Stand

After more than thirty years of tort reform, states are far from finding a
universal solution to rising malpractice insurance premiums. The state experience
has been varied, as is the current landscape of state law on caps on non-economic

damages in medical malpractice actions. The attached tables provide a summary
of where the individual states currently stand on medical malpractice caps on

non-economic damages. Twenty states have a cap, and seventeen states have

30. Lucas V. United States, 757 S.W.2d 687, 691 (Tex. 1988) (citing THE Keeton REPORT

at 7; and Sumner, The Dollars and Sense of Malpractice Insurance 9 (Aft Books 1979)).

31

.

See U.S. Congress, Office of the Technology Assessment, Impact ofLegal Reforms on

Medical Malpractice Costs, OTA-BPH-H- 1 1 9 (Oct. 1 993) [hereinafter Congressional Assessment]

(discussing results of six independent studies: E.K. Adams & S. Zuckerman, Variation in the
Growth and Incidence ofMedical Malpractice Claims, 9 J. HEALTH POL. Pol'Y & L. 475, 475-88
( 1 984); D. K. Barker, The Effects ofTort Reform on Medical Malpractice Insurance Markets: An

Empirical Analysis, 17 J. HEALTH POL. POL'Y & L. 143, 143-61 (1992); G. Blackmon & R.
Zeckhauser, State Tort Reform Legislation: Assessing Our Control ofRisks, TORT L. & PUB. iNT.
(New York W.W. Norton & Co., 1991); P.M. Danzon, The Frequency and Severity ofMedical
Malpractice Claims: New Evidence, 49 LAW& CONTEMP. ProBS. 57, 57-84 (1986); F.A. Sloan et
al.. Effects ofTort Reforms on the Value ofClosed Medical Malpractice Claims: A Microanalysis,

1 4 J. HEALTH Pol. Pol'Y& L. 663, 663-89 ( 1 989); S. Zuckerman et al.. Effects ofTort Reforms and
Other Factors on Medical Malpractice, 27 INQUIRY 167, 167-82 (1990)).

32. William P. Gronfein & Eleanor DeArman Kinney, Controlling Large Claims: The
Unexpected Impact ofDamage Caps, 16 J. HEALTH POL. POL'Y & L. 441 (1991).



2004] MEDICAL MALPRACTICE ACTIONS 783

ruled that their current cap is constitutional. However, of the remaining thirty

states that do not have a cap, eight previously had one but found it to violate state

and/or federal constitutional rights. Another three that now have caps once found
previous versions unconstitutional. The twenty-eight states that have ruled on the
constitutionality of caps provides a body of experience to frame this Note's

discussion ofthe constitutionality ofa national cap on non-economic damages in

medical malpractice.

II. Constitutional Challenges to a National Cap on
Non-Economic Damages in Medical Malpractice Actions:
Lessons Learned from the States, the Federal Experience,

AND Potential Outcomes

State high courts have both upheld and struck down statutory caps on non-
economic damages in medical malpractice actions on numerous grounds.^^ This

section analyzes the major rationales in support of such rulings that came down
on state constitutional grounds that were analogous to some key federal
constitutional provisions.^'* Then, rulings that came down on federal
constitutional grounds are discussed. Finally, potential outcomes of

constitutional challenges to a national cap on non-economic damages in medical

malpractice actions are discussed. While this Note attempts to discuss the

constitutional provisions that are implicated by caps on damages on an individual

basis, it is notable that there is some overlap in the analysis of each of these
constitutional provisions.

A. The Seventh Amendment Right to Trial by Jury

Many states have had challenges to damage caps based on grounds that such

3 3 . For an excellent summary ofjudicial opinions on the constitutional validity, construction,

and application of state statutory caps on damages in medical malpractice claims through 1995, see

QvocQ?i,supra note 2; see also Matthew W. Light, Note, Who 5 The Boss?: Statutory Damage Caps,

Courts, and State Constitutional Law, 58 WASH. & LEE L. REV. 3 1 5 (Winter 2001 ).
34. It is important to note that several state court opinions have also struck down or upheld

statutory caps on non-economic damages in medical malpractice actions in part or solely under

provisions that are unique to specific state constitutions and not particularly relevant to the federal

analysis. See Smith v. Dep't of Ins., 507 So.2d 1080, 1087-89 (Fla. 1987) (discussing open courts

provisions of state constitutions); Kirkland v. Blaine County Med. Ctr., 4 P.3d 1115, 1120-21

(Idaho 2000); Wright v. Cent. DuPage Hosp. Ass'n, 347 N.E.2d 736, 743 (111. 1976) (discussing

state constitutional provisions on special legislation); Kan. Malpractice Victims Coalition v. Bell,

757 P.2d 25 1 , 263-64 (Kan. 1 988) (criticized by Bair v. Peck, 8 1 1 P.2d 1 1 76 (Kan. 1 99 1 )); Adams

V. Children's Mercy Hosp., 832 S.W.2d 898, 904-05 (Mo. 1993); Knowles v. United States, 544

N.W.2d 183, 203-04 (S.D. 1996); Lucas, 757 S.W.2d at 690-92; Pulliam v. Coastal Emergency

Serv. of Richmond, Inc., 509 S.E.2d 307, 315 (Va. 1999), affg Etheridge v. Med. Ctr. Hosp., 376

S.E.2d 525, 533 (Va. 1989). Furthermore, many ofthe statutes in question in the cases discussed

in this Note go beyond merely addressing non-economic damages or medical malpractice actions.

Such instances are noted throughout where relevant.



784 INDIANA LAW REVIEW [Vol. 37:773

caps violate the right to trial by jury. The typical state constitutional provision
for this right states that "the right to trial byjury is inviolate."^^ The argument is
that damages in a medical malpractice action are factual determinations to be
made by thejury. Therefore, it violates an individual's right to trial byjury when
a legislature takes that determination aw^ay from the jury through the use of a cap

on damages.
7. Importance of Challenges Under Analogous State Constitutional

Provisions.—
a. Finding caps violated a right to trial byjury.—State court decisions that

have found caps on non-economic damages in medical malpractice actions to
violate the state right to trial by jury have relied on several key fmdings.^^ The
Oregon Supreme Court's 1993 decision mLakin v. Senco Products, /«c., provides
a good example of the typical analysis these courts have taken.^^ The first and
most crucial step has been a historical analysis of the scope ofjury functions at
the time the rights were adopted in the state constitution. The Lakin court
concluded that the assessment of damages was a factual determination and a
function of a common law jury at the time the Oregon constitution was adopted
in 1851. Therefore, it was unconstitutional for the legislature to take that power
from the jury in passing a statutory cap.^* The Washington Supreme Court
recently criticized courts that have upheld damages caps in light of the right to

trial by jury because they "either have not analyzed the jury's role in the matter

or have not engaged in the historical constitutional analysis used by" courts that

have struck down caps on these grounds.^^
Furthermore, state courts that have found caps to be unconstitutional under

the right to trial byjury have distinguished similar caps on several grounds. The
Lakin court, distinguished caps on damages in wrongful death actions which were

35. See FLA. CONST, art. I, § 22; IND. CONST, art. I, § 20; Kan. Const., Bill of Rights § 5;

Omo Const, art. I, § 5; Or. Const, art I, § 17; Tex. Const, art. I, § 15; Wash. Const, art. I, § 21.
36. See Smith v. Schulte,671 So.2d 1334, 1342-46 (Ala. 1995); PFng/i/, 347 N.E.2d at 736;

Kan. Malpractice Victims Coalition v. Bell, 757 P.2d 251, 263-64 (Kan. 1988) (finding caps on

recovery and mandatory annuity payments violate the right to jury trial and right to a remedy

through due course of law); Lakin v. Senco Prods., Inc., 987 P.2d 463, 468-75 (Or. 1993); Lucas

V. United States, 757 S.W.2d 687, 690-92 (Tex. 1988) (holding $500,000 cap on total medical

malpractice damages violates right to remedy endjury trial); Condemarin v. Univ. Hosp., 775 P.2d

348, 365-66 (Utah 1 989) (plurality opinion) (striking balance in favor ofconstitutional right ofjury

trial); Sofie v. Fibreboard Corp., 771 P.2d 711, 715-28 (Wash. 1989) (holding statutory limit on

non-economic damages in personal injury and wrongful death actions violated the state right to trial

byjury). For further analysis ofthe Utah medical malpractice cap and the decision in Condemarin,

see James E. Magleby, The Constitutionality ofUtah 's Medical Malpractice Damages Cap Under

the Utah Constitution, 21 J. CONTEMP. L. 217 (1995).

37. 987 P.2d at 468-75.

38. "The amount ofdamages . . . from the beginning oftrial byjury, was a 'fact' to be found

by the jurors." Id. at 470 (quoting CHARLES T. McCORMiCK, HANDBOOK ON THE LAW OF

Damages 24 (1935)).
39. 5o//e, 771P.2dat723.



2004] MEDICAL MALPRACTICE ACTIONS 785

held constitutional, because such actions did not exist at common law, as medical
malpractice actions did as a subset of personal injury

."^^ The court reasoned that

since wrongful death actions were created by the legislature, the legislature could

limit the manner in which damages were awarded. However, the legislature had

no power to limit awards in actions existing at common law before the legislature
was created/' The Lakin court also distinguished judicial remittitur, which has
long been held to not violate the right to trial by jury. The court reasoned that
remittiturwas permissible because it was discretionary and the plaintiffwas given
a right to appeal, as opposed to the mandatory nature of the statutory cap in

question."*^

b. Upholding caps over trial byjury challenges.—Several state courts have
upheld caps over challenges on the right to trial byjury."*^ The Virginia Supreme
Court has been cited and discussed by many other courts ruling on this issue.
Virginia first upheld a medical malpractice cap over multiple constituticMial

challenges in the 1991 decision of Etheridge v. Medical Center Hospitals and

most recently affirmed its ruling in the 1999 decision of Pulliam v. Coastal

Emergency Services of Richmond, Inc.^^ The key distinction between these
decisions has come along the lines of how the jury's function has been viewed or

40. Laitm,987P.2dat473.

41. Id.

42. Id.

43. Kirkland v. Blaine County Med. Ctr., 4 P.3d 1

1

15, 1 11 8-20 (Idaho 2000); Pulliam v.

Coastal Emergency Serv. of Richmond, Inc., 509 S.E.2d 307, 315-17 (Va. 1999) (holding that $1

million limit on recoveries in medical malpractice actions did not violate the right to jury trial,

special legislation, or separation of powers provisions of state constitutions, nor the takings, due

process, or equal protection provisions ofthe state or federal constitutions), aff'g Etheridge v. Med.

Ctr. Hosp., 376 S.E.2d 525 (Va. 1989); Scholz v. Metro. Pathologists, P.C, 851 P.2d 901, 905-06

(Colo. 1993); Johnson v. St. Vincent Hosp., Inc., 404 N.E.2d 585, 601-02 (Ind. 1980); Samsel v.

Wheeler Transp. Serv., Inc., 789 P.2d 541, 549-58 (Kan. 1990); Murphy v. Edmonds, 601 A.2d

102, 116-18 (Md. 1992); Adams V. Children's Mercy Hosp., 832 S.W.2d 898, 904-07 (Mo. 1993);

Wright V. Colleton County Sch. Dist., 391 S.E.2d 564 (S.C. 1 990); Knowles v. United States, 544

N.W.2d 183, 202-03 (S.D. 1996). For detailed analysis and favorable treatment of Kirkland, see

Shaila Prabhakar, Tort Reform—Cap on Noneconomic Damages Does Not Violate Right To Jury
Trial. Kirkland v. Blaine County Medical Center, 4 P. 3d 1 115 (Idaho 2000), 32 RmGEKSL.J. 1087

(2001).

44. Pulliam, 509 S.E.2d 307. There are two important distinctions to the Virginia cases

which, however, have no bearing on our analysis. First, the cap in question in Virginia is a cap on

total damages, not merely non-economic damages. See Va. Code § 8.01-581.15. Second, the

Virginia constitutional provision for the right to jury trial is a bit unique. It reads, "[I]n

controversies respecting property, and in suits between man and man, trial by jury is preferable to

any other, and ought to be held sacred." Va. Const, art. I, § 1 1 . For a critical analysis of the

Virginia Supreme Court's decision in Pulliam, see Elizabeth Anne Keith, Pulliam v. Coastal

Emergency Services of Richmond, Inc.: Reconsidering the Standard of Review and

Constitutionality of Virginia 's Medical Malpractice Cap, 8 GEO. Mason L. Rev. 587 (2000)
(concluding that Virginia's medical malpractice cap should be found unconstitutional).



786 INDIANA LAW REVIEW [Vol. 37:773

characterized. The Pulliam court found that part of the jury's fact-finding
function is to assess damages; however, once assessed, the jury's constitutional

function is complete. It is the court's duty to apply the law to the facts, and

remedy is a matter of law, not fact. Because the trial court applies the limitation
after the jury has made its damages assessment, the right to trial by jury is not
violated.'*^

Other courts upholding caps over challenges on the right to jury trial have

focused on the legislature's power to venture into the jury's ftinction. The
opinion of the South Dakota Supreme Court in Knowles v. United States is
representative of courts that have gone very far into this line of thinking."*^ The
Knowles court found that civil damages were not an essential element of the
jury's fiinction as retained at common law, that the common law never recognized
a right to full recovery in tort, and that "[o]ur legislature retains the power to
change a remedy or abolish it and substitute a new remedy, so long as it does not
deny a remedy.'"*^ However, most courts have not gone so far. More illustrative
ofthe reasoning ofthe majority of courts that have upheld caps is the concept that

the legislature merely has the power to set the outer limits of the remedy.'*^

These determinations can often depend upon interpretation of state law. For

example, the Idaho Supreme court upheld a medical malpractice cap on non-
economic damages largely because, under the Idaho constitution, the legislature

had the power to modify or repeal common law causes of action.'*^ The court
addressed the question on certification from a federal court.^^ As the court
reasoned, if the legislature has the power to abolish common law rights, it
therefore has the power to limit the remedies available for a cause of action.^'

2. Federal Law & Experiences.—Many of the state decisions which came
down on challenges to caps based on the right to trial byjury have also discussed
whether the cap did or did not violate the Seventh Amendment. Commentators
have also discussed the implications of the Seventh Amendment upon caps on
damages.^^ Few federal court decisions have directly addressed the
constitutionality of a cap on Seventh Amendment grounds, but many opinions
discussing the relevance of federal law to an analysis of the constitutionality of

state caps are available that prove helpful to the analysis here.^^

45. Id. at 589 (citing Etheridge, 376 S.E.2d at 529).

46. 544N.W.2dl83.

47. Id at 202-03.

48. See Wright, 391 S.E.2d at 569.

49. Kirkland v. Blaine County Med. Ctr., 4 P.3d 1115,1119 (Idaho 2000).

50. Id

51. Id

52. See Kenneth Owen O'Connor, Comment, Funeral for a Friend: Will the Seventh

Amendment Succumb to a Federal Cap on Non-Economic Damages in Medical Malpractice

Actions?, 4 Seton Hall CONST. L.J. 97 (Winter 1993).

53

.

It is important to note that although there are no cases discussed which have found a cap

on medical malpractice damages to violate the Seventh Amendment, particularly in comparison to

the larger number of cases which have held there is no Seventh Amendment violation, this should



2004] MEDICAL MALPRACTICE ACTIONS 787

Many of the state decisions finding caps to violate the right to trial by jury
have cited United States Supreme Court precedent for support. The Lakin court
cited Supreme Court precedent for two propositions. First, the Lakin court cited
Dimickv. Schiedt and Feltner v. Columbia Pictures Television, Inc.^^ These two
cases were cited for the proposition that the assessment of damages was a
function of the common law jury as protected under the Seventh Amendment.^^
The Lakin court went on to cite Hetzel v. Prince William County for the
proposition that "imposition of a remittitur without the option of a new trial
'cannot be squared with the Seventh Amendment.

'"^^

The Washington Supreme Court agreed with the Lakin court on this issue and
suggested that Dimick rather than Tull v. United States provided the most
informative analysis on the constitutionality of non-economic damages limits.^^

Tull was a case where the Supreme Court upheld civil penalty assessments,
without jury involvement, under the Clean Air Act.^^ The Sofie court
distinguished Tull because it did not apply to civil damages actions, but merely
applied to civil penalties under a legislatively created scheme.^^

Some federal courts have upheld state medical malpractice caps on damages
over challenges to the Seventh Amendment.^^ Here again, the determination has

depended upon a characterization of the jury's function. As the Fourth Circuit
Court of Appeals noted, "It is not the role of the jury to determine the legal

consequences of its factual findings . . . that is a matter for the legislature."^^

Some ofthe most convincing language on this issue came from the 1989 District
Court of Maryland decision oi Franklin v. Mazda Motor Corp.:

not end our analysis. The key behind this anomaly lies in part because those courts that have

invalidated caps based on state constitutional grounds have not needed to address the federal

constitution; the state constitution was dispositive. However, courts upholding the caps have had

to address all challenges. Notably, the tendency for a court to rule one way on the state issue may

also show a tendency to rule the same way on the federal issue. Therefore, we cannot end our

analysis merely because there are far more decisions that have specifically held there was no

violation of the Seventh Amendment. This should be kept in mind in analyzing the other federal

rights that will be discussed in this part of the Note as well.

54. Lakin v. Senco Prods., Inc., 987 P.2d 463, 470 (Or. 1 993) (citing Dimick v. Schiedt, 293

U.S. 474, 480(1935) and Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340, 353 (1998)).

55. Id.

56. Id. (quoting Hetzel v. Prince William County, 523 U.S. 208, 21 1 (1998)).

57. Sofiev.Fibreboard Corp., 771 P.2d 711, 725 (Wash. 1989) (discussing D/w/ciS: and Tull

V. United States, 481 U.S. 412 (1987)).

58. rM//,481U.S. at412.

59. Id

60. See Boyd v. Bulala, 877 F.2d 11 9 1 (4th Cir. 1 989); Davis v. Omitowoju, 883 F.2d 1155,

1 1 58-65 (3d Cir. 1989) (upholding $250,000 limit imposed by Virgin Islands statute); Franklin v.

Mazda Motor Corp., 704 F. Supp. 1325, 1330-38 (D. Md. 1989) (upholding Maryland damages

cap).

61. Bo>'^, 877F.2dat 1196.



788 INDIANA LAW REVIEW [Vol. 37:773

Juries always find facts on a matrix of laws given to them by the
legislature and by precedent, and it can hardly be argued that limitations
imposed by law are a usurpation of the jury ftinction. . . . The power of
the legislature to define, augment, or even abolish complete causes of

action must necessarily include the power to define by statute what
damages may be recovered by a litigant with a particular cause of action
.... Particularly in the area of damages for pain and suffering, the
legislature acts within its power in creating reasonable limits on the
causes of action and recoverable damages it chooses to allow in the
courts of law.^^

3. Summation: Constitutionality and Legislative Concerns Regarding the
Seventh Amendment Right to Trial by Jury.—The above referenced federal court
rationales have been questioned and heavily criticized by scholars who find them
to be based on loose foundations.^' Nonetheless, it is likely that a national cap on
non-economic damages will be able to withstand challenges on Seventh

Amendment grounds for the reasoning laid out in Franklin. Moreover, many of
the issues implicated by the analysis under the rights ofthe Seventh Amendment
become more problematic under the constitutional analysis of other challenges.

B. The Constitutional Separation ofPowers

Constitutional challenges on separation ofpowers grounds are closely linked

to the challenges that have come under the right to trial byjury. The crux ofthese
challenges is that through statutory caps, the legislature improperly "delegates to

itself the power of remitting verdicts and judgments, which is a power unique to

the judiciary."^

1. Importance of Challenges Under Analogous State Constitutional

Provisions.—
a. Finding caps violated state separation ofpowers provisions.—^The state

courts which have invalidated caps on damages on separation ofpowers grounds

have focused on the cap's invasion into thejudiciary's power ofremittitur.^^ The
Supreme Court of Illinois laid out the typical rationale in striking down a cap on
these grounds in the 1997 decision ofBest v. Taylor Machine Works.^ First, the
court discussed the doctrine of remittitur, the duty ofthejudiciary to ensure ajury

62. 704F.Supp. at 1331-32.

63. O'Connor, supra note 52.

64. Best V. Taylor Mach. Works, 689 N.E.2d 1057, 1078 (111. 1997).

65. See Best v Taylor Mach. Works, 689 N.E.2d 1057, 1078-81 (111. 1997); State ex. rel

Ohio Acad, of Trial Lawyers v. Sheward, 715 N.E.2d 1062, 1085 (Ohio 1999); see also Wright v.

Central DuPage Hosp. Assoc, 347 N.E.2d 736 (111. 1 976); Sofie v. Fibreboard Corp., 77 1 P.2d 711,

7 1 5-28 (Wash. 1 989) (suggesting a violation ofthe separation ofpowers but striking down statutory

damage limitation on other grounds).

66. 689 N.E.2d at 1078-81.



2004] MEDICAL MALPRACTICE ACTIONS 789

does not award excessive verdicts.^^ The exercise ofjudicial remittitur must be
done on a case-by-case basis as the evidence supporting a jury award varies in

every case.^^ When a judge determines a remittitur is necessary, it is
implemented if the plaintiff consents, and ifthe plaintiff does not consent, a new
trial occurs.^^ The Best court also cited United States Supreme Court precedent
for the proposition that "it has [long] been a traditional and inherent power ofthe
judicial branch of government to apply the doctrine of remittitur^' which is a

"question of law for the court."^^ The court invalidated the cap in question

because it acted as a "legislative remittitur" in violation ofthe power vested in the

judiciary. The court reasoned that the statute was "mandatory and operate[d]
wholly apart from the specific circumstances of a particular plaintiff's

noneconomic injuries."^'

b. Upholdingcaps over state separation ofpowersprovisions.—Other States
have found this Separation of Powers argument to be wholly unpersuasive^^ The
West Virginia Supreme Court dismissed the separation ofpowers argument in the
2001 decision of Verba v. GapheryP The Court found that it was completely
within the state legislature's powers to enact statutes that abrogate the common
law.^"* Therefore, the Verba court found no merit in the legislative remittitur

argument.^^ Likewise, in 2000, the Idaho Supreme Court dismissed such an

argument in Kirkland v. Blaine County Medical Center^^ The Kirkland court

noted that "ifanything, the statute is a limitation on the rights ofplaintiffs, not the

judiciary."^^ Key to both of these cases, however, were the state constitutions'
explicit grant ofpower to the legislature to modify or abolish common law causes
ofaction.^^

2 Federal Law & Summation.—^The Separation of Powers question in this

67. Id. at 1079 (noting that judiciary has a duty to remit where an award falls outside the

range of fair and reasonable compensation, results from passion or prejudice, or shocks judicial

conscience; but allowing awards to stand that "fall[] within the flexible range of conclusions that

can reasonably be supported by the facts" as they are for the jury to determine).

68. 1± at 1080.

69. Id.

70. Mat 1079 (citing Hansen V.Boyd, 161 U.S. 397,412(1896)andDimickv. Schiedt,293
U.S. 474,484-86(1935)).

71. Mat 1080.
72. See Kirkland v. Blaine County Med. Ctr., 4 P.3d 1 1 15, 1 121-23 (Idaho 2000); Verba v.

Ghaphery, 552 S.E.2d 406, 410-1 1 (W. Va. 2001); see also Murphy v. Edmonds, 601 A.2d 102,

116-18 (Md. 1 992) (dismissing ofseparation ofpowers argument in same discussion as right to trial

by jury contention); Pulliam v. Coastal Emergency Serv. of Richmond, Inc., 509 S.E.2d 307, 319

(Va. 1999).

73. 552 S.E.2d at 410-11.

74. Mat 411.
75. Id

76. 4 P.3d at 1121-23.

77. Mat 1122.
78. M; see also Verba, 552 S.E.2d at 41 1 (discussing W. Va. CONST art. 8 § 13).



790 INDIANA LAW REVIEW [Vol. 37:773

context is one in which there is not much federal law to guide our analysis.
However, Congress does retain control over the jurisdiction ofthe United States
Supreme Court and has removed specific subjects from the jurisdiction of the
Court previously.^^ Nonetheless, this is one area in particular where the Court
could determine that the legislature inappropriately crossed the bounds of the
separation of powers. The key to the Court's ruling on such a challenge will
depend on the characterization of both the judiciary's power of remittitur and the
legislature's power to modify or abolish common law remedies. Congress, in
attempting to preserve the constitutionality of any proposed cap, would be wise
to consider means by which the separation of powers is preserved.

C Equal Protection Guarantees

Equal protection clause challenges come as a result of differential treatment
to plaintiffs in medical malpractice actions on two grounds: (1) differential

treatment of plaintiffs in medical malpractice cases versus plaintiffs in other

personal injury cases (who can obtain full recovery), and (2) plaintiffs severely
injured through medical malpractice who have large non-economic damages
versus those with small or non-existent non-economic damages from medical

malpractice (who can obtain full recovery).^^ "Equal protection raises the
question most fundamental to a society: Who gets what? Ofcourse, the problem,
approached from a different angle may be reformulated: Who gives up what?"^'
Under the Fourteenth Amendment, states are prohibited from denying any person
"equal protection of the laws."^^ This section, known as the equal protection
clause, has been made applicable to the federal government's exercise of power,
under the Fifth Amendment.^^ The equal protection argument against caps on
damages in this context is fairly obvious: those who suffer the most severe

79. Light, supra note 33, at 361 n.321-22 (noting the following: the U.S. CONST, art III, §

2 cl. 2 authorizes Congress to make "Exceptions" and "Regulations" regarding Supreme Court

jurisdiction); Exparte McCardle, 74 U.S. (7 Wall.) 506, 515(1 868) ("upholding statute abrogating

Supreme Court jurisdiction to hear habeas corpus appeals of certain ex-Confederates"); William

Cohen & Jonathan D. Varat, Constitutional Law 42-43 (1997) ("discussing congressional
proposals to strip Supreme Court ofjurisdiction over abortion and school prayer cases").

80. A more radical argument that has been made against caps, beyond the scope ofthis Note,
is that caps on non-economic damages will have a discriminatory impact on women's ability to

obtain full compensation in tort. Lisa M. Ruda, Note, Caps on Noneconomic Damages and the

Female Plaintiff: Heeding the Warning Signs, 44 CASE W. RES. L. REV. 197 (1993).

81. Jacqueline Ross, Will States Protect Us, Equally, From Damage Caps In Medical

Malpractice Legislation?, 30 iND. L. REV. 575 (1997) (quoting James W. Torke, The Judicial

Process in Equal Protection Cases, 9 HASTINGS CONST. L.Q. 279, 343 (1982)). The Ross Note

provides a more detailed analysis focusing solely on equal protection guarantees and advocating

state use of a higher than rational basis standard by state courts in analyzing the constitutionality

of medical malpractice caps.

82. U.S.CONST. amend. XIV.

83. BoUingv.Sharpe, 347 U.S. 497(1954).



2004] MEDICAL MALPRACTICE ACTIONS 79

1

injuries will go without full compensation for their non-economic damages, while
those who suffer relatively minor injuries with few non-economic damages will
be fiilly compensated under the law. Nonetheless, mere unequal treatment under
a statutory scheme is generally, in and of itself, not grounds for finding a statute
unconstitutional. The Court's analysis on equal protection grounds will depend
upon the nature of the rights involved, or the grounds under which unequal
treatment occurs; the interest of the state in promulgating the legislation; the

relation between the differential treatment and the goal meant to be obtained; and
how narrowly the law has been designed to minimize the unequal treatment
involved.

It is widely accepted that the Court uses a three-tiered approach for this

analysis.^'* The level of scrutiny the Court will apply increases from rational
basis, to intermediate or heightened scrutiny, to strict scrutiny. Any equal
protection challenge in this context will rely heavily on the level of scrutiny

utilized. "The level of scrutiny utilized is critically important, as virtually any
statute will be upheld under the rational basis test. Courts applying this standard

almost always defer to the legislature's determination that the classification

created by statute is rationally related to a legitimate state objective."^^ The
rational basis test is generally used for analysis ofeconomic or social regulation.

^^

The test is very deferential to the legislature inquiring only whether the
classification has a conceivable rational relationship to an end that is not

prohibited by the Constitution.

Strict scrutiny analysis applies when the classification distinguishes between
persons in terms of any right, upon some suspect class, such as race or national
origin, or where the act classifies people in terms of their ability to exercise a

fundamental right.^^ Under strict scrutiny analysis, the court independently
analyzes whether there is a close and effective relationship between the

classification and the goal, or ends sought, by the legislation. Provided there is

a close relationship between the classification and the ends, the test then is

whether the act is narrowly tailored to achieve ends that amount to a compelling

84. Though some jurists and commentators have suggested the real analysis actually occurs

on more of a spectrum than a system where everything fits into one of three neat tiers. See City of

Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 453 (1985) (Stevens, J., concurring); and San

Antonio Independent Sch. Dist. v. Rodriguez, 41 1 U.S. 1, 98 (1973) (Marshall, J., dissenting).

85. Kevin Sean Mahoney, Note, Alaska 's Cap on Non-economic Damages: Unfair, Unwise

and Unconstitutional, 1 1 ALASKA L. Rev. 67, 73 (June 1994).

86. See generally Mahoney, supra note 85, at 73; Ross, supra note 81

.

87. Where a fundamental right is involved there are implications ofboth equal protection and

substantive due process. Under substantive due process, federal protection will be given to such

fundamental rights, under fundamental principles of liberty and justice and necessary under the

Anglo-American scheme of ordered liberty that pertain to the States under the Fourteenth

Amendment. Duncan v. Louisiana, 391 U.S. 145 (1968). For federal equal protection analysis,

where a fundamental right is implicated the court generally applies a standard which varies

according to the importance of the right and the nature ofthe burden placed on the exercise ofthat

right. Randy J. Riley, EZ Review for Constitutional Law 76 (2001 ).



792 INDIANA LAW REVIEW [Vol. 37:773

state interest.

The intermediate level of scrutiny has been applied to "quasi-suspect"
classifications, mainly gender. Under the intermediate or heightened level, the
legislature must show that the classification involves a "substantial relationship"
to an "important" governmental interest.

7. Importance of Challenges Under Analogous State Constitutional
Provisions.—

a. Finding caps violated state equalprotection guarantee,
—

^The states that

have found their caps on damages in medical malpractice actions to violate the
equal protection clause of state constitutions have, in most instances, relied on a

higher standard than rational basis.^^ In Moore, the Alabama Supreme Court
found a $400,000 non-economic damages cap in medical malpractice actions to
be a violation of the state's equal protection clause.^^ The test applied by the
Moore court was "whether [the classifications created] where reasonably related
to the stated objective, and on whether the benefit sought to be bestowed upon
society outweigh[ed] the detriment to private rights occasioned by the statute."^
The findings in Moore were analogous to those that led to determinations that
equal protection rights were violated in other states with similar holdings. The
court relied on economic studies that found there to be little or no correlation

between medical malpractice premiums and the overall cost of health care and,

further, that damage caps effect on lowering medical malpractice premiums was
also very small.^' Very few damage awards were awarded above the cap, which
only limited the size ofthe most meritorious awards and therefore did nothing to

prevent frivolous claims.^^ While the effect was very remote, the burden placed
on the most severely injured medical malpractice victims was very high,
preventing them from obtaining total compensation.^^

Other courts have admitted that the test used was analogous to the federal

substantial relationship test of intermediate scrutiny. In Carson v. Maurer^^ the

New Hampshire Supreme Court invalidated the state's medical malpractice cap

88. Moore v. Mobile Infirmary Ass'n, 592 So. 2d 156, 165-70 (Ala. 1992), affd. Smith v.

Schulte, 671 So.2d 1334 (Ala. 1995); Brannigan v. Usitalo, 587 A.2d 1232, 1234-36 (N.H. 1991),

fl/T^ Carson v. Maurer, 424 A.2d 825 (N.H. 1980); Richardson v. Carnegie Library Rest, Inc., 763

P.2d 1 153 (N.M. 1988); Arneson v. Olson, 270 N.W.2d 125 (N.D. 1978); Condemarin v. Univ.

Hosp., 775 P.2d 348, 354 (Utah 1989) (favoring middle-tier scrutiny of legislations impinging on

right to recover for negligently caused injuries).

89. A/oore, 592So. 2dat 170.

90. Id. at 1 66. Notably, this test does not correlate directly with any ofthe three tiers of the

federal analysis. The court noted it was at liberty to not follow the federal tiers when applying state

law zmd declined to comment on which of the two lower tiers their analysis was most near. Id. at

170.

91

.

Id. ail 67-69 (citing studies from government and private sources conducted in the mid-

1980's).

92. /J. at 169.

93. Id

94. 424 A.2d 825 (N.H. 1980).



2004] MEDICAL MALPRACTICE ACTIONS 793

using such a test. The Carson court concluded that the damage cap violated equal
protection rights because the limitations were imposed in an unfair, arbitrary, and
unreasonable manner.^^ The court's rationale relied upon similar factors to those
in Moore: that paid out damage awards are only a small part of total insurance
premium costs and few individuals suffer non-economic damages in excess ofthe
cap.

b. Upholdingcaps over state equalprotection challenges.—States upholding
caps over state equal protection challenges have generally applied a rational basis

test, focusing on the legislation being economic in nature.^^ A typical decision
of this sort was Verba v. Gaphery from the Supreme Court of West Virginia in
2001 .^^ The Verba court characterized the legislation as economic in nature and
therefore would not review the basis for the legislature's justification, despite

statistical evidence refuting the legislature's findings in support ofthe cap.^^ The
test as applied was very deferential to the legislature. As the court noted, "the
inquiry is whether the legislature reasonably could conceive to be true the facts

on which the challenged statute was based."^ Like most of these decisions
however, the Verba majority opinion was accompanied by a strong dissent.

^^°

The dissent criticized the majority for ignoring the trend amongst the states that
has been to find medical malpractice caps unconstitutional. '°' The dissent
asserted that "the right to recover personal injury damages is a significant

substantive right requiring the application of some higher, perhaps, intermediate
scrutiny.'"^^

The Verba dissent also cited to the dissent in Fein v. Permanente Medical

Group, the California majority opinion which upheld that state's cap on medical

malpractice damages, for an interesting and persuasive logical argument:

"Insurance is a device for spreading risks and costs among large numbers of
people so that no one person is crushed by misfortune. ... In a strange reversal

95. Id. at 835-39.

96. Fein v. Permanente Med. Group, 695 P.2d 665, 682-84 (Cal. 1985); Scholz v. Metro.

Pathologists, Inc., 851 P.2d 901, 906-07 (Colo. 1 993); Samsel v. Wheeler Transp. Servs., Inc., 789

P.2d 541, 549-58 (Kan. 1990); Butler v. Flint Goodrich Hosp. of Dillard Univ., 607 So. 2d 517,

5 1 8-22 (La. 1 992) (holding $500,000 cap on general damages did not violate state equal protection

guarantee because the Act's limitations were reasonably related to furthering the general state

interest of compensating victims; court also found a quid pro quo whereby tort victims traded full

recovery for guaranteed recovery); Murphy v. Edmonds, 601 A.2d 102, 107-16(Md. 1992); Adams

V. Children's Mercy Hosp., 832 S.W.2d 898, 904-05 (Mo. 1993); PuUiam v. Coastal Emergency

Serv. of Richmond, Inc., 509 S.E.2d 307,

3

17-19 (Va. 1999); Verba v. Chaphery, 552 S.E.2d 406,

410(W. Va. 2001).

97. 552 S.E.2d at 406.

98. /of. at 410.

99. Id.

100. Mat 413.
101. Id

1 02. Id. at 41 4- 1 5 (citing decisions from the Supreme Courts ofNebraska, North Dakota, New
Hampshire and West Virginia for support).



794 INDIANA LAW REVIEW [Vol. 37:773

of this principle, the statute concentrates the costs of the worst injuries on a few
individuals."'^^ Certainly, it is somewhat of an anomaly, contrary to the idea
behind insurance to uphold these types ofcaps on rational basis grounds. Unlike

other economic regulations being upheld on rational basis grounds, the result in
applying such analysis to regulation ofthe insurance industry does seem to strike
a cord with the purpose to have such an industry in the first place. Perhaps this

anomaly further provides some grounds for moving away from the rational basis
test in these situations.

2. Federal Law and Experience on Equal Protection Grounds.—Few
decisions finding medical malpractice damages caps violated state equal
protection guarantees have gone on to hold that the statute also violated the

United States Constitution. '^"^ In contrast, many decisions upholding caps on state
equal protection grounds have gone on to do so under federal equal protection
analysis as well.'°^ In most ofthose cases, the test used for the state analysis was
the federal rational basis test. In several instances, states have appealed to the

United States Supreme Court to clear up confusion on this issue, but the Court
has declined to do so.

The Supreme Court's decision in Duke Power Co. v. CarolinaEnvironmental
Study Group has been cited by several decisions on this issue and lends some
insight to the analysis here.'^ In the Duke Power decision the Court rejected the
use of the intermediate standard of review for analysis of the cap on damages

resulting from a nuclear accident under the Price-Anderson Act.^^^ This federal

act imposed a $560 million limitation on liability for nuclear accidents resulting

from operation of federally licensed private nuclear power plants. '°^ The Court
found rational basis was the appropriate test to apply to the classification which

treated victims of a nuclear accident different from victims of personal injury

103. /£/. at 418 (citing Fein, 695 P.2d at 689-90 (Bird, C.J., dissenting)).

1 04. See supra note 53. The same concerns apply here. But see Waggoner v. Gibson, 647 F.

Supp. 1 102 (N.D. Tex. 1986) (federal district court holding medical malpractice cap on damages

violated federal and state equal protection clauses), rejected by Lucas v. United States, 807 F.2d

414 (5th Cir. 1986); Ameson v. Olson, 270 N.W.2d 125 (N.D. 1978) (finding $300,000 cap on

medical negligence violates equal protection clauses of both the North Dakota and United States

Constitutions).

105. Davisv.Omitowoju,883F.2d 1155, 1165(3dCir. 1989) (finding Virgin Islands' medical

malpractice damage cap of$250,000 constitutional); Franklin v. Mazda Motor Corp., 704 F. Supp.

1325, 1330-38 (D.Md. 1989); Fein v. Permanente Med. Group, 695 P.2d 665, 682-84 (Cal. 1985),

appeal dismissed for want of a federal question, 474 U.S. 892 (1985); Butler v. Flint Goodrich

Hosp. of Dillard Univ., 607 So.2d 517, 518-22 (La. 1992), cert, denied, 508 U.S. 909 (1993);

Adams v. Children's Mercy Hosp., 832 S.W.2d 898, 904-05 (Mo. 1993); Pulliam v. Coastal

Emergency Serv. ofRichmond, Inc., 509 S.E.2d 307, 3 17-19 (Va. 1999); Hoem v. State, 756 P.2d

780, 783 (Wyo. 1988) (holding medical malpractice tort reform violated equal protection under

rational basis review).

106. Duke Power Co. v. Carolina Envtl. Study Group, 438 U.S. 59 (1978).

107. Mat 82-93.
108. Mat 65.



2004] MEDICAL MALPRACTICE ACTIONS 795

from other causes/^^ The Court focused on the fact that this was classic

economic regulation in which deference is great to Congress's rationale in

support of the classification.
''°

The Duke Power decision has been found directly applicable by some courts
and used as the basis for applying rational basis to their analysis of state medical

malpractice caps under equal protection guarantees. However, some courts
choosing not to apply rational basis have distinguished Duke Power. The
Arneson court's reasoning was typical, finding that Duke Power was
distinguishable on two grounds contained in the rationale of the Supreme Court

that were not present in the case of medical malpractice damages caps."^ First,

the Supreme Court relied on the "extremely remote possibility of an accident

where liability would exceed the limitation."' ^^ Second Congress expressed a
commitment to go beyond the limitation to protect the public from consequences

of such an accident."^ As the Arneson, court noted in the case of medical
malpractice damages statutes there is both "a strong possibility ofdamages above

the limitation and no legislative commitment beyond the limitation."''"^

3. Summation: Constitutionality and Legislative Concerns on Fifth
Amendment Equal Protection Grounds.—^The critical issue for a determination
on constitutionality of a national cap on non-economic damages in medical

malpractice actions is whether rational basis test will apply or if intermediate

scrutiny or some heightened level of scrutiny will be applied. While no suspect
class is involved in these cases, there is a very persuasive argument to be made
that there is a fundamental right to full compensation for personal injury. There

is also a strong argument to be made in favor of a heightened scrutiny test due to
the anomalous situation involved in putting a cap on recovery against the

insurance industry. Nonetheless, as in Duke Power, if it is the prerogative ofthe
court it is easy enough to say that this is classic economic regulation at issue and

rational basis will apply. As Duke Power also pointed out, the greater the extent
to which the individual gets something in return for the limitation and the smaller

the likelihood that the cap will be exceeded, the more likely a cap is to pass

constitutional muster."^ This concept comes more into play in discussion of due

process rights.

D. Due Process Rights

Challenges on due process grounds are generally analyzed very similarly to

109. /^. at83.

110. Id.

111. Arneson v. Olson, 270 N.W.2d 125, 135 n.6 (N.D. 1978).

112. Id.

113. Id

114. Id

115. Established, in that case, through an increased congressional commitment to provide for

victims and the high amount at which the cap was set. Duke Power Co. v. Carolina Envtl. Study

Group, 438 U.S. 59, 83 (1978).



796 INDIANA LAW REVIEW [Vol. 37:773

equal protection clause challenges."^ It is very common for the challenges to be
raised together and dealt with in the same fashion by the reviewing court. One
key element that tends to be more associated with the due process analysis than
that under the equal protection clause is the idea of a quid pro quo. This falls
under the general analysis under the takings clause, where it is constitutional for
the government to take property so long as they provide just compensation. Here
the constitutionality of non-economic damages caps in medical malpractice has
often hinged on the extent to which the government has given something to the

victim in exchange for their potential loss offull compensation for non-economic

damages.

7. Importance of Challenges Under Analogous State Constitutional
Provisions.—

a. Findingcaps violatedstate dueprocess rights.—States striking down caps
on due process grounds have often distinguished the caps at issues from others
that have been upheld due to a lack of a quid pro quo."^ The key distinctions
have come in comparison to worker's compensation and to the medical
malpractice statutes of Indiana and Louisiana. The 1988 Texas Supreme Court
decision in Lucas v. United States is often cited for these distinctions.'** A key
concern for the Lucas court was that the statute failed to give an adequate
substitute for a victim of malpractice to obtain redress for their injuries. The
court rejected the argument that there was a sufficient societal quid pro quo thru

1 16. See Best V. Taylor Mach. Works, 689N.E.2d 1057, 1069-78 (111. 1997); State ejc re/. Ohio

Acad, ofTrial Lawyers v. Sheward, 7 1 5 N.E.2d 1 062, 1 092 (Ohio 1 999) (discussing the appropriate

test for due process analysis, since legislation did not involve fundamental right or suspect class,

court applied the "rational relation" test where classification is "deemed valid on due process

grounds '[1] if it bears a real and substantial relation to the public health, safety, morals or general

welfare ofthe public and [2] if it is not unreasonable or arbitrary.'" (internal citation omitted). Also

noting, that while Morris did not involve a fundamental right or suspect class, the right to a jury

trial had subsequently been held by the Ohio Supreme Court to include "the right to have the jury

determine the amount ofdamages to be awarded" and therefore strict scrutiny may apply); see also

Wright V. Cent. DuPage Hosp. Assoc, 347 N.E.2d 736 (111. 1976) (holding a non-economic

damages cap in medical malpractice actions violated plaintifiPs due process right as an arbitrary

taking ofvested rights in property); Kan. Malpractice Victims Coalition v. Bell, 757 P.2d 25 1, 259,

263-64 (Kan. 1988) (finding caps on recovery and mandatory annuity payments violate the right

to jury trial and right to a remedy through due course of law, stating, "means selected have a real

and substantial relation to the objective sought .... One way to meet due process requirements is

through substitute remedies."); Lucas v. United States, 757 S.W.2d 687, 690 (Tex. 1988) (finding

statutory limit on damages violates the open courts guarantee, right to "remedy by due course of

law" Art. I § 13 of Texas Constitution. Standard used "must be shown that the litigant has a

cognizable common law cause ofaction that is being restricted; second, the litigant must show that

the restriction is unreasonable or arbitrary when balanced against the purpose and basis of the

statute.").

117. Sheward, 1 1 5 N.E.2d at 1 069-78. See also Morris v. Savoy, 576 N.E.2d 765 (Ohio 1 99 1

)

(finding $200,000 cap on non-economic damages violates due process).

118. 757 S.W.2d at 690-92.

\



2004] MEDICAL MALPRACTICE ACTIONS 797

lower insurance premiums and medical costs. Workmen's compensation schemes
were distinguished because they provide a quid pro quo by giving the victim a
quicker remedy at law with a lower burden of proof.

^'^

Indiana and Louisiana were cited by the Lucas court as examples of states

that had provided an adequate quid pro quo through the establishment of a

patient's compensation fund (PCF).'^° The PCF's are in effect government
sponsored excess insurance to which all health care providers pay in each year.

Under those systems, recovery from the medical malpractice insurance company
or the healthcare provider is capped at one amount, for example $ 1 00,000. Once
a victim recovers up to the cap from the provider, the PCF then provides
additional compensation to a higher amount, for example $750,000. The quid pro
quo is that the state guaranteed this excess insurance to the victim. The guarantee
of recovery was the essential substitute for full recovery.

b. Upholding caps over state due process challenges.—States that have
upheld medical malpractice damages caps over due process challenges have often

found there to be a quid pro quo provided by the legislature. ^^^ The Louisiana
Supreme Court in upholding the Louisiana cap and statutory scheme found three
benefits that were offered to the most severely injured: {\) greater likelihood

that the offending physician would have malpractice insurance, (2) greater

assurance of collection from a solvent fund [through the state sponsored PCF],

and (3) payment of all medical care and related benefits.'"^^ Another adequate

quid pro quo has been found through arbitration. The Florida Supreme Court
approved a statute imposing caps on non-economic damages in medical

malpractice cases where the defendant accepted arbitration.'^^ The arbitration

1 19. Id. at 690 (citing Wright v. Cent. DuPage Hosp. Ass'n, 347 N.E.2d 736, 742 (111. 1976)).

The Kansas Supreme court also made a distinction to no-fault insurance schemes, "injured patient

does not receive prompt payment (as in no-fault insurance) or a reduced burden of proof (as in

workers' compensation)," despite the defendant's arguments that quid pro quo was satisfied thru

lower-cost and increased, sustained availability ofhealthcare to the public and guaranteed recovery

from insurance. Bell 757 P.2d at 259. See also Lakin v. Senco Prods., Inc., 987 P.2d 463, 468-75

(Or. 1999).

120. Lwcaj, 757 S.W.2d at 691 (citing Johnson V. St. VincentHosp.,404N.E.2d 585, 601 (Ind.

1980) (upholding a $500,000 cap on total recovery in medical malpractice actions); Sibley v. Bd

of Supervisors, 462 So. 2d 149, 154-8 (La. 1985) (upholding $500,000 cap on non-economic

damages in medical malpractice actions)).

121. See Fein v. Permanente Med. Group, 695 P.2d 668, 679-82 (Cal. 1985); Johnson, 404

N.E.2d at 598-600; Butler v. Flint Goodrich Hosp. of Dillard Univ., 607 So. 2d 517, 518-22 (La.

1 992); see also Scholz v. Metro. Pathologists, 85 1 P.2d 90 1 , 907 (Colo. 1 993); Adams v. Children's

Mercy Hosp., 832 S.W.2d 898, 907 (Mo. 1992); Knowles v. United States, 544N.W.2d 183, 189-

202 (S.D. 1 996) (finding no due process violation because due process does not apply to remedies);

Pulliam V. Coastal Emergency Serv. of Richmond, Inc., 509 S.E.2d 307, 317-19 (Va. 1999);

Robinson v. Charleston Area Med. Ctr., 414 S.E.2d 877 (W. Va. 1991) (finding no due process

violation under rational basis test similar to that of equal protection analysis).

122. 5M//er,607So.2dat521.

123. See Univ. of Miami v. Echarte, 618 So.2d 189, 194 (Fla. 1993).



798 INDIANA LAW REVIEW [Vol. 37:773

was found to provide the plaintiff with the benefit of access to a remedy faster
and less expensive than litigation in exchange for the 1 imitation.

^^"^

Some state courts have been willing to consider the general goals of medical
malpractice statutory caps as constituting a sufficient quid pro quo. The Supreme
Court of California in Fein noted that "it would be difficult to say that the
preservation of a viable medical malpractice insurance industry in this state was
not an adequate benefit for the detriment the legislation imposes on malpractice

plaintiffs."'^'

The Colorado Supreme Court went even further in Scholz v. Metropolitan
Pathologists, P.C}^^ The Scholz court did not even address the issue of a quid
pro quo. Rather, that court held that the constitutional guarantee of due process
is applicable to rights, not remedies. '^^ Therefore, there could be no violation of
due process in capping damages as it is merely a remedy afforded to the plaintiff,
in contrast to a right to a process to obtain a remedy.

'^^

2. Federal Law & Summation.—^Here again, the likelihood that a federal
court would find a cap on non-economic damages in medical malpractice to be
in violation of the due process clause is not very high. However, to the extent

there is any risk of such a finding, Congress could ensure the constitutionality of

a cap by providing a quid pro quo to plaintiflFs in medical malpractice actions. To
the extent a quid pro quo is provided the likelihood of an unconstitutional ruling

will decrease.

E. Drafting Lessons

While the constitutional challenges that are likely to be raised against a

national cap on non-economic damages in medical malpractice actions are of

questionable validity. Congress would nonetheless be very wise to draft any

proposed cap with these challenges in mind. There are several things that could

be done to ensure the constitutionality of a national cap on non-economic

damages in medical malpractice actions. It is also important to note that these

"drafting lessons" are important ways to ensure, not only that such a cap

would surely pass constitutional muster, but also to reach a socially optimal

value. Each of these will be discussed in more detail in the subsequent section

ofthis Note to analyze what their overall economic impact to a legislative scheme

might be.

L Make Any Cap Waive-able by the Judiciary.—One way to avoid some of
the challenges that arise under the separation of powers and the right to trial by
jury could be making any cap that is passed waive-able by the judiciary.

Concerns over the right to jury trial and separation of powers may be lowered by
allowing the jury to make the determination and leaving the decision up to the

124. Id.

125. 695P.2dat681 n.l8.

126. 851 P.2dat907.

127. Id.

128. Id. (quoting Gibbes v. Zimerman, 290 U.S. 326, 332 (1933)).



2004] MEDICAL MALPRACTICE ACTIONS 799

judiciary as to whether or not the cap should be appropriately applied to a given

case. This was included in a congressional proposal in 1993 and has been

advocated for by some commentators.'^^

2. Economic Data—Show a Rational Relationship.—Should the Court
decide to apply higher scrutiny than rational basis the legislature will need to

have made some explicit findings of the close relationship between high non-
economic damage awards and high medical malpractice premiums or overall
health care costs depending on the purported goals of any such legislation. The
current economic data to support such a relation is at best weak and incomplete.
It would assure the likelihood a cap would be found constitutional and bolster
support for legislation generally, if congress made specific empirical findings to
support any such cap.

i. Narrowly Tailored.—A national cap on non-economic damages in medical
malpractice actions would also be more likely to be found constitutional the more
narrow the restrictions upon the right to recover are. There are several ways that

the effect of any classification could be narrowed. Most notably, the higher the
amount of the cap the less narrow the restriction is going to be found, as it will
affect less people. There are more creative solutions to narrow the restrictions
aside from fluctuations in the amount of the cap. More creative solutions will be
discussed in the later sections of this Note and in conjunction with providing a

quid pro quo.

4. Quid Pro Quo.—The final drafting lesson we can take from the
constitutional analysis of a proposed national cap is that a finding of

constitutionality would be more likely if a quid pro quo was provided to plaintiffs

for their loss of potential recovery. As previously noted, two potential quid pro
quos could be providing faster remedies through arbitration or guaranteed

recovery through government sponsored excess insurance.

Whether a national cap on non-economic damages in medical malpractice

actions could or should be found constitutional, the likelihood of such a finding

can clearly be increased through some drafting considerations. However, any
additional features we add to a cap, and indeed a cap in and of itself, must be
analyzed for their economic desirability before we reach that point.

III. Expected Economic Effect: Is a National Cap on Non-Economic
Damages in Medical Malpractice Actions Economically Desirable?

The actual economic effect of a national cap on damages has increasing
relevance to the judicial determination of constitutionality the higher the level of

scrutiny that is applied. The economic effect of a national cap needs to be
analyzed in terms ofthe goals that such a statute may purport to achieve, lowering
healthcare costs as a whole or lowering malpractice premiums alone. Moreover,
just because something is constitutional should not end the inquiry ofwhether or

1 29. Chupkovich, supra note 3, at 371-75 (advocating for passage ofthe Healthcare Liability

Reform and Quality of Care Improvement Act of 1992 which would have imposed a national cap

on liability with a waiver provision giving discretion to the judiciary).



800 INDIANA LAW REVIEW [Vol. 37:773

not it is desirable. Economic analysis of the impact of a national cap on non-
economic damages in medical malpractice actions will be a very important tool
in determining whether or not to pursue such a cap. It is important to note at the

outset of this economic analysis that much of the discussion here is based on
empirical data that is old and has relied solely on state experiences. It would
serve our national policy-makers well to gather recent empirical information

covering a broader spectrum ofthe nation to make a more well-informed decision
on whether or not to pursue a national cap on non-economic damages in medical
malpractice actions.

A. Potential Direct Effect on the Healthcare Industry

Statistical and empirical data would suggest that, regardless ofa national cap
on damages effect on medical malpractice insurance premiums, it is not likely to
have an impact on the overall cost ofhealth-care plaguing the country. The effect
of a cap on non-economic damages upon medical malpractice insurance alone is
a topic of much debate. But, even if a great effect upon malpractice insurance is
achieved it is not likely to answer to America's health care woes. The reason for
this conclusion is fairly simple. Medical malpractice insurance costs simply are

not a large piece of the pie that represents overall health care costs. ^^° For

example, in 1992, doctors paid five to six billion dollars in premiums while the
overall cost ofnational health care reached 840 billion dollars. '^^ That's less than

one percent of the total cost of health care that can be attributed to malpractice

premiums.
'^^

Policy makers should be carefiil not to represent a national cap on non-

economic damages in medical malpractice actions as the answer to America's
healthcare woes. Nonetheless, medical malpractice insurance premiums are

rising. '^^ The effects of these increases can be devastating, just ask the residents
of West Virginia, who had to be flown out of state for emergency surgical
treatment during the West Virginia Surgeons strike.'^"*

B. Effect on Malpractice Insurance Premiums Alone

The theory behind the feasibility ofa cap on damages to decrease malpractice

130. Lucas V. United States, 757 S.W.2d 687 (Tex. 1988); ABA, supra note 27.

131. Fran Kirtz, Medical Malpractice MayRide the NewReform Wave: With Help FromAMA
and Congress, Exorbitantly High Premiums—andSettlements—CouldCome Down, Med. WORLD
News, Apr. 1993, at 70.

132. Larry S. Stewart, Damage Caps Add to Pain and Suffering, WASH. TIMES, Nov. 7 1 994,

at 1 8 ("Losses paid by insurers in 1991 for medical negligence amounted to only 0.31% ofnational

health care costs.").

133. Knowles v. United States, 544 N.W.2d 183, 190 (S.D. 1996) ("The Hatch Study

concluded '[d]espite unchanging claim frequency and declining loss payments and loss expense,

on average, physicians paid approximately triple the amount of premiums for medical malpractice

insurance in 1987 than in 1982.'").

134. See supra noitXA.



2004] MEDICAL MALPRACTICE ACTIONS 80

1

insurance premiums is based on making risks calculable and minimal. Insurance

is concerned with spreading the cost of like events over a large group of people

who are at risk of realizing such an event. Insurance premiums therefore must be
based on two factors: the probability that an individual may realize the insured
event and the amount or value that will be lost if the event is realized. '^^ In terms
of medical malpractice insurance, riskier fields with higher incidence of
malpractice pay higher premiums due to the increased risk on the former factor.

^^^

The later factor, however, is much more difficult to determine. Damage caps are
attempts to both minimize the potential cost of malpractice claims and ease the

evaluation of the potential cost in evaluating risk. The more calculable the value
of potential risk is, the better an insurance company can make premiums fair in
terms oftheir relation to the insured's actual potential loss. Correspondingly, the

lower these calculable risks can be set, the lower the premium should be as well.
This should also foster competition between insurers. '^^ A non-economic damage
cap attempts to both ensure better calculability and minimization of risk. In

systems without a cap, the insurance company arguably must account for the risk,
however minimal it may be, that a physician could get a very large, potentially
boundless, claim against them. The non-economic damages cap makes the risk
more calculable and minimized, at least in respect to the non-economic damages
portion of the equation. Notably, the overall calculability of risk is still highly

difficult to calculate as economic damages will vary in terms of a malpractice

victim's future medical expense and lost wages. ^^^ However, non-economic

damages are viewed, at least by proponents ofcaps, to be most suspect to difficult

calculations as jury awards for pain and suffering are most difficult to predict

because they are not based on any concrete value of loss and arguably can be

irrationally large.
'^^

Two simpler rationales behind the theory supporting a non-economic
damages caps ability to lower malpractice insurance premiums are that actual
payments by insurance companies will be lowered and claim frequency will

decrease.
^"^^ Since there will be capped awards for non-economic damages it is

135. For more detailed economic discussion and further breakdown economically in terms of

group premiums versus individual premiums, see Franklin D. Cleckly & Govind Hariharan, A Free
Market Analysis ofthe Effects ofMedical Malpractice Damage Cap Statutes: Can We Afford to

Live with Inefficient Doctors?, 94 W. Va. L. Rev. 11, 52-60 (1991).

136. /c/. at53.

137. Id?X51.

138. This is a likely cause of the finding in some studies that only caps on total damages

resulted in a decrease in malpractice premiums. See Gronfein & Kinney, supra note 32, at 64-65.
An in depth analysis of caps on total damages is beyond the scope of this Note, but would also be

a useful tool in constructing the most appropriate legislation in this arena.

139. American Medical Association, The Medical Liability Crisis: Talking Points, Jan. 21,

2003, at http://www.ama-assn.org/ama/pub/articie/9255-7188.html (last visited Mar. 3, 2003);

American Osteopathic Association, Medical Malpractice Liability: A Call for Tort Reform?, at

http://www.aoa-net.org/Govemment/stateaffairs/PLI/tortreform.htm (last visited Nov. 18, 2002).

140. Id



802 INDIANA LAW REVIEW [Vol. 37:773

expected that total payments for claims will be reduced as the amount of awards
will be lowered. Hence, as insurance companies are paying out less they will
reduce their premiums proportionately. It is also argued that there will be lower
overall payouts because claim frequency, or the number of suits brought for
malpractice will go down. The theory is that many frivolous suits that are
brought in hopes of receiving a large award will not be pursued by plaintiffs
because of the decreased likelihood of a substantial windfall for non-economic

damages. Nonetheless, these are only theoretical economic effects which we
cannot regulate directly.

The available information on the effect state non-economic damages caps
have had on their malpractice insurance premiums is varied. Nonetheless, some
interesting observations can be made from the available economic information
from the state experience that poke some holes in the theoretical arguments in
support of a national cap and suggest some concerns to bear in mind in
considering alternative solutions.

A 1 993 federal government study on tort reform revealed some interesting
results concerning the economic impact of damage caps.'"^' The study combined
the results of six empirical studies assessing the impact of state damage caps.'"*^
The studies found that caps on total damages, both economic and non-economic,
were the most effective of any of the tort reforms analyzed in reducing payment
per paid claim and malpractice insurance premiums. '"^^ However, the results of

analysis on non-economic caps alone were mixed: three studies concluded that

such caps had a statistically significant effect of decreasing medical malpractice

insurance premiums; but, the other three found no measurable impact on reducing

premiums.''*'* Another interesting finding was that only one of the six studies
assessed the effect of damage caps on frequency of claims, finding that the cap
had no effect on decreasing claim frequency.*"*^

Another useful study on this point compared the status of malpractice

insurance premiums and jury verdicts in Indiana, which adopted a cap on

damages in medical malpractice actions, to those in Michigan and Ohio which did
not.

'"^^ The study revealed that the average jury award in a malpractice case in the
state with a cap was actually higher than the states without caps.''*^ Insurance

141. Congressional Assessment, supra note 3 1 , at 62-67. This source provides an excellent

summary of the background of the medical malpractice crisis and various reforms, a compilation

of economic studies analyzing the impact of such reforms, and a very brief discussion of some

constitutional implications.

142. Mat 63-65.
143. Id. at 64. Among the other tort reforms analyzed for impact on medical malpractice

insurance were: statutes of limitations, pretrial screening panels, limits on contingent attorney fees,

modifications in the standard ofcare, allowing reductions ofcollateral payments, allowing periodic

payments, joint and several liability, informed consent, and costs for frivolous suits.

144. /fif. at 64-65.

145. Id. at 65.

1 46. Gronfein & Kinney, supra note 32, at 446-60.
147. Id. at 447 (showing mean claim award in Indiana was $404,832, while mean claim



2004] MEDICAL IVIALPRACTICE ACTIONS 803

companies and doctors alike were more likely to settle. Furthermore, they were
more likely to settle at the price ofthe cap than below it.'"** As a result, the actual
cost that was being paid per claim was higher in the state with a cap than the
states without a cap (this will be referred to later as the settlement anomaly). It

is also important to note that few cases were awarded at prices greater than the
cap in any of the states that were analyzed. Despite this settlement anomaly,

Indiana still experienced comparatively low medical malpractice premiums.'"*^

This would tend to suggest that the ability to calculate risk is actually more
important in reducing insurance premiums than actually lowering payouts per

claim.

The study did not go further to look at the overall cost to citizens in these
states with caps. In Indiana, as in many states, there is also a patients'
compensation fund. This is government paid excess insurance. The cost of
running such a system is extreme and often pits young inexperienced attorneys
against more competent and experienced plaintiffs' attorneys. *^° The cost and
effect of running such a system must also be examined.

Several states have found that caps will not reduce their medical malpractice

premiums. '^^ Most notably, West Virginia, which recently experienced a
physician strike, had such a finding. A report of the West Virginia Legislature
Committee concluded after a year studying the issue that "any limitations placed

on the judicial system (regarding medical malpractice caps, etc.) will have no
immediate effect on the cost of liability insurance for health care providers."^^^

The conclusions of that study were similar to the experiences of Nevada and
Missouri. In Nevada, insurance companies refused to lower doctor's malpractice

rates after the enactment of a cap that was supported by the insurance industry in
2002.'^^ Missouri also caps damages, but nonetheless, has experienced rises in

malpractice premiums though the number of malpractice claims in that state and
cost paid per claim have been declining.'^"* This implies that even ifcaps have the

actual desired economic effect there must be measures to ensure that it is realized

by insurance companies decreasing premiums proportionately.
Many sources have also suggested that insurance rates have risen not as a

result ofthe liability crisis but because ofpoor management. '^^ A 1986 report by

awards for Michigan and Ohio were $290,022 and $303,220, respectively).

148. Id. at 447-48 (showing 27.9% of Indiana claims settled at $500,000, amount of cap in

Indiana, whereas only 12.3% in Michigan and 14.1% in Ohio were settled at or above $500,000).

149. Mat 459.
150. Id.

151. Press Release, American Trial Lawyers Association: New Bipartisan Study by West
Virginia Legislature Confirms Caps in Medical Malpractice Cases Won't Reduce Insurance Rates

for Doctors (Jan. 7, 2003), available at http://www.ata/prg/ConsumerMedia Resources/Tier3/press_

room/medmalpr.aspx (last visited Jan. 17, 2003).

152. Id

153. Id

154. Id

155. Supra notes 20-25. Gail Eisland, Note, Miller v. Gilmore: The Constitutionality ofSouth



804 INDIANA LAW REVIEW [Vol. 37:773

the National Association of Attorney Generals concluded that "insurance

premium increases were not related to any purported liability crisis, but 'resulted
largely from the insurance industry's own mismanagement.'"'^^ While it is
unlikely that the entire industry is mismanaged, it is important to note that the

industry does enjoy higher profits than comparable insurance sectors.
'^^

Regardless ofwhether or not caps on damages are pursued or not, policy makers
need to seriously consider increased regulation of medical malpractice insurance

rates. Permitting increased rates while the industry is making higher profits than
any other comparable insurance sector is not good policy and has the potential to
undermine any measures taken to lower rates.

Ifmedical malpractice insurance premiums have had any effect, most sources
indicate it has been relatively small. '^^ At times, the insurance industry itself has
noted that a non-economic damages cap would have little or no effect on reducing
insurance premiums. '^^ This further bolsters the findings ofsome state courts that
because of the very small number of claims that are awarded above a cap, even
before one was in place, it was not rational that it would have the intended
effect.

'^^ In light of these studies, it is no surprise that many states where caps
have previously been upheld as constitutional continue to have challenges to their

statutes for not achieving their purported goals. For example, in Indiana, one

reason for passing a reform was to keep doctors in state, but that effect has not
been realized.'^' It is also an important economic implication to note that the

likelihood of constitutional challenges arising will also delay the economic

Dakota's Medical Malpractice Statute of Limitations, 38 San Dego L. Rev. 672, 685 n.l21

(1993). For an example ofhow one medical malpractice insurance company lost money and folded

for reasons that had nothing to do with low premium rates or high medical malpractice lawsuit

verdicts, see Verba v. Ghaphery, 552 S.E.2d 406, 415-16 (W. Va. 2001) (Starcher, J., dissenting)

(citing Barry Hill, Ponzi Rides Again: The PIE Mutual Story, WVTLA Advocate (Fall 1998)).
156. Eisland, supra note 155, at 685 n.l21 (quoting W. John Thomas, The Medical

Malpractice "Crisis": A Critical Examination ofa Public Debate, 65 TEMP. L. REV. 459, 473

(1992) (quoting National Association of Attorney Generals, An Analysis of the Causes of the

Current Crisis of Unavailability and Unaffordability ofLiability Insurance (1986))).

1 57. Larry S. Stewart, Damage Caps Add to Pain and Suffering, WASH. TIMES, Nov. 7, 1 994,

at 18 ("[M]edical malpractice as a line of insurance had the highest profit as a percentage of

premiums in 1991.").

1 58. U.S. GAO, Medical Malpractice: Effects of Varying Laws in the District ofColumbia,

Maryland, and Virginia, (1999).

159. State ex rel. Ohio Acad, of Trial Lawyers v. Sheward, 715 N.E.2d 1062, 1092 (Ohio

1999) (citing "a 1987 study by the Insurance Service Organization, the rate-setting arm of the

insurance industry, found that the savings from various tort reforms, including a $250,000 cap on

noneconomic damages, were 'marginal to nonexistent'").

160. Lucas V. United States, 757 S.W.2d 687, 691 (Tex. 1988) (citing an independent study

that showed that less than 0.6% of all claims brought were for more than $100,000).

161. Bureau of Census, U.S. Dep't of Commerce, Statistical Abstract of the Unffed

States 1993, at 122 (1994). The rate ofphysicians per 100,000 residents in Indiana is 165, while

the national average is 224.



2004] MEDICAL MALPRACTICE ACTIONS 805

impact of any reform taking place. If the constitutionality of a reform is put into

question then the risk calculations engaged in by insurance companies will retain

a large level of uncertainty.

A final key consideration of the potential economic impact of a national cap
is the effect to which its effectiveness would increase due to its scope. Analysis

of the effectiveness or ineffectiveness of state experiences with caps have

considered one key factor to be that many malpractice insurers serve a national
or regional market. The effect of caps in one state alone may not have much
effectiveness on the rate-setting activity of a company with a national or regional
scope. The effect that a national cap may have on these companies has not been
the subject of much empirical study. This is another area that congress needs to
examine in order to make a wise policy choice in this area.

C. Other Economic Effects on Society as a Whole

There are several other potential indirect economic effects that require

examination and analysis. First, let us examine the aforementioned Settlement

Anomaly a bit closer. At first glance, the fact that states with caps are having
more settlements at the level of the cap resulting in higher overall payments per
claim seems to suggest that, overall victims ofmalpractice are being compensated

more under these schemes in a less costly system, as litigation is likely to be more
expensive than settlements. A closer look reveals a more disturbing result. The
increase ofsettlements is likely to increase the disparity ofcompensation between

victims ofminor injuries and severe injuries. Those with minor injuries are likely

to be overcompensated as insurance companies have an incentive to get out of

what could be lengthy and costly litigation to settle at a slightly higher price. But,

those with very high non-economic damages from severe injury will still get the

cap as well. The inequity between these two classes is increased as the severely
injured is left at the same level ofundercompensation while the victim with minor

damages is over-compensated.

A second troubling effect of the settlement anomaly is the likelihood of
increased costs to society as a whole. Part ofwhat makes the settlement anomaly
work is that insurance companies are let out at a very low level of liability and to
get up to the overall cap ofthe injury the victim then goes through litigation with
a state excess insurance ftind. Now we have traded costs to the medical
malpractice insurance company for the cost of resources used by a state agency
which will often have to go to litigation for a determination of the total jury

award that should be rewarded. Instead of the doctors who have committed
malpractice and their insurance companies paying for the litigation, now the state
must take up those costs. The costs of state run systems ofexcess insurance must
be analyzed, in order to completely address this scheme.

Another concern is the extent to which a national cap will still serve the goals

of tort law, to compensate the injured and deter negligent conduct. Medical

malpractice caps on non-economic damages do neither. Negligent conduct of
physicians is deterred less and compensation to victims of tragic malpractice is

also decreased. The risk of suffering a high jury verdict in a case of malpractice,
on an economic level, deters a higher level of malpractice than a capped level of



806 INDIANA LAW REVIEW [Vol. 37:773

liability will.'^^ The insurance industry has argued that verdicts that are too high
can cause doctors to engage in defensive medicine, ordering unnecessary

procedures to rule out maladies that the doctor would not normally consider.
They argue that these defensive medicine costs increase health insurance costs
and medical costs to society. The economic data in this area of deterrence is
primarily speculative and incomplete. But, it is the opinion of this author that in

having to choose between increased costs for overprotective versus

underprotective practices, society is much better off in taking the overprotective
route and ensuring the health and safety of the nation's people.

IV. Alternatives: Potential to Solve the Problem and
Retain Compensation

Certainly, the questions of the constitutionality and economic impact of a
national cap on non-economic damages in medical malpractice actions should be
enough to bring policy-makers to ask, "Are there any better solutions to the
problem of increasing medical malpractice premiums?" Many creative solutions
may be likely to achieve the goals of a national cap on non-economic damages
without solely burdening the severely injured, or at least providing them better
compensation, and thereby avoiding much of the constitutional and economic
debate surrounding proposals for a national cap on non-economic damages in
medical malpractice actions. Alternative solutions need to be investigated before

a national cap is declared the solution to the nation's healthcare problems. Many
ofthe alternatives here could be used in conjunction with each other and/or a cap

on non-economic damages and some states have done so. Further, it is important
that each of these proposals presents its own questions of constitutionality and
economic desirability that should be explored, but do not fall within the scope of

this Note.

A. Loser Pays—Limiting Frivolous Cases Without Punishing the Most
Severely Injured

One key focus of advocates for caps is that frivolous lawsuits are the cause
of the rise in costs. Discouraging frivolous lawsuits might more effectively be
achieved by forcing the losing party to pay their opponents attorney fees. Fees

can be exorbitant in medical malpractice cases, largely due to the high cost of

providing expert medical testimony at trial. '^^ Requiring attorneys fees to be paid

by a losing plaintiff would cause plaintiffs attorneys to filter out frivolous claims,

particularly those of the poor whom cannot indemnify the attorney for legal fees
in preparation of the case. However, this opens the door to another room filled
with constitutional challenges. One way to limit both the potential for disparity

162. Wachsman, supra note 18.

1 63. In many states costs are also excessive due to the lengthy period oftime it takes to work

a medical malpractice case through the legal process, which may involve a pre-trial medical

screening panel, litigation or settlement with the party being sued, and litigation or settlement with

a state excess insurance fund.



2004] MEDICAL MALPRACTICE ACTIONS 807

due to wealth of plaintiffs and burdening the plaintiff who had a trial worthy
claim, but merely lost at trial, from paying fees is by making the assessment of
attorney fees to the losing plaintiffjudicially determinable. It may be best for a
judge to be able to make the determination of what is or is not a frivolous case
and assess fees accordingly.

B. Periodic Payments—Easing the Burden ofLarge Awards
Another way we could ease the burden on insurance companies lessening

their payments paid per claim per year thereby, theoretically, leading to lower

premiums is to allow them to pay the victim over time, dividing the award out
over their remaining life expectancy. Permitting insurance companies to pay

plaintiffs receiving large awards through periodic payments could lessen the

impact of a large verdict being assessed against a particular company.'^"* Here

again there are also constitutional challenges. But, by limiting the payment of an

award to only those that meet a predetermined level and giving those plaintiffs

greater assurance that they will receive full compensation the likelihood of a

constitutional ruling invalidating such a system should be minimized.

C. Fully Utilizing the Judiciary 's Powers ofRemittitur and
Additur and Waive-able Caps

Caps that are waive-able at the discretion ofthe judiciary are one alternative.

Such a cap was proposed to Congress in 1 992, but failed to pass.'^^ A large focus
of groups advocating non-economic damages caps is that they are simply

irrational and excessive jury awards. '^^ If that is truly the case, then the judiciary

may be the best place to determine when such has occurred. "Rather than
focusing on the size ofjury awards, the emphasis should be on whether juries

award appropriate levels of damages relative to plaintiffs' injuries."'^^ The
implication is perhaps one less of a need for a cap and more a need for increased
importance ofthe judiciary exercising the power ofremittitur. The establishment
of a national cap that is waive-able would allow the judiciary room to waive the

cap where the case warrants it. By making the cap the norm and requiring
judicial discretion to permit an award above it, the likelihood of successful

constitutional challenges on right to trial by jury, separation of powers, and due

process grounds will be greatly decreased. Nonetheless, this may not fully
achieve lowering medical malpractice insurance rates as one ofthe key causes of

high rates, as previously discussed, is an account for risk—^the more the insurance
company can know the better they can account for risks. The industry is not
likely to gain much more risk calculability under a waive-able cap. If irrational
jury determinations are really the focus ofproponents of such a cap, this is a good
alternative. However, if the goal is to reduce malpractice insurance premiums a

164. See Wachsman, supra note 1 8, at 323-24.

1 65. See Chupkovich, supra note 3.

166. See Chamallas, supra note 16.

1 67. O'Connor, supra note 52, at 114.



808 INDIANA LAW REVIEW [Vol. 37:773

waive-able cap does not appear to be a very good solution.

D. Scheduling—Making Risk Calculable Yet Permitting Compensation

One way the legislature could make risks more calculable for insurance
companies yet provided adequate compensation for victims ofmalpractice could

be through scheduling. ^^^ There is a wealth of data in this country from previous

jury awards as to what appropriate values ofcompensation for pain and suffering

from different acts of malpractice may be. Using this data combined with expert
opinion the legislature could establish some scheduling standards for different
types of injury. Certainly, the legislature has been able to determine similar

values in criminal law through the assessment of fines and sentences for

imprisonment, and perhaps such legislation is warranted here. If most of our
worry is that juries are giving excessive awards, the legislature can attempt to

quantify what an appropriate award for different types of injuries would be. This
could be a combination offactors including the type ofinjury and the duration for

which the victim must live with the impact of the condition.

Insurance companies would be able to account for the risks of different types

of injuries that occur by using the schedule in combination with the likelihood of

the particular injury resulting from malpractice as a function of a physician's

specialty and clientele. Risk assessment is key to the insurance industry, almost

more so than the amount ofthe potential award. Nonetheless, through scheduling
both value and risk assessment can be taken into account in such a manner that
victims of the most severe acts of malpractice will still be compensated at a

legislatively predetermined level.

E. PCF—The Potentialfor Government Subsidization to Regulate
Insurance Industry Management

As radical an idea as scheduling for injury in malpractice may be, an even
more dynamic solution could be government subsidization. As previously noted,
part ofwhat has made many programs that have passed state constitutional muster
successful has been the establishment of a state excess insurance fund thereby

providing victims ofmalpractice a quid pro quo for the potential loss ofcomplete

compensation. ^^^ A national PCF could be a potential component ofany medical
malpractice liability reform. '^^ Moreover, this could be used on a national level,

to curb concerns of industry mismanagement undermining the scheme of the

statutory structure. One such scheme could provide that ifan insurance company

168. For further explanation of this alternative, see Randall R. Bovbjerg et al., Valuing Life

and Limb in Tort: Scheduling "Pain and Suffering, " 83 Nw. U. L. REV. 908 (1989).

169. See supra note 120 (discussing cases where state caps upheld due to quid pro quo

provided thru PCF).

1 70. A step beyond some national subsidization would be a move towards a no-fault medical
liability system. This is beyond the scope ofthis Note. For such a proposal, see David M. Studdert

& Troyen A. Brennan, Towarda Workable Model of "No-Fault" Compensationfor Medical Injury
in the United States, 27 AM. J.L. & MED. 225 (2001).



2004] MEDICAL MALPRACTICE ACTIONS 809

is reaping more of a profit than a government declared industry average and an

excessive award is granted against them, then the government will not subsidize

the company in the event of a large award. However, if an insurance company
is charging fair rates and reaping moderate profits, then if they take a hit the

government could share the cost with them. This way we would not have blind
acceptance of insurance companies keeping large profits, nor would we have
blind burdening ofthe most severely injured victims ofmalpractice. Further, the

extent to which society would have to pick up the bill to help victims of

malpractice would only be where extremely necessary, not every instance where

someone is victimized by malpractice in a severe manner, but a small subset of
those where the malpractice insurer is operating within government standards.

Conclusion

The specter that those who suffer the greatest pain and suffering from severe
acts of medical malpractice, like Gilford Tyler,'^' will pay the price for doctors

and insurance companies nationwide to receive decreased liability is growing.

While it is likely that Congress would not violate the federal constitution in

passing such a national cap on non-economic damages, the economic desirability

of such a cap is very suspect. Nonetheless, if such a cap is not carefully drafted

it is likely to be subject to constitutional challenges which could slow and subvert

the effect of its implementation. Furthermore, a national cap on non-economic

damages that is not carefully drafted opens the door for the potential, albeit
unlikely, for the Supreme Court to find such a cap to violate various

constitutional protections. Congress would be very wise and best serve the nation

by seeking out economic data to provide support for any such cap. Moreover, the

importance of the constitutional rights and economic consequences that such a

cap implicates warrant careful consideration of alternatives that might better

achieve the goals of proponents of caps on non-economic damages while not

burdening only the most severely injured victims of medical malpractice.

171. American Trail Lawyers Association, supra note 1

.



810 INDIANA LAW REVIEW [Vol. 37:773

TABLE 1: BREAKDOWN OF STATE CONSTITUTIONALITY OF CAPS
ON NON-ECONOMIC DAMAGES FOR MEDICAL MALPRACTICE

(as of 5/16/03)

Number of States Finding Caps Unconstitutional 8

Number of States Finding Caps Constitutional 17

Number of States with a Cap but No Ruling 5

Number of States with Neither a Cap nor a Ruling 20

TABLE 2: SUMMARY OF STATE CONSTITUTIONAL RULINGS ON
DAMAGES CAPS AFFECTING MEDICAL MALPRACTICE ACTIONS

(as of 5/1 6/03)

STATE CAPS RULED UNCONSTITUTIONAL

STATE CAP DESCRIPTION & COVERAGE RIGHT(S)
VIOLATED

AMOUNT DAMAGES ACTIONS

Alabama''^ $400,000 Non-Economic

Only

Medical

Malpractice

Trial by Jury,

Equal Protection

Clause

Florida'" $450,000 Non-Economic

Only

Medical

Malpractice

Open Courts

Provision

Illinois''" $500,000 Non-Economic

Only

Common Law

Actions for

Death, Bodily

Injury & Property
Damage

Separation of

Powers, Special

Legislation

New

Hampshire'^^

$250,000/

$875,000

Non-Economic

Only

Medical

Malpractice/All

Personal Injury

Equal Protection

Clause

Ohio"'' $250,000-

$1,000,000

Non-Economic

Only

Any Tort Action Due Process

Clause

172. Moore v. Mobile Infirmary Ass'n, 592 So. 2d 156 (Ala. 1992).

173. Smith v. Dep't of Ins., 507 So. 2d 1080 (Fl. 1987); $250,000 cap on non-economic

damages only where both parties submit to arbitration. PL. Stat. § 766.207.

174. Best V. Taylor Mach. Works, 689 N.E.2d 1057 (111. 1997).

1 75. Brannigan v. Usitalo, 587 A.2d 1 232 (N.H. 1 991 ), ajf'g Carson v. Maurer, 424 A.2d 825

(N.H. 1980).

176. State ex rel Ohio Acad, of Trial Lawyers v. Sheward, 715 N.E.2d 1062 (Ohio 1999);

Morris v. Savoy, 576 N.E.2d 765 (Ohio 1991).



2004] MEDICAL MALPRACTICE ACTIONS 811

Oregon'" $500,000 Non-Economic

Only

All Personal

Injury

Trial by Jury

Texas'^** $500,000 All but Medical Medical Open Courts

Expenses - Malpractice Provision

Including Future Including

Expenses Wrongful Death

Washington'''^ 43% ave. annual Non-Economic All Personal Trial by Jury

wage for life Only Injury and

Wrongful Death

STATE CAPS UPHELD AS CONSTITUTIONAL

STATE CAP DESCRIPTION & COVERAGE RIGHT(S) NOT
VIOLATED

AMOUNT DAMAGES ACTIONS

Alaska'"" $400,000 Non-Economic Any Personal Trial by Jury,

Only Injury or

Wrongful Death

Claim

Equal Protection

Clause, Due

Process,

Separation of

Powers, Open

Courts, Special

Legislation

California"" $250,000 Non-Economic Any Action Equal Protection,

Damages Against Any

Health Care

Provider

Due Process

Colorado'"^ $1,000,000 Total Recovery Medical

Malpractice

Due Process,

Equal Protection

Clause

177. Lakin v. Senco Prods., Inc., 987 P.2d 463, 476 (Or. 1999).

178. Lucas v. United States, 757 S.W.2d 687 (Tex. 1988).

179. Sofie v. Fibreboard Corp., 771 P.2d 71 1 (Wash. 1989).

1 80. Alxska Stat. § 09. 1 7.0 1 (2003); Evans v. State, 56 P.3d 1 046 (Alaska 2002).

181. Cal. Civ. Code § 3333.2 (2004); Fein v. Permanente Med. Group, 695 P.2d 668 (Cal.

1985).

182. Colo. Rev. Stat § 13-64-302(1) (2003); Scholz v. Metro. Pathologist, 851 P.2d 901

(Colo. 2003).



812 INDIANA LAW REVIEW [Vol. 37:773

Idaho'^^ $400,000 Non-Economic All Tort Actions Trial by Jury,

Special

Legislation,

Separation of

Powers

Indiana'" $1,250,000 Total Recovery Medical

Malpractice

Including

Wrongful Death

State and Federal

Due Process and

Equal Protection,

State Rights and

Privileges, Trial

by Jury

Kansas'*^ $250,000 Non-Economic

Only

All Tort Actions Trial by Jury,

Reparation After

Due Process

Equal Protection

I^uisiana'^*^ $500,000 Non-Economic

Only

Medical

Malpractice

State & Federal
Equal Protection

Clause

Maryland'" $500,000+ Non-Economic

Only

All Personal

Injury

Equal Protection,

Trial by Jury,

Open Courts

Missouri'** $350,000+ Non-Economic

Only

Medical

Malpractice

Including

Wrongful Death

State and Federal

Equal Protection,

Trial by Jury,

Open Court,

Certain Remedy,

Due Process

183. IDAHO Code § 6-1603 (2003); Kirkland v. Blair County Med. Ctr., 4 P.3d 1 1 15 (Idaho

2000).

184. IND. Code Ann. § 34-18-14-3 (2003); Johnson v. St. Vincent Hosp., 404 N.E.2d 585

(Ind. 1980).

185. Kan. Stat. Ann. § 60-19a02 (2003). Non economic cap previously struck down in

Kansas Malpractice Victims Coalition v. Bell, 757 P.2d 251 (Kan. 1988)

186. La. Rev. Stat. Ann. § 40:1299.42 (2001); Butler v. Flint Goodrich Hosp. of Dillard

Univ., 607 So. 2d 517 (La. 1992).

187. Md. CodeAnn., Cts.&Jud.Proc. § 1 1-108 (2002); Murphy v. Edmonds, 601 A.2d 102

(Md. 1992).

1 88. Mo. REV. STAT. § 538.210 (2000); Adams v. Children's Mercy Hosp., 832 S.W.2d 898

(Mo. 1992).



2004] MEDICAL MALPRACTICE ACTIONS 813

Montana'"'^ $250,000 Non-Economic Medical Right to Full

Only Malpractice Remedy and

Equal Protection

Nebraska"" $1,250,000 Overall Medical

Malpractice

Trial by Jury, Due

Process,

Separation of

Power

New Mexico''^' $600,000 All but Medical

Expenses

All Tort Actions Access to Courts,

Equal Protection

North Dakota"^ $500,000 Non-Economic Medical Equal Protection,

Only Malpractice Trial by Jury

South Dakota"' $500,000 Non-Economic Medical Procedural Due

Only Malpractice Process, Trial by

Jury, Open Courts

Virginia''^" $1,500,000+ Total Recovery Medical

Malpractice

Including

Wrongful Death

Trial by Jury,

Special

Legislation,

Taking of

Property, Due

Process or Equal

Protection,

Separation of

Powers

West Virginia"^ $250,000/ Non-Economic Medical Equal Protection,

$500,000/ Only Malpractice Separation of

$1,000,000 Powers

189. MONT. Code Ann. § 25-9-41 1 (2003); Meech v. Hillhaven West, Inc., 776 P.2d 488

(Mont. 1 989) (discussing cap on wrongful death damages).

190. Neb. Rev. Stat. § 44-2825; Gourley v. Neb. Methodist Health Sys., Inc., 663 N.W.2d

43 (Neb. 2003).

191

.

N.M. STAT. Ann. § 41-5-6 (2003); Trujillo v. City ofAlbuquerque, 965 P.2d 305 (N.M.

1998).

192. N.D. Cent. Code § 32-62-02 (2003); Arneson v. Olson, 270 N.W.2d 125 (N.D. 1978).

193. S.D.C0DIFIEDLawsAnn.§21-3-11 (2003);Knowlesv.UnitedStates,544N.W.2d 183

(S.D. 1996).

194. Va. Code Ann. § 8.01-581.15 (2003); Pulliam v. Coastal Emergency Servs., Inc., 509

S.E.2d 307 (Va. 1999).

1 95. W. Va. Code § 55-7B-8 (2003); Robinson v. Charleston AreaMed. Ctr., 414 S.E.2d 877

(W. Va. 1991).



814 INDIANA LAW REVIEW [Vol. 37:773

Wisconsin''^'^' $350,000+ Non-Economic

Only

Medical

Malpractice

Trial by Jury,

Separation of

Powers, Remedy,

Equal Protection,

Due Process

The constitutionality of caps in Hawaii, Massachusetts, Michigan, Montana, and Utah have not been

ruled on.''^^

Arizona and Wyoming have constitutional provisions prohibiting the enactment of any law limiting

damages recoverable for personal injury and/or death.

The following states have neither a statutory cap nor a constitutional provision explicitly prohibiting

them: Arkansas, Connecticut, Delaware, District of Columbia, Georgia, Iowa, Kentucky, Maine,

Minnesota, Mississippi, Nevada, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania,

Rhode Island, South Carolina, Tennessee, and Vermont.

196. Wis. Stat. §§ 893.55, 665.017 (2003); Guzman v. St. Francis Hosp., Inc., 623 N.W.2d

776 (Wis. App. 2000), rev. denied, 629 N.W.2d 783 (Wis. 2001).

197. Haw. Rev. Stat. §§ 663-8.7, 663-10.9; Mass. Ann. Laws ch. 231, § 60H, ch. 229 § 2

(2000); Mich. Comp. Laws § 600.1483; Utah Code Ann. §§ 78-14-7.1, 78-14-3 (2003). The

Massachusetts cap is often not problematic for plaintiffs because it allows juries to give higher

awards where they find certain special circumstances so warranting such. For a detailed discussion

ofMichigan's Medical Malpractice Cap in which the author calls for the Michigan Supreme Court

to find the cap unconstitutional, see John P. Desmond, Michigan 's Medical Malpractice Reform

Revisited—Tighter Damage Caps and Arbitration Provisions, 11 T.M. COOLEY L. REV. 159
(1994). While the current Utah cap has not been ruled on, a previous attempt was struck down in

Condemarin v. University Hospital, 775 P.2d 348 (Utah 1989).