Medical malpractice crisis: Coming soon to a profession near you


Veterinarians average $312,360 in revenue production and the average medical malpractice premium hovers at $197...

Medical malpractice insurance is a cost of doing business in the human medical profession. But in the past 30 years, some startling developments have begun to affect the delivery of even basic care to millions of Americans seriously. The insurance companies complain that the large jury settlements make the business climate in many states untenable. They clamor for statutory caps on pain and suffering.

Attorneys threaten that capping settlements denies basic compensatory rights for those wronged by doctors. As they raise fees or accept lower incomes to keep up with ever increasing malpractice insurance premiums, doctors complain that the cost of doing business has driven them from practice. And patients are caught in the middle — frustrated by the rising cost of care and fearful of the inability to sue in the event of a tragedy.

Additional Resources

In 1993, there was one law school teaching animal law, and as of the summer of 2004, there are 38 doing so with two, 700-plus page volumes of animal law available since 2000. There is a National Center for Animal Law at Lewis & Clark Law School in Portland, Ore., There is a 25-year old U.S. organization called Animal Legal Defense Fund with 47 student chapters at U.S. law schools and 13 new chapters being formed in 2004,, as well as an Animal Legal and Historical Web Center at Michigan State University College of Law. There is even an International Institute for Animal law,

These are only a few of the pre-eminent sources of information for the animal law movement, all of which intend to change the status of pets under traditional property law principles. One of the topics at the head of the list of changes being pursued by today's budding legal scholars pertains directly to the limited liability available to veterinarians and other animal care givers relative to expense of the healthcare received by today's beloved pets.

This series reviews the impact of rising liability and concurrent increases in the cost of professional liability insurance in the human healthcare arena, tactics being taken in that field to control liability costs, and which of the methods that have been touted or are being tried appear to be effective.

The South Carolina example

In South Carolina, human patient access to care is threatened by the current state of the medical liability system. Doctors are forced into tough choices about limiting services or leaving practice altogether because of skyrocketing medical liability premiums.

On average, doctors in South Carolina saw a 24-percent increase in Joint Underwriting Association and Patient Compensation Fund premiums in 2003 alone. Since 1995, the increase has been a staggering 66.5 percent. The most significant factors in rate increases throughout those eight years have been the rise in the size of awards and the dramatic increase in the number of claims filed.

South Carolina is not alone. The American Medical Association (AVMA) lists 12 states in medical malpractice liability insurance crisis: Florida, Georgia, Mississippi, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, Texas, Washington and West Virginia.

Currently, veterinarians pay a mere fraction of the price physicians do for professional liability insurance. Recently, however, a number of cases have emerged that threaten to change this.

Changing veterinary laws

Today, in most states, owners of animals can seek, but will not be granted, pain and suffering damages in most veterinary malpractice suits. Animals are viewed as property by law, and as such, owners are due only the fair market value of an animal at the time of its death and/or lost earnings, lost profits, lost use of the animal (as stud or dam). In the case of injuries caused by negligence, expenses incurred attempting to prevent the death or permanent disability of animals are allowed including veterinary fees up to the market value of the animal. These costs may not (and usually don't) even cover the financial costs associated with righting the wrong.

In many states, however, the law is beginning to look upon animals with new eyes.

In 2000, Tennessee passed a civil statute permitting owners to seek awards of up to $4,000 for non-economic damages limited to compensation for the loss of the reasonably expected society, companionship, love and affection of a pet. Before the bill was passed out of committee and voted on by the Legislature, a provision was added exempting veterinarians. This was the first such law in the nation.

But this was not the only non-economic damage (i.e., emotional distress) law for long. In 2002, Illinois initiated a law allowing recoveries for the monetary value of the animal, veterinary expenses incurred on behalf of the animal, any other expenses incurred by the owner in rectifying the effects of the cruelty, pain and suffering of the animal, and emotional distress suffered by the owner. The court could also add punitive or exemplary damages of no less than $500 but not more than $25,000 for each act to which the animal was subjected. Lastly, the court must award reasonable attorney's fees and court costs actually incurred by the owner in the prosecution of any action under this section.

In the past three years, various types of emotional distress bills with remarkably different caps on liability have been pursued or are pending in Connecticut, Rhode Island, New Jersey, Michigan, Oregon, California and New York. West Virginia rescinded the law capping damages in a suit involving the loss of an animal to the market value of the animal, effectively permitting owners to seek damages above and beyond the fair market value of their pets.

While laws on the books open the door to non-economic damages in suits involving animals, the precedents that ultimately will change the way these cases are handled is the growing reluctance of the courts to dismiss them, even in states where no such laws exist. Because judges and courts are uncomfortable not allowing for any realistic damage recoveries, they have begun distinguishing pets from nonliving property.

In April 2004, a California Superior Court in Lunas v. Stockton refused to strike a $30,000 emotional distress claim resulting from the loss of the Lunas' Beagle mix, "Austin," a companion and hearing aid dog that died of an alleged result of their veterinarian's failure to diagnose Austin's testicular cancer.

Juries and judges in California, Washington, Oregon, Wisconsin, Alaska and other states have awarded non-economic and punitive damages to pet owners that vary from $5,000 to $135,000. However, juries and judges only herald the start of a trend. In many of these cases, the appellate courts have struck down such awards. In other cases, participants have elected to settle out of court or not to appeal them for fear that new precedents adverse to veterinarians and animal caregivers might be established. As courts uphold the rights of owners to seek these damages, or refuse to strike them on appeal, the die will be cast.

In 2001, the Kentucky Court of Appeals held in Burgess v. Taylor that it was the conduct of the offender, and not the subject of the conduct that determined a plaintiff's right to punitive damages. In that case, boarders of horses were sued by the owner for selling the animals in their charge for slaughter and then lying about what had transpired. The court awarded $1,000 for the horses' economic value, $50,000 for the outrageous conduct of the defendants and $75,000 in punitive damages.

Also in 2001, the Court of Appeals for the Third Circuit, Pennsylvania, created new precedent when it ruled that the plaintiff in Brown v. Muhlenberg Township could seek emotional distress damages after witnessing a police officer shoot and kill her dog because a jury could determine that this conduct constituted outrageous conduct. The case was remanded for a trial, and a jury in Philadelphia heard six days of testimony before concluding that the officer's conduct did not rise to the level of outrageous conduct and, thus, was insufficient to bring about an award for the intentional infliction of emotional distress.

In Riff v. Welleby Veterinary Medical Center, the case involves the death of Adam Riff's 8-year-old Shetland sheepdog during a routine dental procedure. If the plaintiffs win and then survive appeal, Florida will become the next state with a recent precedent that would allow a pet owner to collect emotional distress damages.

Reformation efforts

By the early 1970s, California physicians were where South Carolina is today: facing a human healthcare crisis of mammoth proportions. In 1972, California insurers were paying $150 in settlement costs for every $100 they collected in premiums. When operating costs were added, the figure jumped to $180 per $100. In 1975, two companies refused to renew medical malpractice policies on physicians in Southern California. Physicians in Northern California saw their premiums increase by 380 percent.

In 1975, California enacted the Medical Injury Compensation Reform Act (MICRA). The act passed with support from the Physician Insurers Association of America, Californians Allied for Patient Protection (CAPP) and the AVMA.

Provisions afforded by MICRA include:

  • A $250,000 cap on jury awards to individuals suing for non-economic damages,

  • A requirement that plaintiffs reveal collateral sources of payments,

  • Periodic payment provisions for awards more than $50,000,

  • Arbitration to promote out-of-court settlements,

  • Tightened statute of limitations for bringing medical malpractice suits,

  • A 90-day warning of an intent to sue to allow for out-of-court settlements,

  • Limits on contingency fees for attorneys.

In 1988 California voters placed and passed Proposition 103, a law that sought to regulate the insurance industry.

Provisions afforded by Proposition 103 include:

  • Requirements that insurance premiums be approved by an elected insurance commissioner prior to implementation,

  • California Department of Insurance approvals of rates and rate increases,

  • A required immediate 20 percent rate rollback effective from date of passage,

  • Public notice required for all rate changes,

  • The elimination of ratings organizations in rate setting.

Arguments have ensued over which reforms really addressed the crisis California faced. Since 1975, the year MICRA was enacted, California has seen a 168 percent increase in medical malpractice premiums. The nation as a whole, by comparison, has watched its rates increase by 505 percent. This is a favorite statistic of caps proponents, but these numbers are misleading because they do not take into account the dramatic increases in states like Pennsylvania, North Carolina or Nevada. Moreover, rather than averaging physician premiums nationwide, it takes an average of the averages by state, with no offset for population shifts or differences in local economies. This highlights one of the biggest hurdles to reform, i.e. statistics that are manipulated by special interest groups that are highly invested in the outcome of such reforms and which truly cloud the picture.

Proponents of MICRA and Proposition 103 claim responsibility for California's low medical malpractice premiums. Though passed in 1976, MICRA did not completely wind its way through the courts until 1985. Proposition 103 passed in 1988. Therefore, insurance premiums benefited mightily from the newly implemented MICRA, just as Proposition 103 also began to impact the insurance landscape. The truth is that provisions of both laws have probably contributed not only to lower premiums, but also to a stable business environment, increases in dividends paid to policy holders, and access and avenues for the public to participate in the regulation and redress of the insurance industry.

Some discussants are fond of pointing out that physicians pay a mere 3 percent of their average annual revenue production in malpractice premiums. Nationally, the average revenue production for physicians, including all specialties, equals $1,540,181. The average professional liability premium is $46,205.

Currently, veterinarians average $312,360 in revenue production and the average medical malpractice premium hovers at $197 for small animal practitioners, the group most affected by pressures for increasing damage awards. Using the percentage of production formula applied for physicians, that number would jump to a whopping $9,370 for veterinarians — approximately one fifth the rate physicians pay, but representing an increase of 4,756 percent.

The Joint Underwriting Association quotes statistics from states with caps, like Texas, where the passage of reform was followed by a 12 percent decrease in premiums, or Washington, where one of the largest medical malpractice insurers announced it would lower premiums by 10 percent if caps passed. These statistics only tell a part of the story, however.

In Florida and California, premium reductions have been included in the language of the reform bills while in states, such as Washington, the insurance industry backing the cap effort has agreed to reduce premiums as a part of a caps package it deems beneficial to the industry.

Supporters of caps often claim that states with caps attract physicians while states without caps lose them. In reality, the difference is clear but not convincing. States with caps have seen a 95-percent increase in the per capita physician rate, while states without caps have experienced a 79-percent increase.

Again, these numbers do not take into account population or business trends. For example, states with tort reform on the books might be inherently more business friendly, might have higher per capita incomes, and therefore might be more attractive to physicians.

However, even capped claims cost money to defend. In 2002, the Department of Health and Human Services estimated that it costs an average of $25,000 to defend a malpractice claim. And 61 percent of claims never even make it to trial. Of those that do, 80 percent find in favor of defendants. Still, that average $25,000 pricetag still lingers. A fair tort reform plan must address meritless lawsuits rather than focusing on capping those that find in favor of plaintiffs.

Reforms should strive to make it more difficult to file frivolous or nuisance value lawsuits against doctors for malpractice. Provisions such as a) mandatory arbitration, b) a requirement that experts submit affidavits of merit before suits can be filed, and c) fee-switching so that the winners' fees and costs are paid by the losers are all measures that could advance this goal.

A state-by-state look at reform measures

  • Colorado passed a $250,000 non-economic damages cap in 1998. In 2002, the median pay out in medical malpractice cases was $100,000, representing a 300-percent increase since the law was passed. In addition, premiums have continued to rise, to the tune of 48 percent in 10 years. The Consumer Price Index rose 28.2 percent during that same time period. There are few other provisions in the Colorado law. No attempt was made to regulate insurers, cap attorney's fees or encourage arbitration.

  • Florida: In late 2003, the Florida legislature addressed its critical healthcare problems with a comprehensive bill. The law caps non-economic damages at $500,000 per physician, $750,000 per hospital. At the same time, the law requires that doctors inform patients of injuries and mandates the formation of Patient Safety Committees. Moreover, the law addresses regulation of the insurance industry, freezing premiums on Dec. 31, 2003, and subsequently reducing premiums by the estimated savings incurred as a result of the reforms. Insurers are afforded seven months to study cases and offer settlements, and physicians are afforded the right to sue their carriers for bad faith acts if no settlements are offered. All players are required to submit statistics to the state on premiums, incidents of malpractice and medical errors.18 The statutory cut in premiums makes it difficult to assess how this law would affect rates without the strict regulatory reform it contains.

  • West Virginia: March 2003 marked the passage of comprehensive reforms in West Virginia. Modeled after California's dual reforms, West Virginia lowered its cap on non-economic damages from $1 million to $250,000. In cases of wrongful death or severe deformity, the cap increases to $500,000. West Virginia declined to regulate the insurance industry directly and instead relies on reforms such as requiring a) certificates of merit from experts, b) 30 days notice to file before plaintiffs can proceed with suits, and c) tax credits for physicians equal to 21 percent of the premiums. Other reforms include a collateral source rule and expert witness laws.

Prior to passage of this reform, West Virginia saw a 40 percent increase in median pay out under the $1 million cap. While information on increases in premiums was not directly available, the median premium in 2002 was on the high end, at $56,989. It is too early to tell what impact the new law will have in the future.

  • Delaware: In attempting to address frivolous claims while avoiding the hot-button issue of limiting claimant awards, Delaware passed a law in June 2004 requiring a certificate of merit from an expert witness before a suit can be filed. The original bill also contained a provision capping non-economic damages at $250,000. Nonetheless, pressure from trial attorneys and citizens' groups ensured that version did not have the votes to pass. Currently, Delaware's median premium hovers in the range of $25,000 — on the low end nationally. However, sharp increases in the recent median payout —almost 105 percent — might soon be reflected in increased premiums.

  • Ohio: In January 2003, Governor Bob Taft signed into law a bill capping non-economic damages at $250,000, or three times the economic award, up to $350,000. The hope was that this would address the rapidly rising cost of doing business in Ohio. It didn't. Medical malpractice insurance premiums continued to rise — at a rate of more than 27 percent in 2003 and an additional 20 percent through June of this year. To address this continuing crisis, Ohio passed additional reforms, including a collateral source rule and a defendant's right to ask the court to rule on the merit of the case. In the event the court dismisses the case as frivolous, plaintiffs pay the defendants' fees and court costs.

Furthermore, the new bills regulate insurers, requiring a 60-day notice of rate increases and 120 days notice of intent to cease coverage.

  • Texas: Of all of the states addressing this issue in 2003, Texas passed the most detailed bill without regulating the insurance industry in the least. The Texas law imposes a $250,000 per physician, $500,000 per hospital cap on non-economic damages. It establishes a nine-member Texas Medical Disclosure panel, provides for uniform informed consent laws and procedures, allows for Good Samaritan exemptions in emergency room cases and requires a 60-day notice to file a suit. Periodic payment provisions are included for awards more than $100,000.

The Texas story is an example of one particular lobbying group (the insurance industry) out-muscling another (the trial lawyers). Members of Congress have expressed an interest in using the Texas law as a template for federal reform. Despite the fact that Texas's healthcare crisis was not nearly as bad as that of other states, logging moderate by comparison (100 percent) increases in pay outs and premiums over 10 years, supporters of this type of legislation at the federal level have been trumpeting its merits for more than a year now. Perhaps this law will address the crisis — there are some excellent provisions in it — but it appears likely that the citizens of Texas will once again have to seek relief through legislation down the road.

  • Arkansas passed a law not only capping non-economic damages at $250,000 or three times the compensatory award, up to $1 million, but also put in place a "clear and convincing" evidence rule before any award may be granted for pain and suffering. Normally, all that is required in malpractice cases is a "preponderance of the evidence."

While this looks good on the surface, the issue in Arkansas has been physician self-policing. Citizens do not have access to a doctor's disciplinary or malpractice payout records, a surprisingly small number of doctors (2.6 percent) in Arkansas make up the repeat offender pool that is responsible for 47.3 percent of all medical malpractice payouts.

  • Nevada faces a crisis in coverage. To remedy this, the Nevada Legislature passed a statute that requires that carriers provide 120 days notice before withdrawing from the state. It also prohibits rate increases to offset investment losses.

A corollary issue of high payouts is addressing the issue of investment losses in the insurance industry. This begins to get at the heart of one of the problems healthcare providers face. Regulation of the insurance industry begins to ensure that carriers are in the business of providing coverage to their clients, rather than investing premium dollars in dividend paying assets that enhance the bottom line for their shareholders.


Some of these laws address the issue head on. Others tinker around the edges. Still others blatantly ignore whole industries while claiming to address the crisis faced by patients. Forty-one state legislatures addressed this issue in 2003. The next two to five years will show the fruits of that labor. It behooves us to carefully monitor the successes and failures while we pursue our own reform.

Next month: The series examines statutory caps and potential legislation that may stave off this crisis.

Ms. Tirrell is a third-year veterinary student at Michigan State University

Dr. Wilson, of Priority Veterinary Consultants in Yardley, Pa., is a nationally recognized speaker and author on animal law.

Suggested Reading

"Courts Warm Up to Pet Owners' Suits State legislatures begin to enable plaintiffs to sue for punitives and more", Cherie Song, The National Law Journal, July 21, 2003

South Carolina Medical Association

DrugIntel News

Tennessee Code Unannotated, 44-17-403. Death of pet caused by negligent act of another – Damages

Illinois Compiled Statutes, 510ILCS 70/16.3, Source: P.A. 92-454, eff. 1-1-02

"West Virginia Backgrounder", American Medical Association, 2004

Lunas v. Stockton, No. 2002-074717 (Alameda Co. Super. Ct.).

Evers v. Palmer, No. 773909 (Orange Co., Calif., Super. Ct.).

Riff v. Welleby's Veterinary Medical Center Inc., No. 02-012991-08 (Broward Co., Fla., Cir. Ct.)

Californians Allied for Patient Protection (CAPP)

Foundation for Taxpayer and Consumer Rights (FTCR)

"Medical Malpractice Insurance – Why the Price Hikes?" Michigan Trial Attorneys Association,

"2002 Physician Inpatient/Outpatient Revenue Survey", Merritt, Hawkins and Associates, 2002

American Veterinary Medical Association

Priority Veterinary Management Consultants

"Medical Malpractice Analysis." Milliman USA on behalf of Florida Hospital Association. November 7, 2002.

"Medical Liability Caps Miss the Mark." Susanna Dokupil, The American Enterprise Magazine. July/August 2004.

"ORL Research Report." Saul Spigel. 2002.

"The Impact of Non-Economic Damage Caps on Physician Premiums, Claims Payout Levels, and Availability of Coverage." June 2, 2003.

Office of Governor Craig Benson, New Hampshire.

"Taft Signs Bills to Limit Claims; Reforms Address Doctors Leaving Ohio." Amy McCullogh. Mansfield News Journal. June 18, 2004.

Medical Malpractice Attorney Source.

Pennsylvania Ruling: Intentional Infliction of Emotional Distress. McCullough, McKenty, And Kafader, PA.

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