Non-economic damages caps
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Non-economic damages caps, including medical malpractice caps, are controversial tort reforms to limit (i.e., "cap") damages in lawsuits for non-pecuniary harms such as permanent disability, disfigurement, blindness, loss of a limb, paralysis, trauma, or physical pain and suffering. This is opposed to economic damages, which encompasses pecuniary harms such as medical bills, lost wages, and lost future income.
Non-economic damages, sometimes described as quality-of-life damages, compensate injury victims and their families for injuries and losses that are not easily quantified by a dollar amount.
Medical malpractice damages caps
In the area of medical malpractice, tort reform advocates have claimed that with the imposition of damages caps insurance premiums would decrease, both making medical care more affordable and eliminating a disincentive for doctors to practice. Critics responded that high medical malpractice insurance rates are a result of the cyclical nature of the insurance industry, lack of competition, mismanagement of reserves and a decline in investment income.
Many jurisdictions, including U.S. states, have debated, passed legislation or amended their constitutions to impose caps on non-economic damages. Former President George W. Bush proposed a nationwide $250,000 cap in medical malpractice cases.
Impact on healthcare costs
From the start, some disputed whether damages caps would reduce overall medical costs for patients. A study by the U.S. Congressional Budget Office published in 2004 found that "Malpractice costs account for less than 2 percent of health care spending." Proponents of caps suggested other possible effects of limiting tort liability, such as reducing the extent to which physicians practice “defensive medicine”, the provision of unnecessary medical care in order to avoid potential liability, and would increase access to health care. There is scant evidence, either anecdotal or empirical, that doctors significantly change their approach to providing health care services as a result of tort reform measures.
Impact on malpractice insurance premiums
Although proponents of damages caps in medical malpractice cases argue that the caps reduce malpractice insurance premiums for doctors, despite a considerable amount of research on the subject the data in support of that argument is not compelling.
Within the United States, the impact of damages caps on the number of malpractice claims paid out by insurance companies varies by state. In many states, reviews of malpractice premiums following the implementation of damages caps showed that the caps had no effect on premiums.
Impact on patients
In a personal injury lawsuit, the two basic forms of compensatory damages that may be awarded are economic damages, compensation for the injured person's past and future financial costs and losses, and non-economic damages, compensation for the pain and suffering that results from an injury. Non-economic damages are thus the only compensation an injured person can receive for the injury itself, as opposed to reimbursement of out-of-pocket expenses such as lost wages, medical bills, and court costs. Non-economic damages can be especially important for injured people who do not work outside the home, including the elderly, children, and homemakers. The "worth" of a homemaker's work inside the home is not easily measured by a dollar amount, and a claim of lost capacity to earn income may not have much value.
Tort reform supporters argue that it is difficult for juries to assign a dollar value to these losses with the guidance they are normally given. They argue that there is no basis for non-economic damages, and uncapped non-economic damages violate the equitable principles of justice by being inherently quite random, because different juries will always come to different results. Because of the highly charged environment of personal injury trials, they contend that some awards will inevitably be unreasonable. For example, in Ernst v. Merck, a Texas Vioxx products liability case, the jury issued a verdict of $24 million in compensatory damages, which includes non-economic damages, for a widow of a 59-year-old triathlete who died from arrhythmia, or an irregular heartbeat, that could have been prevented had Merck provided warnings about the drug. Tort reform supporters argue that the widow had not been married a long time, and suggest that the damage award was excessive. However, since the basis for non-economic damages are not easily measured by a dollar amount (which tort reform supporters themselves argue), by the same logic there is no basis to assume that the award was, in fact, excessive.
Tort reform supporters argue that juries give arbitrary non-economic damage awards, but fail to argue that the legislature's assignment of non-economic damage caps is any less arbitrary. Opponents of tort reform would argue that members of the legislature are at a greater risk for assigning arbitrary dollar values to non-economic damages than juries; members of the legislature are not present at trial and do not get to observe evidence, witness testimony, and other factors that contribute to a verdict.
Opponents of tort reform contend that jurors should assess damages on a case-by-case basis, that the risk of loss should not be shifted from those who cause harm or could prevent harm onto the innocent victim, and that damages should not be arbitrarily capped by a legislature.
Overall, non-economic damages throughout the United States cover pain, suffering, and other nonpecuniary injuries, and in medical malpractice cases many states have imposed caps that range from $250,000 to $750,000 or more. Damage caps have various purposes; for instance, they can discourage malicious lawsuits and prevent the costs of transacting business from being overly inflated, but have also been criticized as unjust.
Many jurisdictions with non-economic damage caps have defined non-economic damages by statute.
Constitutionality of caps
Right to trial by jury
Opponents of caps on damages argue that caps on the amount of damages jurors can award violate the right to a trial by jury. Because tort law has historically been a question of state law, states have the power to establish a constitutional right to a trial by jury in civil cases. Historically, juries have decided both the question of liability and the question of how much damages to award in tort cases, subject to instructions on the law by a judge. Several state appellate courts that have considered the issue have struck down damages caps as a violation of state constitutions.
Separation of powers
Some tort reform supporters, such as the conservative Federalist Society, have criticized court decisions that overturn damages caps legislation as a violation of the concept of separation of powers.
In contrast, critics of caps contend and state courts have held that legislatures violate the principle of separation of powers when they attempt to impose arbitrary damage caps on juries, who function as part of the judicial branch of government. In Best v. Taylor Machine Works, the Illinois Supreme Court ruled that a $500,000 cap on non-economic damages functioned as a "legislative remittitur" and invaded the power of the judiciary, in violation of the separation of powers clause. The court noted that courts are empowered to reduce excessive verdicts where appropriate in light of the evidence. The cap, however, reduced damages by operation of law, without regard to the specific circumstances of the case.
The Illinois Supreme Court found in the 1997 case Best v. Taylor Machine Works found that a $500,000 cap on noneconomic damages was (in addition to serving as a "legislative remittitur") special legislation that made an arbitrary distinction between those who sustained major noneconomic damages in a single tort versus multiple tortious actions and between those that suffered minor amounts of noneconomic damages versus amounts about the $500,000 cap (such as a plaintiff who becomes permanently disabled).
In the 2010 case Lebron v. Gottlieb Memorial Hospital, the Illinois Supreme Court ruled that Section 2-1706.5 of Public Act 94-677, which placed caps on non-economic damages in medical malpractice actions, violated the separation of powers clause in the Illinois Constitution and was therefore facially invalid. Additionally, because Public Act 94-677 contains an inseverability provision, the entire Act was held void and invalid in its entirety.
In California, non-economic damages awarded in medical malpractice actions are capped at $250,000. Non-economic damages are meant "to compensate for pain, suffering, inconvenience, physical impairment, disfigurement and other nonpecuniary damage."
In Maryland, non-economic damages are capped at $800,000. In personal injury cases, non-economic damages are defined as "pain, suffering, inconvenience, physical impairment, disfigurement, loss of consortium, or other nonpecuniary injury" . In wrongful death cases non-economic damages are defined as "mental anguish, emotional pain and suffering, loss of society, companionship, comfort, protection, care, marital care, parental care, filial care, attention, advice, counsel, training, guidance, or education, or other noneconomic damages authorized under Title 3, Subtitle 9 of this article."
Michigan normally has a cap of $280,000 for "noneconomic loss," which is defined as "damages or loss due to pain, suffering, inconvenience, physical impairment, or physical disfigurement, loss of society and companionship, whether claimed under section 29222 or otherwise, loss of consortium, or other noneconomic loss. However, the cap is increased to $500,000 where the plaintiff, due to physician negligence, is made "hemiplegic, paraplegic, or quadriplegic resulting in a total permanent functional loss of 1 or more limbs caused by [either] injury to the brain [or] injury to the spinal cord"; "when the plaintiff has permanently impaired cognitive capacity rendering him or her incapable of making independent, responsible life decisions and permanently incapable of independently performing the activities of normal, daily living"; or "there has been permanent loss of or damage to a reproductive organ resulting in the inability to procreate."
In West Virginia, non-economic damages are capped at $500,000. Non-economic damages are "(1) wrongful death; (2) permanent and substantial physical deformity, loss of use of a limb or loss of a bodily organ system; or (3) permanent physical or mental functional injury that permanently prevents the injured person from being able to independently care for himself or herself and perform life sustaining activities."
In 2005, a Wisconsin court ruled that a $350,000 cap on non-economic damages in medical malpractice cases violates the state's equal protection guarantee. In Ferdon v. Wisconsin Patient's Compensation Fund, the court ruled that there was no rational relationship between the objectives identified by the legislature that were intended to prevent a medical liability crisis in Wisconsin and treating people with more severe injuries and higher non-economic damage awards different from people with lower non-economic damage awards.
In Wisconsin, non-economic damages for medical malpractice are capped at $750,000. Non-economic damages means "moneys intended to compensate for pain and suffering; humiliation; embarrassment; worry; mental distress; noneconomic effects of disability including loss of enjoyment of the normal activities, benefits and pleasures of life and loss of mental or physical health, well-being or bodily functions; loss of consortium, society and companionship; or loss of love and affection.".
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