Ten Years of 10-Gallon Tort Reform
by Jill McLain, Executive Vice President of Governmental Relations
Physicians under fire
It was the mid-1970s. I was monitoring the trial of a medical liability case. The plaintiff, who had been driving while intoxicated, was seriously injured in a high-speed single car accident. Yes, the patient had some lingering injuries the physician was unable to repair. But the patient received good care. We saw this as a very winnable case. The jury deemed otherwise — or simply ignored the facts in finding the physician negligent.
Clearly, we had under-estimated the influence of empathy and a pro-plaintiff venue. It was a stunning loss. There were many stunning losses back then — so many that most insurance companies were either refusing to write medical liability coverage or leaving the state altogether.
Early reforms
In 1977, the Texas legislature intervened with the passage of Article 4590i, the Medical Liability Insurance and Improvement Act. The reforms included a $500,000 damage cap, indexed for inflation. Today that cap stands at just over $1.865 million. No one knew at that time whether the reforms would successfully mend the broken system.
It was in this tumultuous environment that Texas Medical Liability Trust was born. Our stated goal was to provide physicians with a stable and reliable source for medical liability coverage, and we’ve done that since our inception. Unfortunately, the liability environment continued to deteriorate.
Over the years, many of the protections in 4590i were either eroded or eviscerated. The damage cap was declared unconstitutional in personal injury cases. The Texas Supreme Court found in Lucas v. United States (757 S.W.2d 687, Tex. 1988) that the limit violated a section of the Texas Constitution guaranteeing access to the courts. Later, the Texas Supreme Court ruled that the cap was constitutional for statutorily-created death cases (Rose v. Doctors Hospital, 801 S.W.2d 841, Tex. 1990). However, the cap was to be applied per defendant, thus it allowed “stacking” and encouraged filing against multiple defendants.
Case law extended the statute of limitations in cases where the alleged injury was not known during the two-year limitation period. The statute of limitations involving minors was also ruled unconstitutional, Weiner v. Wasson, 900 S.W.2d 316 (Tex. 1995). This made it impossible to know for at least 20 years that a physician was safe from litigation in caring for minors. Article 4590i contained no Statute of Repose. Therefore, doctors had no protection from stale cases in which medical records and witness testimony were no longer available.
In Phillips MD v. Bramlett, No. 07-0522 (Tex. Mar. 6, 2009), the Texas Supreme court held that insurance carriers could be held responsible under the so-called Stowers Doctrine for damages in excess of the insured physicians’ own liability exposure. This made it impossible to predict the range of potential damages in any given case. This high and unpredictable risk regularly led to the settlement of cases that were medically defensible.
Physicians often felt trapped in a system in which settlement discussions were driven by the potential payout rather than the quality of care given. Judgments and settlements became reportable to the Texas Medical Board and to the National Practitioners’ Data Bank, opening physicians to regulatory scrutiny, even when they did not feel they were truly negligent. Sometimes, these investigations impacted their hospital privileges.
Expert reports were required to maintain a medical liability cause of action. Unfortunately, there was so much room for judicial discretion that the requirements were ineffective in preventing unwarranted litigation or in obtaining dismissal of meritless suits. There were no significant repercussions for suing a physician without adequate cause. The frequency of suits was staggering, even excluding mass litigation. One in every four or five Texas physicians was being sued annually. In 40 years of handling and supervising medical liability claims, I had never witnessed litigation against physicians at rates that high.
There were minimal limitations on what juries could award and plaintiffs could collect. In addition, sympathy often played a big role in assessing damages. In my entire career, I was only able to collect sanctions for frivolous litigation one time, on a case in which I had explained to plaintiff counsel in advance that the physician was not involved in the care at issue. I asked him not to file suit without first verifying my statements. The lawyer filed suit nonetheless, and then later dismissed the case because it was so clearly baseless.
Reforms in the 1990s
Over the years, my colleagues and I have shared the disappointment and frustration of physicians. Ultimately, this led TMLT to seek meaningful lawsuit reforms on behalf of our physicians. With the help of some of our talented defense and appellate attorneys, then Executive Vice President of Claims Bob Fields began working on a tort reform agenda in 1993. A few modest reforms were enacted by the Texas Legislature in 1995. Unfortunately, the reforms were not what we sought and did not portend meaningful change. What’s more, the legislature instituted a five-year mandatory and prospective rate rollback. This was done without any evidence that the reforms would achieve their stated goal of decreasing the frequency and severity of suits.
The medical liability crisis
Claims results continued to worsen, but because of the mandated rollback, rates had to be lowered. Incredibly, the answer to one crisis hastened the next. Underwriting results deteriorated, and again, many carriers went out of business, left the state, or curtailed the amount of business they were willing to write in Texas. Many physicians could not find coverage and were forced into the Texas Medical Liability Insurance Joint Underwriting Association (JUA), the carrier of last resort.
The high cost of medical liability coverage and the fear of unwarranted litigation were pushing many physicians into early retirement. Others curtailed their practice or ceased providing certain treatment due to liability concerns.
Unbridled lawsuits turned entire regions of the state into high-risk areas to practice medicine. Patients were losing access to their physicians. Emergency rooms were woefully understaffed.
Many rural areas had lost hope of recruiting physicians. The physicians, hospitals, and liability carriers of Texas were aboard a sinking ship. Solutions had to be found and fast. So, TMLT and its competitors did the previously unthinkable — we joined hands and jumped into the rescue boat together, forming a statewide liability coalition known as the Texas Alliance for Patient Access.
Texas physicians march to the courthouse
Austin internal medicine physician Howard Marcus chaired TAPA, as he does to this day. Dr. Marcus marshaled support and financing. In doing so, he built a cohesive organization with a strong and unified voice. Bob Fields travelled across Texas to speak to physician groups, mobilizing them to participate in the efforts to pass truly meaningful reforms. He told them “Doctors need to be willing to put on their white coats and stethoscopes and demonstrate. They need to march on the courthouse steps until the laws of this state are changed and made fair.”
The crisis reached a well-publicized boiling point in April 2002 when physicians in five Texas cities did as suggested and staged a one-day protest march to the steps of their local courthouses. Nearly 1,000 doctors, nurses, and patients participated in the march in Edinburg, Texas.
Within days of the protest marches, both Governor Perry and his challenger announced that, if voted into office, they would make medical liability reform an emergency issue, giving it fast-track priority status in the legislature.
Texas-sized tort reform
TAPA emerged as a consortium unlike any we had ever seen, and set out to correct the problems that needing fixing. Skilled attorneys Mike Hull, Brent Cooper, and Michael Wallach, among others, used their knowledge of defending and appealing medical liability cases to craft proposed legislation.
Voters returned Governor Rick Perry to office. True to his word, the governor made tort reform a top priority. Drafting and passing a piece of legislation as comprehensive and complex as House Bill 4 was an arduous task. The drafting, conversations, negotiations, testimony, research, and re-drafting seemed endless. Ultimately, a masterful bill evolved and was passed, including the cornerstone of the bill — the $250,000 non-economic damage cap.
State Representative Joe Nixon of Houston, and State Senator Bill Ratliff from Mount Pleasant, shepherded the tort reform package through the House and Senate. Lt. Governor David Dewhurst brokered an agreement on the cap.
Governor Perry understood that the cap would likely be challenged in the courts for years. He also understood that the sooner the cap was deemed constitutional, the sooner rate relief would be viable. He took the extraordinary step of pushing for a constitutional amendment asking voters to affirm the legislatively-approved cap.
Proposition 12 was placed before the voters on September 13, 2003. Though it faced substantial opposition by the trial lawyers, it passed by the narrowest of margins. Ten years later, the cap and every other provision of our landmark reforms have remained intact, in the legislation and in the courts.
Physicians flock to Texas
Following the passage of Proposition 12, TMLT announced a rate reduction of 12%, indicating our confidence that, finally, effective reforms had been achieved.
Not surprisingly, the state did not move from crisis to correction overnight. Between the time that House Bill 4 was passed and the time it actually became effective, there was a “rush to the courthouse” to file cases under the old 4590i law. This backlog of “old law” cases did not dampen our spirits. We were confident this new beginning would help us attract physicians to our state.
“Ten-gallon tort reform,” as it was called by the Wall Street Journal, worked. By 2007, the Texas Medical Board was inundated with new applications from physicians wanting to move to Texas. Access to care improved, particularly in some of the most underserved areas of the state.
Even though many new physicians were moving here, new claim intake dropped dramatically and has since remained stable. This has occurred, in large part, due to the sweeping expert witness requirements in House Bill 4. Today, dismissals of non-meritorious cases often occur on a timely basis. Physicians are now spending more time in the exam room and less time in the court room. Because the law now clearly defines damage parameters, cases are more readily evaluated for settlement ranges. In many cases, this has eliminated the need to go to trial.
Today, the Texas health care liability landscape is vastly different than it was before the reforms. Institutional funds that had been used to pay for liability premiums are now being freed to build, enhance, and enlarge medical facilities. Many of the physicians who began practice here after 2003 have no frame of reference for the enormity of the crisis or the cost of achieving reforms. But they know this — anywhere in America, when physicians talk about meaningful medical liability reforms, the phrase “like in Texas” is often included in the conversation. Our hard fought victories have become a model for others and a must to defend. TMLT stands resolute, with you, in support of these comprehensive reforms and the benefits they are yielding to Texas patients.
Jill McLain is the Executive Vice President of Governmental Relations at TMLT. She has more than 40 years experience in the insurance industry. Jill works on strategic planning regarding tort reform and other legislative issues.