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Another State Supreme Court Decides Caps On Damages

November 21, 2011

Over ten years ago, the Florida legislature passed a statute capping or limiting non-economic damages in medical malpractice cases to $500,000. Wrongful death cases are capped at $1 million. The Florida Supreme Court, like many other state supreme courts before it, is asked to decide whether its cap on damages is constitutional under its state constitution.

In personal injury and medical malpractice cases, a plaintiff may recover both economic damages and non-economic damages. When someone suffers a serious personal injury, they must usually undergo extensive medical treatment and miss considerable time from work. Economic damages are used to recover these financial losses. However, the most significant damages in a serious injury case are often non-economic damages such as when someone suffers a spinal cord injury, a brain injury, or birth injury. In those instances, a plaintiff may seek compensation for pain and suffering and disability or loss of a normal life. In wrongful death cases, a surviving spouse or child is entitled to compensation for the loss of companionship, support, and affection they lost because their parent and/or spouse is gone.

The cornerstone of the tort reform movement is to cap non-economic damages in personal injury, medical negligence, and wrongful death cases. There are various justifications given by tort reformers for caps. The primary justifications given is that caps on damages purportedly prevent frivolous lawsuits, prevent runaway jury verdicts, reduce healthcare costs, and/or prevent doctors from fleeing to states with caps on damages.

First, do caps on non-economic damages prevent frivolous lawsuits? When a lawsuit is frivolous, there is no credible basis for compensation because the defendant did nothing wrong or the injury is so trivial that the costs of suit may exceed any damages recovered. Thus, capping non-economic damages do nothing to avoid frivolous lawsuits as the value of these cases are so low they do not come anywhere near a six figure cap. Instead, the real people impacted by caps on non-economic damages are those who suffer the most catastrophic injuries or families who lost a loved one. These are the people impacted by caps on damages because their cases involve both significant losses and strong evidence of wrongful conduct by the defendant. There, rather than preventing frivolous lawsuits, caps on damages actually punish those with the most meritorious cases.

Another justification cited for caps on non-economic damages is they prevent runaway jury verdicts. The assumption behind this theory is twofold. The first assumption is that excessive jury verdicts cannot be reduced. In reality, judges are required to reduce excessive jury verdicts. Just recently, a judge in New York reduced a $60 million verdict to $600,000 because the judge found the verdict excessive. The Appellate Court affirmed. The second assumption is that any non-economic award above the capped amount (e.g., $500,00) is always excessive. Yet, in bench trials where the judge (not a jury) decides the amount of damages to award, judges often return verdicts above 1 million for non-economic damages. Indeed, in the case now before the Florida Supreme Court, the trial judge was asked to decide fair compensation for the family of a woman who died from medical malpractice after labor and delivery. The judge--not a runaway jury--determined that $2 million was appropriate compensation for the family. However, because of Florida's current cap on damages, that verdict must be reduced down considerably unless the statute is held unconstitutional.

Another justification for caps on non-economic damages is that they will have a meaningful impact on reducing healthcare costs. In reality, the total amount of money that goes toward medical malpractice costs is less than 2% of total healthcare spending--a conclusion reached by the non-partisan Congressional Budget Office in 2009. A similar finding was made by the CBO during the Bush Administration. Thus, caps on damages will have no meaningful impact on reducing healthcare costs.

A final justification used in medical malpractice cases is that caps on damages prevent doctors from "fleeing" a state without caps on damages (because of large malpractice insurance premiums) to a state with caps on damages (with supposedly small malpractice insurance premiums). In reality, caps on damages have little if any impact on malpractice premiums. Medical malpractice premiums in states with non-economic damages are over 10% higher than states without caps on damages.

In Illinois, the legislature passed a cap on medical malpractice damages in 2005. Proponents argued it would reduce runaway jury verdicts and prevent doctors from fleeing the state. The validity of these arguments was proven false by an independent study Duke University. The study determined the "Illinois Tort System does not appear to be the cause of the undisputed fact that doctors' liability premiums showed a dramatic rise." On whether caps on damages would reduce malpractice premiums, the Duke study concluded a $500,000 cap "would have resulted in a minimal reduction in overall payouts to plaintiffs and would be unlikely to affect doctors' liability insurance premiums." Since the Duke study, the Illinois Supreme Court ruled caps on damages in malpractice cases unconstitutional. Whether Florida will arrive at the same conclusion remains to be seen.

Sources Used:

American Association for Justice, Center for Constitutional Litigation, November 2011.

Congressional Budget Office, Report to United States Senate, October 9, 2009.

Center for Justice & Democracy, Myth Buster: Specific State Examples that "caps Don't Work!," June 13, 2005.

Medical Liability Monitor, October 2005.

Foundation for Taxpayer and Consumer Rights, "Third Time a Charm: Another Malpractice Insurer Admits Caps Won't Lower Doctors' Premiums," February 15, 2005.

Duke University Study, Medical Malpractice and the Tort System in Illinois (Report to the Illinois State Bar Association), May 2005.

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