The American judicial system differs from other
democracies in the Western world in that the losing side in litigation may
recover the reasonable costs of defending themselves. But, imagine a scenario
in which the attorney and plaintiff who lose a medical liability case would
have to pay the reasonable expenses of the prevailing doctor. Texas Governor
Rick Perry recently suggested using loser-pays modifications as part of
furthering tort reform in his state. Borrowing from the British legal System,
Perry proposed that attorneys filing cases on a contingency basis would have to
pick up the reasonable legal costs of the defense if they lose their suits. I
agree with the governor that this would certainly add disincentives for
bringing suits that are “groundless” and frivolous which are fueled
by current contingency incentives.
According to Perry’s website, his proposal
- creating an early dismissal option for
- ensuring victims of frivolous lawsuits do not bear the financial
burden of defending themselves;
- ensuring new laws cannot create causes of action unless expressly
established by the state legislature; and
- setting up expedited trials and limited discovery for lawsuits with
claims between $10,000 and $100,000.
The bar associations have argued that frivolous suits
are not a significant problem. They say that the most egregious cases are
thrown out or discontinued. They argue that because frivolous cases represent
only a small percentage of cases that actually go to trial they do not
contribute significantly to higher costs of litigation in this country. While
that statement may be partially correct, from a physician’s perspective
there is more at stake in lawsuits then monetary consequences. We know well
that the cost of litigation to us may involve ensuing outrageous premiums, the
loss of revenue and countless hours and expenses in preparing for a case and
giving depositions, and, what may be the greatest cost, the emotional toll a
malpractice case takes on a physician. All of these activities interfere with,
and take time away from, caring for patients and being with one’s family.
Even though only a small percentage of these cases actually end up going to
trial, frivolous cases involve time for preparation. These transaction costs of
resolving a case often exceed the value of the damages sought in the lawsuit.
A frequently used argument against losers-pay
initiatives is that it may deter lawyers and individuals from pursuing
legitimate cases. Many of our politicians, judges and as well as attorneys feel
the ability to bring suits needs to be preserved especially for the poor and
disadvantaged. Justice in the courts represents an opportunity for injured
parties to be compensated by their perceived wrongdoer. A loser-pays system
would limit a perceived fundamental right, they claim.
Losing a case does not necessarily mean it was a
frivolous lawsuit, a number of reasons combine to determine outcomes in a
courtroom. The court is a place where justice “may” occur. There are
many incentives in the system that push plaintiffs to consider a settlement,
such as the costs involved with defending a case or the uncertainty of the
outcome. In addition, many cases may take up to 5 years to work through the
judicial process. This delayed resolution can lead to higher costs as the
longer a case goes unresolved, the higher the cost generated by lawyers’
fees. When, or if, a case settles, often the cost of the plaintiff’s
lawyer’s contingency fee and expenses when added to the defense cost may
gobble up more than half the settlement.
Debate remains, lawyers fight
A Texas-style loser-pays rule will be defined further by
Perry and no doubt be debated in the state. Since it reformed its
medical malpractice laws, Texas has a $250,000 cap on
noneconomic damages for pain and suffering. Partly because of this reform,
high-risk physician specialties in Texas have seen their liability rates
decreased by more than 25% since 2003. Members of the bar admit that since the
medical liability reform, Texans have enjoyed increased access to health care
as the number of physicians practicing in high-risk specialties, like
orthopedics, and neurosurgery has increased significantly — especially in
areas of the state that were underserved by these specialties in the past.
Bar associations across the country are aligning their
voices, votes and funding behind movements to block the governor’s
proposed changes. Their hefty donations will be focused on Texas during the
discussions with much of this money coming from large legal firms. They will go
to no ends to limit and block any state that would try to place limits on
frivolous lawsuits. Texas has the opportunity to make a definitive statement on
this type of tort reform, but never underestimate the legal professions
lobbying and spending efforts to prevent any change this bold.
One proposed compromise would be for the losing
plaintiff to be absolved from paying the victorious defendant’s fees if he
or she agrees to a binding arbitration. If one litigant will not agree to
arbitration the plaintiff faces the risk of loser-pays.
Under health care reform — whatever form it ends up
taking — the frivolous and groundless suits will have to be limited. See
my commentary from the November 2009 issue of Orthopedics
Today on specialty courts as a better approach for medical litigation.
These courts can more efficiently compensate deserving individuals and not have
judgments subjected to a lay group of jurors with widely varying and sometimes
questionable abilities to understand complex medical issues. We would all
benefit from a system designed to resolve disputes and alter the costs of our
current litigious lawyer-driven system.
A note from the editors
For more on malpractice litigation reform, see the Round
- Douglas W. Jackson, MD, is chief medical editor of
Orthopedics Today. He can be reached at Orthopedics
Today, 6900 Grove Road, Thorofare, NJ 08086; e-mail: