by:David B. Allen, Attorney
In this second part of a two-part article, I will discuss issues surrounding the application of the Guaranty statute in medical malpractice cases.
Conflict Between Guaranty Statute and Medical Malpractice Act
IIGA’s refusal to pay medical specials is not the only problem for Plaintiffs in medical malpractice cases when the healthcare defendant’s insurer becomes insolvent. In fact there are a couple problematic areas of the Guaranty statute where the interests of patient Plaintiffs and defendant healthcare providers are actually aligned.
The first of these areas relates to the limitation on liability under the Guaranty law, and the conditions precedent for accessing the Patients Compensation Fund for additional damages under the Medical Malpractice Act. As noted above, the IIGA’s maximum liability is the lesser of the insured’s policy limits or $100,000.00. Under the current medical malpractice scheme, the qualified healthcare provider’s underlying liability is $250,000.00. In order to access the Fund for additional damages, the defendant healthcare provider must settle for an amount with a present value exceeding $187,000.00 (in practice that translates to $187,001.00), so long as the settlement includes the purchase of an annuity which, over time, will bring the total value of the settlement to $250,000.00.
The obvious problem is the difference between IIGA’s maximum liability ($100,000.00), assuming they pay the amount of their liability (which means abandoning its absurd statutory construction arguments, as it should have done after receiving guidance in the Davis and Blickensderfer cases), and the amount it takes to access the Fund for additional damages ($187,001.00). In my opinion, this issue is problematic for Plaintiffs and Defendants.
In essence, if a Defendant wants to settle a claim and assuming IIGA pays the full $100,000.00 for which it is liable, the defendant healthcare provider must pay, out of pocket, at least $87,001.00. That complicates settlement for Plaintiffs, and, frankly, makes it more difficult for Defendants to settle when they are personally on the hook for that amount of money.
Considering the changes to the Medical Malpractice Act raising the defendant healthcare provider’s underlying liability limits to $250,000.00, the legislature needs to consider amending the Guaranty law to raise the amount for which IIGA is liable if a medical negligence liability insurer becomes insolvent. In my opinion, medical negligence Plaintiffs are impacted to a much greater extent than are Defendants in most other tort actions by the $100,000.00 limit of liability prescribed by the Guaranty law, and settlement of already very difficult cases is even further complicated by the present state of the Guaranty law.
The second problematic area that needs to be addressed is the types of damages the IIGA is required to pay when it “steps into the shoes” of the insolvent insurer. More accurately, it is the types of damages it is not required to pay. The Guaranty law does not require (or even allow) IIGA to pay any non-economic damages. In other words, the IIGA does not have to pay (in fact, is not allowed to pay) for emotional distress or pain and suffering damages. As Plaintiff’s lawyers very well understand, the non-economic damages are a very large component of damages in death cases. There are many death cases where there may be very little in the way of medical specials. That means Plaintiffs with cases that have a value equal to or greater than the cap on damages in the Medical Malpractice Act ($1,250,000.00) may only receive a nominal, if any, payment from IIGA, leaving defendant healthcare providers on the hook for all or nearly all of the underlying liability of $250,000.00. Again, I believe this complicates settlement.
This issue is even further complicated because IIGA is only required to pay for lost wages which have actually been incurred (seefootnote 1 outlining the logic IIGA uses regarding lost wages in death cases). That is to say, under the current statutory scheme, IIGA is not required to pay future lost wages. So, even if the decedent was a young man or woman with a significant work life expectancy, IIGA is not obligated to pay any future lost wages, but only the wage loss actually incurred. Once again, I believe this statutory scheme complicates settlement of many medical negligence cases from the perspective of the patient Plaintiffs and the defendant healthcare providers.
Solving The Problem
I believe these difficulties with the Insurance Guaranty law aligns the interests of injured patients and defendant healthcare providers, providing us with a very unique and rare opportunity to work together to accomplish a common goal. Working together to amend the Guaranty statute furthers our clients’ interests by trying to change the statute to provide for payment of well accepted, traditional tort damages; amendment of the statute also furthers the interests of Defendants in medical malpractice actions by providing them the benefit of the coverage they paid for, making settlement of these cases possible.
Perhaps the biggest benefit to Plaintiffs would be the public relations perception of injured patients and defendant doctors, and their counsel, working together to achieve a common goal. That is a rare opportunity to improve how the public perceives clients, and the lawyers that represent them. Working together with the medical malpractice defense bar against the IIGA’s absurd refusal to pay damages in these cases could only benefit both groups involved in medical malpractice litigation.
IIGA and Damages In Medical Negligence Actions (Part 2)
by:David B. Allen, Attorney