Advocates Arena: Tort Reform

The Firm, P.C. is a boutique Las Vegas law firm founded by Preston Rezaee, Esq. Preston Rezaee is also the founder and Editor in Chief of Vegas Legal Magazine.

Leonard Fink, Esq.

Affirming View

No two words in civil litigation are more divisive than “tort reform.” While you can always point to outliers, generally, plaintiff attorneys and consumer lobby groups advocate a hands-free approach to litigation emphasizing that if someone has caused another person harm, the offender should pay for it. And while the defense industry generally agrees that an injured party should be compensated, there need to be limits in place so that commerce and free enterprise are not choked out by runaway jury verdicts.

The risk is very real that without tort reform, unlimited damages awards can burden businesses with liabilities they cannot afford to pay and, consequently, there will not be any affordable insurance available for businesses or individuals to compensate injured parties. While this argument has always struck me as somewhat reptilian, in and of itself, it is compelling when we consider what can happen without adequate safeguards. To avoid this scenario, every potential plaintiff (which is all of us) must be willing to take a step back, take a society-wide view, and agree that reasonable limits must be put in place on what they are legally entitled to recover. As the price for insurance rises, so does the cost of doing business as a whole. In order to continue making a profit and thus preserve their existence (because without profits there is no business), businesses are forced to push those increased costs to their customers. In the end, therefore, it is the consumer that pays, and the consumer, after all, is all of us, even injured plaintiffs. So, for every multi-million dollar verdict that a jury awards, there are costs that we all must pay

Taking this scenario further, once a few multi-million dollar judgments begin to pile up, we can see the real possibility that the cost to insure an individual or business can become so outrageous (because even insurance companies have to make a profit), the individual or business can no longer afford it. When that happens, we lose necessary service providers…even good ones. This was exactly the situation that Nevada faced in 2002 concerning the rising cost of malpractice insurance for OBGYNs. Due in no small part to litigation and increasingly large damages awards, in 2002, many insurers began to charge unaffordable skyrocketing premiums (or declined to continue to write medical malpractice insurance altogether). As a result, many OBGYNs considered leaving the state, which would have created a public health crisis: If expectant mothers were suddenly unable to get proper treatment during their pregnancies, no doubt the number of birth complications would rise, placing further stress on health insurance and other tangential businesses in addition to the personal costs that would be incurred by the women, children, and families negatively impacted by a correctable problem. Ultimately, reason won the day and the Nevada Legislature passed an emergency bill to address these concerns, including instituting the 2004 caps on medical malpractice damages awards, largely averting the crisis. Nothing is ever perfect!

Even when insurance remains available and a business or individual can afford the increased premiums, sometimes the insurance product or coverage is not as great as it was before. In the construction defect industry, we saw many insurers leave Nevada in the mid-2000s, with others coming in and writing policies that offered much less coverage than what was previously available, leaving contractors unprotected. Consequently, a homeowner might not be able to recover any damages for real issues, especially when an insured business ceased operations and there are no remaining assets to look to for compensation other than that insurance policy

Although I certainly agree that an aggrieved party should be entitled to be compensated by the person that harmed them, that must not come without risk or the willingness to compromise. Without tort reform, the first plaintiffs will get all, and maybe more than they otherwise deserve, but at the expense of society at large (including future plaintiffs). While I do not claim to know the best answer to achieve an appropriate balance between a party’s ability to be compensated without overburdening commerce, I do know that tort reform is necessary to a healthy economy and that it will take the concerted efforts of a lot of people to look past their seemingly different agendas to come up with a compromise that compensates fairly but does not put the overall system in crisis.

Glenn Truitt, Esq.

Dissenting View

Tort Reform. The name alone represents a successful reframing-by-renaming effort on the part of the insurance lobby. What “tort reform” really means is medical malpractice reform. After all, medical malpractice only represents a small fraction of the overall tort legal market, and yet, when reform is called for, they simply assume the mantle. And the reforms contemplated amount to nothing more than capping payouts. In that way, it’s not unlike how San Francisco insists on being called “The City” in a metropolitan area where it is the third largest of the three major cities comprising it. Nevertheless, we can all agree that, unlike San Francisco, the MedMal system is one that is deeply in need of improvement.

In 2015, nearly four billion dollars were paid from Medical Malpractice actions, and Nevada represented the second largest growth in payouts, increasing 73% over the previous year. Medical malpractice payouts declined for a decade from 2003 to 2012, before again rising in 2013 and every year since. Whatever we thought might be working is not, and now, with awards on the rise, and the associated insurance premiums rising with them, the calls have resumed for “tort reform.

The stakes for physicians are, quite literally, life and death. As a result of the unique and important part that healthcare plays in human life, the economy that has evolved around medicine is both mature and sophisticated in dealing with the risks associated with it. Malpractice jurisprudence serves important public policy objectives: holding physicians accountable for a recognized standard of care and punishing failures to meet that standard which result in substantial and often permanent harm (including death). What’s more, the malpractice insurance market has developed to help physicians manage and quantify the risk associated with potential malpractice. By employing extraordinary amounts of data and actuarial analysis, malpractice carriers pool the economic risk of malpractice across populations of physicians, at a fraction of the cost to the offending practitioner that he/she would have otherwise been liable for.

These carriers constantly warn of the dangers of increasing awards and payouts, noting that they will be forced to pass along these costs on to clients in the form of increase premiums, dropped clients and perhaps ceasing operations altogether. Further, many physicians decry the increasing cost of malpractice insurance premiums, noting that the concurrent downward pressure on reimbursement makes private practice all but impossible.

Of course, insurance carriers are not public utilities. They are profit-seeking enterprises with stockholders, partners and other principals who seek to benefit handsomely if the insurance company can lower its expenditures (e.g. payouts) without a corresponding reduction in premiums.

However, the proposed “tort reform” (i.e. capping payouts) is a profoundly reductive and myopic solution – placing the burden on the parties least capable of bearing it: the actual victims of negligence and malpractice. There certainly is reform needed, after all, no one wants private practitioners to be priced out of the market before they’re even in it. However, addressing compensation is a derivative concern; the real reform needed is in the practice of medicine, itself.

Initial American medical licensure is widely-considered to be the most challenging in the world. The course of study, performance and testing required to become a medical doctor in the U.S. is rigorous, demanding and prohibitively lengthy and expensive. Unfortunately, continuing licensure for domestic medical doctors is woefully asymmetrical to its academic counterpart. Dazed attendance at CME (Continuing Medical Education), administrative form filling and nominal annual fee payments are nearly all that’s required to maintain a medical license. Little, if any, actual testing is required. Nevertheless, we expect a physician’s training to endure so substantially as to never require refreshment until retirement.

Further, as physicians mature in their careers, most rely less and less on team-based medicine, and are increasingly expected to have superior judgment based almost wholly on experience. This approach ignores the value of both continued instruction and, more importantly, innovation, which becomes all but inaccessible to aging practitioners. One study showed that by the age of 65 years, 75% of physicians in low-risk specialties and 99% of those in high-risk specialties were projected to face a malpractice claim.

So, if we all agree that the astronomical amounts of money spent on medical malpractice payouts deserve reform, we should all be able to similarly agree that there are at least two ways to address this problem: reducing the amount paid per claim (the “traditional tort reform” solution) or reducing the number of claims. Addressing the root cause, rather than a secondary outcome, is economically and ethically preferable.

The good news about this approach is not having to tell the victims of medical malpractice or their families, to make due with less money, despite the horrors inflicted upon them, and rather, focuses on avoiding those circumstances in greater numbers.

The even better news is that many of these reform efforts are already underway with leadership from the insurance industry

Public and private payors are increasingly turning to outcome-based reimbursement models to provide economic incentives to practitioners to undertake the best possible treatments for their patients and not simply the most valuable ones. As government payors seek innovative tools to manage their costs and ensure their survival as a matter of vital public importance, they have aggressively pursued data analysis, information technology and coordination of care to make this model not only possible but practical. It is estimated that implementation of these structures could reach fifty percent in the next two to three years, and result in an overall cost savings of more than ten percent.

Tort reform? That’s a special interest trope. We’ve got plenty of reform taking place in healthcare already, and it will undoubtedly result, in the near term, in a lower total Medical Malpractice payouts because it will result in fewer actionable outcomes. The only difference is we won’t be handing those gains over solely to insurance carriers.

Glenn H. Truitt, Esq. is a founding and managing partner of iDeal Business Partners in Las Vegas, NV, and has been practicing law for over 11 years. Licensed in Nevada and California, Glenn represents healthcare clients in a wide variety of transactional, business and compliance matters. He is a frequent contributor to local scholarship regarding healthcare law and policy and consults with industry leaders nationwide. Glenn his bachelor’s degree in Mathematics from the United States Naval Academy in Annapolis, MD, and following submarine service aboard the USS Tennessee (B), received his Juris Doctorate from Stanford Law School in Palo Alto, CA.

Leonard T. Fink, is a founding partner of Springel & Fink, LLC in Las Vegas, Nev., and has been practicing law for more than 20 years. Licensed in Nevada, California, Arizona, Washington, and Idaho, Fink represents a variety of different clients in all types of civil and business-related litigation matters. He is a frequent speaker at MCLE events and, at times, a guest lecturer at the University of Nevada, Las Vegas. Fink received his Juris Doctor degree from the University Of San Diego School Of Law and received his bachelor’s degree from Arizona State University.

The Firm, P.C. is a boutique Las Vegas law firm founded by Preston Rezaee, Esq. Preston Rezaee is also the founder and Editor in Chief of Vegas Legal Magazine.


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