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AAOS Now

Published 1/1/2015
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Brian S. Kern, JD

Unconventional Warfare: Fighting the New Tort Reform Battles

As health care changes, so does the perceived liability associated with its delivery. With these changes, plaintiff attorneys are adopting new strategies to obtain compensation for patients.

The fight for caps on noneconomic damages and other traditional tort reform measures should not eclipse the need to adapt to the times. The healthcare liability system has expanded from one that almost exclusively revolved around medical malpractice to one where plaintiffs seek to exploit a wider legal framework to hold healthcare providers accountable. Physicians must recognize this strategy and be prepared.

Medical malpractice
The frequency of medical malpractice lawsuits has declined by nearly 50 percent over the past decade. Although improvements in risk management and physician adoption of more defensive medicine strategies may contribute to the decline, economics may also play a role.

When the medical malpractice insurance industry was in turmoil, physicians across the country significantly reduced their collective limits of insurance for reasons of availability and affordability. At one time, physicians may have carried $12 million in coverage for a single claim; now the universal industry standard is $1 million per claim.

Meanwhile, the costs to bring professional liability suits increased. Tort reform measures made it more difficult to file cases by establishing additional expert and/or affidavit requirements. Other provisions reduced the time limits to file a claim or capped certain damages. In short, the return on investment in a medical malpractice lawsuit diminished.

Gaining leverage
Given the increased expense and lower availability of recovery (insurance), plaintiff attorneys have become both more selective and smarter. They have adopted new tactics such as vicarious liability and uncovered claims to gain leverage to help them ensure success in professional liability cases.

Vicarious liability—One of the simplest ways to bring more insurance into a case is to name more defendants. Recognizing this fact, plaintiff attorneys have become highly successful in convincing courts to adopt the vicarious liability framework that exists in virtually every industry outside of health care.

Vicarious liability is a theory that holds an employer responsible for its employees, thus allowing a plaintiff to sue a company based on the acts of its representatives. In response, a company—rather than each employee—will carry an insurance policy to protect itself from negligence suits.

The fundamental difference between other industries and health care is that physicians generally have a legal requirement to carry their own individual insurance. As a result, plaintiffs in a medical liability suit often can add a defendant corporation to a case against a physician by claiming vicarious liability.

The healthcare industry should combat this strategy by attempting to limit the use of the vicarious liability theory. For example, if a physician-defendant meets his or her statutory insurance requirement(s), a vicarious liability claim should not be available.

Uncovered claims—A negligence complaint against a physician typically needs only to allege that he or she deviated from accepted medical standards—and include the requisite documentation and/or attestations—to proceed. Complaints today increasingly go much further. New counts continue to surface, and many have the effect of expanding a case not only beyond negligence but also beyond the coverage found in most professional insurance policies.

Professional liability policies rarely cover situations where physicians violate regulations or criminal laws, although sublimits for regulatory billing errors and omissions and cyber breaches have been added to some policies. That has not stopped plaintiffs in negligence cases from alleging that physicians also violated laws, such as the nursing home bill of rights legislation, laws against discrimination, the Americans with Disabilities Act, and others.

In New Jersey, for example, a recent case alleged intentional infliction of emotional distress because the doctor reported a potential case of child abuse to the authorities. Elsewhere, plaintiff attorneys use the Affordable Care Act to establish “managed-care” type claims against providers.

These situations almost invariably lead to a letter from the insurance company to the physician-defendant notifying him or her that, if the uncovered claim is successful, the physician will have to pay for such losses out of pocket. This not only increases the physician’s anxiety, it may also encourage the physician to accept a settlement of the “covered” claim.

However, such allegations should have no place in a negligence action. In a recent New Jersey Appellate Court case (Jarrell v Kaul), the judge understood this when he ruled that a plaintiff could not blend a statutory (medical board regulation) violation into the negligence case, separating the requirements of the medical board from those of the statutes governing negligence.

Consistent with this ruling, physicians should attempt to limit recovery in a medical negligence case to medical negligence.

One of the fastest growing areas of healthcare liability relates to privacy breaches. Even though HIPAA laws do not provide a private cause of action for patients to sue providers, plaintiffs have attempted to use HIPAA against defendant-physicians and have filed breach of privacy claims.

In fact, the Connecticut state Supreme Court just held that HIPAA can be used to establish a standard of care in breach of privacy cases.

Cyber-hacking—Unfortunately, hackers have been successful in accessing personal information from banks, retailers, the government, and healthcare systems. The process for notifying victims of such breaches and the corresponding expenses associated with protecting them can be astronomical.

Given the clear challenges associated with protecting data and meeting government mandates to make health care digital, the healthcare community should lobby to limit its liability if it complies with certain minimum criteria. Accordingly, providers should not be subject to private causes of action when patient information is hacked.

Inadvertent Internet posts—Many physicians may use testimonials and “before-and-after” photos to promote their practices. Practices should always obtain consent and a written release form signed by the patient, permitting the use of such material, before posting or releasing it.

Recent media attention has focused on patients who do not consent to the use of such material, yet find their information inadvertently posted on websites. Instead of just requesting that a practice remove the images, patients may also look to the plaintiff bar in hopes of obtaining compensation. Claims for monetary damages may range from reputational damage to unjust enrichment.

A related battle in the cyber world involves search engine policies on removing posts that may be damaging to individuals. Although the “right to be forgotten” has not been successful in, for example, removing negative posts about a medical practice, it would almost certainly apply to a patient whose personal and sensitive information was wrongfully posted.

Physicians need to take the utmost care when using any form of electronic or social media. However, when honest “system” mistakes are made or criminal acts are perpetrated against a practice, the healthcare community should push to establish a reasonable system of recovery.

The rapid change in health care may appear to have put tort reform on the backburner and forced both the plaintiff and defense bar to live with current legislation. But the plaintiff bar has not been resting; it has been tweaking its strategy. The healthcare community should consider doing the same.

Brian S. Kern, JD, is the northeast regional director of health care for Arthur J. Gallagher & Co., an insurance, risk management, benefits, and human resources consulting firm. He can be reached at brian_kern@ajg.com

Editor’s note: Articles labeled Orthopaedic Risk Manager (ORM) are presented by the Medical Liability Committee under the direction of Robert R. Slater Jr, MD, ORM editor. Articles are provided for general information and are not legal advice; for legal advice, consult a qualified professional. Email your comments to feedback-orm@aaos.org or contact this issue’s contributors directly.