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Nearly three years after Tennessee passed a bill that required a “certificate of good faith” from medical experts that a malpractice suit had merit before it was filed, the state has tightened the reins further with its latest tort reform measure. Called the Tennessee Civil Justice Act of 2011, this reform caps non-economic damages and punitive awards. The act was passed in mid-June and will go into effect in October.

“This new law was apparently a priority for Governor Bill Haslam during the first legislative session of his administration,” said Jim Howell, Vice President – Claims for State Volunteer Mutual Insurance Company in Nashville. “It is designed to better enable Tennessee to compete for business development, by modifying our tort law in various ways that will lessen the risk of a Tennessee business being subjected to a runaway civil damage award.”

The bill was part of Haslam’s legislative jobs package and received bipartisan support in both houses of the General Assembly. Before the bill was passed, Tennessee was one of two states in the 12-state Southeast region without caps on punitive damages.

Haslam’s proposal for the caps had the backing of the Tennessee Medical Association. According to a press release for TMA, B.W. Ruffner, MD, president of the TMA, said, “If we are going to keep the doctors we have and attract new ones, we must pass these additional reforms to help reduce the threat of lawsuit and improve our overall business climate.”

In terms of a malpractice suit, the legislation places limits on non-economic damages, such as pain and suffering, to $750,000 and punitive awards to $500,000 or twice compensatory damages, whichever is greater. Exceptions cover severe injuries and the deaths of parents with minor children, in which the cap for damages is raised to $1 million. “Under the bill, punitive damages will be capped at $500,000 or twice the amount of compensatory damages, whichever is greater,” said Howell. “These limitations will not apply if a defendant intended to inflict injury, if a defendant altered, concealed or destroyed records to evade liability, or if a defendant caused injuries while under the influence of alcohol or drugs.”

“For health care practitioners and facilities, the centerpiece of the legislation is the limits that will be placed on non-economic and punitive damages,” Howell added. “In most healthcare liability actions, non-economic damages (such as pain and suffering and loss of consortium) will be limited to $750,000.

In less frequent cases involving “catastrophic” injuries, non-economic damages will be limited to $1,000,000. This includes spinal cord injuries resulting in paraplegia or quadriplegia, multiple amputations, third degree burns over 40 percent or more of the face or body, or wrongful death of a parent leaving a surviving minor child or children.”

Howell pointed out that the law’s immediate economic impact on physicians and healthcare facilities will be limited, for the following reasons:

· The law becomes effective October 1, 2011, and it will apply only to causes of action that accrue on or after that date. Claimants filing lawsuits based on events occurring before October 1 still will be entitled to potentially unlimited damages, and those lawsuits may not surface for several years. In Tennessee we have a one-year Statute of Limitations, which begins the day an incident occurs, or should be reasonably known to have occurred, and allegedly caused an injury. That one year is extended to three years (Statute of Repose) from the date of the actual incident if the date of discovery is past one year from the date of the incident. Therefore, a lawsuit based on an incident that occurs on September 29 of this year may not be filed until September 29, 2014.

· Economic damages, which include past and future lost wages and past and future medical costs, are not capped under this legislation and will remain the largest component in many healthcare liability actions.

· A challenge to the constitutionality of this new law is likely at some time in the future, and it may be years before we know whether our courts will let the law stand. Similar laws have been upheld in many states in recent years, but have been ruled unconstitutional in a few states.

· While helpful, these damage caps are high enough to limit their favorable impact on the costs of professional liability insurance. Most non-economic damage losses in healthcare liability actions in Tennessee will remain below the level of these caps.

· Insurance rates in Tennessee already have dropped sharply, reflecting a decline in lawsuit filings over the past few years. This new law may hopefully lead to further decline, but only time will tell how significant any further decline will be.

The law is particularly welcome in the medical profession. “For the doctors in the state, this has been a long time coming,” said Don Alexander, CEO of the Tennessee Medical Association in a press release. “They need stability in their practices, when the largest expense is their professional liability. Now they know how to at least gauge and know exactly what to set aside to pay. They can limit their coverage a little bit more.”

“This new law is a welcome development for all Tennessee businesses,” said Howell. “For physicians and other practitioners, it should bring the peace of mind that Tennessee law will no longer expose them to completely unlimited liability for their provision of heathcare. Rates will respond over time and will reflect any favorable impact from this new law.”

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