Tennessee General Assembly Looking at More Tort Reform to Lower Medical Malpractice Insurance Premiums

Last year was a banner year for the passage of state-level tort reforms. In fact, the American Tort Reform Society pronounced 2011 to be the “most productive year for the enactment of meaningful state civil justice reforms in recent memory.” All together, more than 30 new tort reform measures were enacted in states across the country, including big legislative victories in Alabama, Arizona, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Wisconsin, among others. The intent behind these laws was to reduce the cost of litigation within the state, which would correspond to a lowering of the cost of medical malpractice insurance premiums and business liability insurance products. In Tennessee, the general assembly barely took a break to congratulate themselves on their reform successes before plotting an even more aggressive tort reform agenda in 2012, which includes “loser pays” legislation similar to the one Texas enacted last year.

Tort reform generally refers to legislation that changes a state’s existing civil justice system with the intent of reducing the cost of litigation and/or damage compensation. Tort reforms are advocated by the healthcare industry because they improve the actuarial predictability of healthcare-related malpractice lawsuits, allowing medical malpractice insurance companies to lower coverage premiums because they no longer have to carry surplus levels adequate to cover catastrophic, multi-million-dollar jury verdicts. The “loser pays” family of tort reforms is based on the Western European legal conscript where a litigant is compelled to pay the defendant’s legal costs if they turn down a settlement offer and do less well at trial.

In 2011, Tennessee lawmakers passed the Tennessee Civil Justice Act, a major tort reform package and Gov. Bill Haslam’s largest legislative initiative to improve the state’s healthcare and business climates. Key healthcare-related provisions of the Tennessee Civil Justice Act include the definition of two components of compensatory damages: economic and non-economic; placing a cap on non-economic damages at $750,000 per injured plaintiff; and placing a cap on punitive damages, which must be proved by clear and convincing evidence, at two times the compensatory damage or $500,000, whichever is greater.

Tennessee House Speaker Pro Tem Judd Matheny was recently quoted as saying the general assembly has further tort reform plans for 2012, and pointed to the “loser pays” legislation passed in Texas last year as one measure likely to be debated.

In May of 2011, Texas Gov. Rick Perry signed into law House Bill 274 (HB 274), a series of reforms intended to expedite the resolution of lawsuits and discourage plaintiffs from filing non-meritorious actions. The legislation adopted rules that let a defendant move for dismissal of a case before discovery is underway. The decision on whether to file a pre-discovery motion to dismiss will be affected by provisions allowing the prevailing party in such a motion to recover costs and reasonable attorney fees from the losing party. Thus, if a plaintiff files a lawsuit without basis in law or fact, and the defendant obtains dismissal, the plaintiff must pay the defendant’s costs and reasonable attorney fees. While this provision is designed to deter frivolous lawsuits, it also aims at deterring frivolous motions to dismiss; a defendant who loses the motion to dismiss will not only have the case proceed, but that defendant will also be liable for paying the plaintiff’s accrued costs and attorney fees.

While not a strict European-style “loser pays” system, the Texas legislation should deter frivolous medical malpractice lawsuits and ease the burden on a crowded court system. Speaker Pro Tem Matheny said that the “loser pays” legislation being discussed in the Tennessee Assembly would specifically address lawsuits that would be perceived as malicious—situations where there are possibly second or third appeals in cases.