Coming three months after the passage in March of Act 13’s slate of significant tort reform measures, the "Fair Share Act," as it is dubbed by supporters, will shield parties with less than 60 percent liability in a medical malpractice or personal injury lawsuit from exposure to the entire amount of a jury award. The law will certainly protect hospitals that in the past may have been named as minority defendants in malpractice cases in order to access their "deep pockets" of liability insurance when other defendants’ coverage ran out.

The law’s practical impact may not be all positive for physician defendants, however, and may conceivably expose their personal assets to risk when a jury award exceeds their malpractice insurance coverage and plaintiff attorneys have nowhere else to turn for recovery.

What It Does

Legislation seeking to reform Pa.’s joint and several liability doctrine has been around for decades, but has never been signed into law until now. Under the legal concept of joint and several liability, each defendant in a lawsuit—even those with minimal or partial legal responsibility—was held financially liable for the full amount of a damage award if other defendants were bankrupt, failed to carry insurance or had their insurance coverage limits tapped by the award.

In a case with more than one defendant under the new law, defendants who are found by a judge or jury to be less than 60 percent liable would only pay their attributed share of the overall liability, while those over 60 percent would be exposed to the full amount, as before. The legislation retains four additional circumstances where a defendant could be liable for full payment of an award: intentional misrepresentation, intentional tort, violations of the Hazardous Sites Cleanup Act, and cases where alcoholic beverages are served to a visibly intoxicated patron.

How It Passed

The law applies to a wide range of tort cases, including product liability, and is not limited to medical malpractice lawsuits. In fact, it was the Pennsylvania Chamber of Business and Industry (PCBI), the lobbying arm of the state’s business community, that made joint and several liability reform its number one priority for this legislative session, according to Carol A. Steinour, Esq., a registered lobbyist for PCBI and defense attorney with the Harrisburg law firm of McNees Wallace & Nurick LLC.

Steinour was part of the team instructed by the Chamber to draft language for the new measure, which she says came directly from SB 5, a list of tort reforms from a few years ago. The Pennsylvania Roundtable and the Pennsylvania Manufacturers Association joined PCBI to lobby for passage of the measure on behalf of the business community, Steinour says.

In a sluggish economy with poor prospects for tax breaks, the state’s business community saw joint and several liability reform as an essential tool to attract and keep businesses in Pa., and to keep businesses from going out of business, says Steinour. She believes that the new law will end "extortion" against businesses, and that cases will be settled for much more reasonable amounts.

The Hospital & Healthsystem Association of Pennsylvania (HAP) teamed up with the business community in lobbying for the measure, notes Jim Redmond, HAP’s senior vice president of legislative services. He notes that the measure was part of the initial tort reform package that became Act 13, but was struck down in the Senate.

In order to prevent it from getting bogged down in committee, the joint and several liability language had been attached to SB 1089, an unrelated bill dealing with DNA data and testing, after it had already cleared the Senate, says J. Scot Chadwick, a former state representative and now director of government affairs for the Pennsylvania Medical Society (PMS). Chadwick says that the PMS board unanimously supported the bill, but notes that HAP was more aggressively involved than PMS in lobbying for it.

The bill moved through the Pa. House with the support of House Majority Leader John Perzel, while Senate Majority Whip Jeffrey Piccola and Sen. Harold Mowery helped get it through the Senate, with support from key Democrats in both chambers, says Redmond. Gov. Schweiker, a strong supporter of tort reform, also made a key difference in the effort to get the measure passed, Redmond adds.

How It Helps

The measure will have beneficial impacts on health care providers, says Redmond. In a case with multiple defendants, it clearly reduces the amount owed by the "deep pocket" defendant who is under 60 percent liable and reduces plaintiff attorneys’ leverage in negotiating settlements with them.

For example, in the past if a hospital and physician were jointly sued for $5 million and the hospital believed it was only 10 percent liable, it may have settled such a case for $2 million because it was still legally exposed to the whole amount—and most hospitals in Pa. carry $5 million to $25 million in excess liability coverage, says Redmond. Under the new law, that hospital might not agree to settle at all, or would not agree to any settlement beyond $0.5 million, he notes.

The new law will similarly benefit "deep pocket" physicians who operate businesses, such as orthopods who have an extensive network of rehabilitation and sports medicine services, Redmond says.

But hospitals have traditionally been the deep pockets in medical malpractice cases, and it seems clear that hospitals will often benefit from the new law, says Chadwick. "We support it, but the level of enthusiasm from physicians was not equivalent to that from the hospitals," he adds.

Physicians may see some benefits. Any defendant who is assigned a minor fraction of a case’s total liability amount will now only have to pay their share, which could be lower than their malpractice insurance coverage limit, notes Chadwick.

The new obstacles to award recovery may even reduce the number of cases filed overall, given the high up-front cost of filing and that many are taken on a contingency fee basis, Redmond believes.

How It May Hurt

Plaintiff attorneys have traditionally not gone after physicians’ personal assets in the past when recovery could be sought from the deeper pocket defendants in a malpractice case. "Now, to protect their clients for the full amount, they’re going to have to," says Pennsylvania Trial Lawyers Association Legislative Counsel Mark Phenicie. "I think it’s inevitable that some physicians’ assets are going to be seized. Plaintiff attorneys would otherwise be guilty of malfeasance in working for their client’s recovery," he adds.

The Pennsylvania Orthopaedic Society has the same reservation. Although it did not strenuously lobby against it, the POS said it opposed the joint and several liability legislation because it would not reduce malpractice insurance premiums for specialty surgeons, and it would expose their personal assets to increased risk in a lawsuit. The POS informed the state House and Senate of its position through committee testimony and correspondence to members of the General Assembly.

In the past, if a hospital and physician were jointly sued for $10 million, with the physician assigned 75 percent of the blame and the hospital 25 percent, the physician would pay $1.2 million (their prior malpractice insurance coverage limit) and the hospital would pay the remaining $8.8 million. Now, the hospital only has to pay $2.5 million.

Using this example, "The physician now has $1 million in coverage, $7.5 million in exposure, and the plaintiff has nowhere else to go to get it. The potential exists that the plaintiff might get more aggressive than in the past in going after the physician’s personal assets," says Chadwick. That risk has always existed, he notes, but the new law makes it even more important that physicians ensure that their personal assets are protected, he adds.

Chadwick maintains that physicians must look at the new legislation in the context of past and future tort reform efforts: "The Medical Society supported the hospitals and the business community for this legislation. They have supported us in the things that we wanted. If we all fragment and just go for the things that are good for us, none of us will get any of this done. The trial bar is still a very formidable opponent."

There may now be an enhanced effort by plaintiff attorneys to name a greater number of defendants in malpractice and personal injury cases, or target each party more heavily than before the new law, suggests Stephen Sheller, Esq., a plaintiff’s attorney with Sheller, Ludwig & Badey in Philadelphia. The overall amount and cost of litigation will increase, he believes, as defendants will fight more vigorously among themselves to stay under the law’s 60 percent responsibility threshold, and try to shift as much responsibility to other parties.

That dynamic may even drive up jury award amounts, as physicians and hospitals no longer present a united front as defendants and are seen fighting with each other in front of a jury, says Andrew L. Braunfeld, Esq., of the malpractice defense firm of Masterson, Braunfeld & Millner LLP in Norristown. Braunfeld does not regard the new measure as true tort reform, since nothing in it is going to make a verdict size lower or change the basis on which it is rendered; it only deals with whether and how a plaintiff can collect it.

The law may drive a wedge between the interests of hospital and physician co-defendants. Hospitals have traditionally been overgenerous in trying to get cases with multiple defendants resolved because they have the insurance and were exposed to the full verdict amount, says Redmond. "That may continue into the future, but resources are getting tighter and tighter and it may get a little tougher for them to be so generous, especially since more hospitals are pursuing self-insurance or risk-retention groups. It’s no longer somebody else’s money," Redmond notes.

Some of the dangers may be mitigated by existing protections. A new frivolous lawsuit rule in Pa. protects against the impulse by plaintiffs to string together more defendants to make up the difference in award collection, says Chadwick. The Pa. Supreme Court issued a rule in late spring allowing any party in a suit who feels that it is frivolous to request a court hearing seeking fines and sanctions against the plaintiff, while also authorizing a judge to levy sanctions without such a hearing.

Pa.’s delay damages rule, Chadwick adds, provides an incentive for parties to avoid dragging a case out by levying a financial penalty on an award, which increases the longer it takes for a case to go to trial beyond a certain length of time after the suit is filed.

"Assuming that physicians protect their personal assets, this law will ultimately result in lower insurance costs as verdicts, settlements and payouts will be lower," Chadwick maintains.

The law’s likely impact on malpractice insurance costs is difficult to predict. Chadwick says that the law is an important relief for excess liability carriers like the CAT Fund, but less important to private carriers, who are only liable for their policy limits. Sheller believes that private insurers benefit from the law because it gives them the ability to distribute their allocated costs more predictably, reduce their payouts on certain classes of professionals and eliminate coverage altogether for classes that go up in cost.

PMSLIC, a major medical liability carrier in Pa. with a sizable hospital book, says it is still too soon to tell what, if any, impact the new law will have on its rate-making process.

A potential weakness of the law for physicians is the provision that would reinstate joint and several liability in the event of intentional tort, which may now be targeted more heavily by plaintiff attorneys, according to Braunfeld. A physician’s violation of informed consent could trigger the intentional tort exception of the law, he says.

The law is also vulnerable to challenge. According to Phenicie, some consumer groups have expressed interest in being plaintiffs to challenge the law, possibly as an unconstitutional cap on damages. Opponents have also threatened to attack the process the Legislature used to pass the law—tacking it onto an unrelated, freestanding bill, says Redmond.

What’s Next

Remaining items on the tort reform agenda of the PMS and HAP include pursuing a cap on pain and suffering awards, starting early next legislative session, says Chadwick, explaining how it can be done: the General Assembly has to pass it twice—once in each of two consecutive sessions—and early enough in the session that there is time to publish it in at least two newspapers in every county of the state before a state referendum during a general election. Chadwick believes that it is unlikely for the current Pa. Supreme Court to secure the required unanimous opposition vote to strike down the measure, as it struck down provisions of tort reform legislation in 1997 with Act 135, and during the 1980s with Act 111.

The PMS and HAP are also supporting award caps at the federal level. HR 4600, a medical malpractice reform bill introduced in the U.S. House by U.S. Rep. Jim Greenwood (R-Erwinna) and co-sponsored by U.S. Rep. John Murtha (D-Johnstown), includes a provision to place a limit on pain and suffering awards at the greater of two times the amount of economic damages or $250,000.

A Venue Commission, created by Act 13 this year, was to submit by Sept 1 a report to both the Pa. Supreme Court and the Pa. General Assembly on how to solve the problem of plaintiff attorneys filing malpractice cases in counties other than where an alleged malpractice incident occurred—essentially shifting trials to Philadelphia, where jury verdicts have historically been much higher than elsewhere in Pa. There is no formal timetable after Sept. 1 for when action will be taken, notes Chadwick.