Damage Limit Upheld in Medical Malpractice : State Supreme Court Approves $250,000 Ceiling by Rejecting Final Challenge to 1976 Reform Act

The California Supreme Court upheld Thursday the last remaining sections challenged as unconstitutional in the Medical Injury Compensation Reform Act of 1976, approving 4 to 3 a $250,000 limit on damages for pain and suffering and allowing deduction of a victim’s insurance payments from damages awarded in court.

Passed when skyrocketing medical malpractice insurance premiums threatened to put many doctors out of practice, the controversial law was designed to limit the high cost of malpractice suits for medical practitioners and their insurers.

Ruling in three related cases in 1984 and earlier this year, the high court had upheld sections of the law that provide for periodic rather than lump-sum payments of awards over $50,000, limit what third parties can collect and limit attorneys’ fees according to a sliding scale of 40% for the first $50,000 down to 10% of any damage award over $200,000.

Chief Justice Dissents

In a stinging 23-page dissent to the 55-page majority opinion, Chief Justice Rose Elizabeth Bird termed the law “fundamentally unjust” and chided her colleagues for “singling out the most severely injured victims of medical negligence to pay for special relief to health care providers and their insurers.”

Voting to uphold the law were Justices Otto M. Kaus, who wrote the majority opinion, Allen E. Broussard, Joseph Grodin and Malcolm Lucas. Second District Court of Appeal Justice Arleigh Woods, sitting by special assignment, joined in Bird’s dissent, and Justice Stanley Mosk wrote a separate dissenting opinion.

The ruling was made in a medical malpractice case (Fein vs. Permanente Medical Group) filed by Lawrence Fein, an attorney with the legislative counsel’s office in Sacramento, who suffered a heart attack in February, 1976, when he was 34. He sued the medical group because examinations by a nurse-practitioner and a doctor on his first two trips to the affiliated Kaiser Health Foundation hospital misdiagnosed his problem as a muscle spasm. When his pains persisted, he made a third visit and saw another doctor who took an electrocardiogram and diagnosed the heart attack.

Fein, who returned to part-time duties eight months later and to full-time work 19 months after the heart attack, was awarded $24,733 for past lost wages, $63,000 for future medical expenses, $700,000 for loss of future wages because his remaining life span was cut to an estimated 17 years, and $500,000 for “non-economic damages,” or pain, suffering and inconvenience.

Sacramento Superior Court Judge Michael J. Virga, following the Medical Injury Compensation Reform Act, cut the $500,000 award to the maximum allowed by the law--$250,000--and deducted $19,303 already received by Fein in disability payments from the award for past lost wages. He also ruled that Permanente need pay up to $63,000 for future medical payments only when Fein’s medical insurance failed to pay his bills.

Lost Wages

In upholding Virga’s judgment, the court majority denied that the $250,000 ceiling violates victims’ constitutional right to equal protection of the law by capping their awards while other negligence litigants can recover more. The opinion stressed that the law is fair because it permits malpractice victims to recover unlimited damages for specific economic items, such as lost wages.

Limits Justified

The Legislature was justified, the court said, in limiting the non-economic awards and subtracting insurance payments from awards in order to curb the financial burdens of malpractice litigation on health providers and, indirectly, on consumers.

“Our recent decisions do not reflect our support for the challenged provisions of (the law) as a matter of policy, but simply our conclusion that under established constitutional principles the Legislature had the authority to adopt such measures,” Kaus wrote.

As adamantly opposed to the deduction of insurance payments from awards as to the limit on damages for pain and suffering, Bird countered: “(The section) permits negligent health care providers and their insurers to reap the benefits of their victims’ foresight in obtaining insurance.”

Another Opinion

In another opinion issued Thursday (Huntington Park Redevelopment Agency vs. Michael A. Martin), the court on a 6-1 vote sanctioned the 4-year-old practice of redevelopment agencies to impose a sales and use tax of up to 1% on personal property to pay off revenue bonds by crediting the tax against a city’s sales and use taxes. Because the tax is, in effect, only transferred from the city to the agency, no increase in taxes is involved.

Martin, the agency’s secretary, had refused to publish (or make official) the group’s Aug. 24, 1982, ordinance imposing a 1% tax, which was approved by the city of Huntington Park. He claimed that the tax violated provisions of Proposition 13, the 1978 tax limitation initiative, prohibiting “special districts” to levy taxes without approval of two-thirds of the voters, and provisions of the 1979 Jarvis-Gann initiative limiting local government appropriations to the same amount as the previous year.

Aren’t Special Districts

The high court, however, decided that redevelopment agencies are not special districts and do not, on their own, levy or collect taxes, and therefore do not need two-thirds approval by voters. The justices also said that because taxes are not increased under the system, there is no violation of the Jarvis-Gann initiative, which was designed to limit government spending and protect “taxpayers from excessive taxation.”

In a partial dissent, Justice Lucas agreed that the practice does not violate Proposition 13, but said he considered it an unconstitutional exceeding of spending limits imposed by Jarvis-Gann.

The decision, which permits development of a square-block area in Huntington Park, sanctions an estimated $500 million in tax allocation bonds for redevelopment agencies throughout the state.

Other Action

In other decisions, the court on Thursday:

--Ordered full trial of a civil negligence suit against Huntington Memorial Hospital in Pasadena by one of its anesthesiologists, Dr. Mervyn Isaacs, who was shot and seriously injured in the hospital parking lot March 26, 1978. (Isaacs vs. Huntington Memorial)

Los Angeles Superior Court Judge Howard J. Thelin had dismissed the case in mid-trial, saying that Isaacs’ experts failed to present sufficient evidence about prior assaults and inadequate security measures to hold the hospital liable.

But Bird countered in the unanimous opinion that, “the totality of circumstances in this case strongly suggests that the foreseeability of an assault in the research parking lot should have been submitted to the jury.” In ordering retrial of the case against the hospital, the court upheld the pretrial dismissal of the hospital’s insurer, Truck Insurance Exchange, as a separate defendant. Isaacs sued the insurer on grounds that it participated in the hospital’s decision to disarm its security guards, but the court said nobody can be held liable for injury on property it does not own.

Conviction Overturned

--Overturned the conviction of Luther Clayton Brock for second-degree murder for allegedly administering a fatal dose of amphetamines to Iris Southall, a patient at San Francisco General Hospital, in 1980. The court decided unanimously in People vs. Brock that San Francisco Superior Court Judge William E. Mullins wrongly permitted statements against Brock by a witness, Mary Williams, a cancer patient who died before the trial. Although Williams had testified at Brock’s preliminary hearing, the high court said she was too ill to permit meaningful cross-examination by Brock’s attorneys. Brock will be retried.