Court Bars Discounting of Malpractice Awards

The California Supreme Court ruled Monday that victims of medical malpractice are entitled to the full current value of awards for “pain and suffering” and that defendants are not entitled to discounts just because they choose to pay in installments over time.

At stake, essentially, is which side in a malpractice lawsuit gets to take advantage of the power of compound interest. In the case before the court, Los Angeles County, the defendant, proposed to meet a $240,000 damage award by investing just over $60,000 in an annuity that would make payments over time. By contrast, lawyers for the plaintiff, a boy injured at birth, argued that if the family were given the money in a lump sum, the family could invest it and earn nearly $900,000 over the boy’s lifetime.

The unanimous ruling was hailed by attorneys for malpractice plaintiffs, who argue that the state’s $250,000 cap on pain and suffering already tightly limits the amount patients are able to recover from doctors and hospitals. They say that allowing discounts on that amount could cripple patients’ rights to redress in certain malpractice cases.

The decision stemmed from a Compton family’s lawsuit against Los Angeles County involving a 1988 birth at Harbor-UCLA Hospital. The suit alleged that Jabes Salgado suffered serious damage to his right arm because county doctors disregarded the mother’s need for a caesarean section. The boy’s body, enlarged because of his mother’s diabetes, became lodged inside the birth canal, the family’s lawyers argued. By the time Jabes was pulled out, he had suffered nerve damage and was partly paralyzed. He can’t fully straighten his arm, lift it above his shoulder or throw a ball.

The jury, which like most juries in California was not informed of the $250,000 cap, awarded the boy $550,000 in future pain and suffering damages. But a Los Angeles County Superior Court judge in Compton decided he would allow the county to invest less than $62,000 to satisfy the judgment of $240,000--the statutory limit minus $10,000 that the family had won for past suffering.

Jabes’ lawyer, Manuel Hidalgo of Los Angeles, argued that the judge’s ruling was unfair.

The court did not grant Jabes the lump sum, but did rule that Jabes was entitled to whatever payments the current value of $240,000 would generate over his lifetime.

Kent Richland, one of the county’s private attorneys, said Monday that while he was disappointed with the court’s ruling on the value of the award, he was pleased that the court upheld the county’s right to pay the judgment over time.

Hidalgo described himself as being “as happy and elated as I could possibly be.”

“This cleared up an issue that hasn’t been cleared up for more than 20 years. It erases all confusion that [plaintiffs] are entitled to the entire [value of] the $250,000 cap. It’s always a big fight with some judges.”

Hidalgo said the decision is a boon to poor malpractice plaintiffs in general, because they often are forced to pay their attorneys on contingency out of pain and suffering awards. If the awards were reduced to paltry sums, he argued, many poor clients would not be able to find attorneys willing to take their cases.

The Supreme Court decision also may be politically important, because it extinguishes an issue that had inflamed the debate over the cap itself. Plaintiffs’ malpractice attorneys have long argued that the $250,000 limit, part of a 1975 law designed to keep malpractice premiums and jury awards reasonable, is far too low for patients harmed today.