Nevada’s Tortured Tort Reform

Nancy B. Alston

In an effort to thwart a perceived “crisis” and based on fear concocted by media campaigns designed to shift the focus from the real problem, the citizens of the State of Nevada passed a ballot initiative capping noneconomic damages in medical malpractice actions. See NRS 41A.035. This cap is unconstitutional under both the provisions of the United States and Nevada Constitutions. The courts should declare the noneconomic damage cap unconstitutional.

A. The Problem

NRS 41A.035 and related provisions, collectively sometimes referred to as “tort reform” were enacted to address the perceived problem of skyrocketing medical malpractice insurance rates coupled with the belief that such rates were either driving physician’s out of practice, limiting their practices, or completely leaving the State of Nevada. The urgency of the need for action and the perception presented was that in some way this problem was immediate and causally connected to recent unreasonably high jury verdicts creating losses for insurers which justified unreasonable rate increases for medical malpractice insurance.

The “problem” is not a creature of the twenty first century that has recently morphed from a single cell into a full blown tumor. Rather, the “problem” has existed for decades. For instance, in September 1976, the Legislative Commission of the Legislative Counsel Bureau, State of Nevada published Bulletin No. 71-1, entitled “The Problem of Medical Malpractice Insurance.” This bulletin grew out of Senate Concurrent Resolution No. 21 (1975), wherein the study was commissioned. The Resolution states,

WHEREAS, There is a nationwide problem of doctors and health care providers obtaining malpractice insurance with many of the insurance carriers getting out of malpractice coverage and others increasing premiums by several hundred percent; and…

WHEREAS, The malpractice problem in Nevada is presently in a state of transition with the exact dimensions of a number of problems unclear;…The bulletin found that the “so-called malpractice crisis” began in the early 1970’s, with the twin problem of high costs of premiums and decreasing availability of insurance.

B. The Historical Causes

It is important to have a general understanding of the “causes” of the alleged crisis in order to evaluate whether the proposed “solution” is rationally related to the interest sought to be protected. In the 1976 Bulletin, the Commission identified a number of potential causes. First, the Commission found that there was no one single “cause.” Among the causes, the Commission included: (a) malpractice itself; (b) the media; (c) national litigiousness; (d) contingency fees; (e) the imposition of no fault insurance; (f) Stock market losses; (g) Inadequate underwriting; and (h) jury verdicts.

While these are not all of the causes, they represent the most frequently discussed. However, the Commission did conclude that the leading cause of the medical malpractice crisis was medical malpractice itself. A decade later, the Legislative Commission revisited the crisis, publishing a “Study of Insurance Against Medical Malpractice,” Bulletin No. 87-18, Legislative Commission of the Legislative Counsel Bureau, State of Nevada, August 1986. (Addendum IV). This bulletin recognized that between the years 1976 and 1983, nationally medical malpractice insurance rates rose only 51%. However, once again the cycle flowed resulting in dramatic increases in 1984 and 1985. Id. This again piqued legislative interest. This time, in addition to the causes previously discussed, the Commission stated, “the insurance industry is at least partially responsible.”

C. The Historical Solutions

As far back as the 1976 Commission study, solutions to the alleged crisis were being proposed. One of the proposed solutions included “tort reform.” These reforms included limitation on jury verdicts. Id. However, as early as this report, the evidence suggested that statistical probability of Plaintiff success was so low that any such limitation would have almost no real impact on insurance rates and availability. The 1976 bulletin states, “only 8 percent of all claims ever go to trial. Only 6 of that 8 percent go all the way to verdict.” Of those, only 17 percent were in favor of Plaintiffs.”

D. The Twenty First Century Problem

With an historical perspective and understanding, we are brought to the instant crisis which lead to the ultimate initiative enactment of NRS §41A.035, limiting noneconomic damages to $350,00.00. The clear purposes behind this tort reform movement included: (a) reducing medical malpractice insurance rates; (b) stabilizing the insurance market and availability of that insurance; and (c) insuring the availability of medical care for the citizens of Nevada.

NRS §41A.035 was introduced in 2003 as Senate Bill 97, which tracked the initiative petition and potential ballot submission to the voters. The legislative history is replete with references to the fact that the Senate Bill 97 and the ballot initiative language were identical. Thus, while the legislature itself did not enact NRS §41A.035, the discussions before the legislature are informative and relevant. On March 23, 2003, Dr. Manthei, an individual whose name was synonymous with the initiative petition, testified before the Senate Judiciary Commission stating, “All we are saying is presently the number of cases and the amount of the awards is making health care unaffordable.”

On March 5, 2003, Ms. Alice Molasky-Arman, Commissioner for the Division of Insurance for the State of Nevada addressed the Senate Judiciary Committee. She testified that between 1999 and 2001, 296 of 552 claims filed closed with no indemnity payment. She further testified that in July 2002, there was a huge spike in the number of claims filed. Id. Ms. Molasky-Arman stated that the 2002 tort reforms did not cause insurance rates to decrease. Both Lawrence Matheis and Assemblywoman Buckley stated that the reforms would not cause insurance premiums to decline. At best, there was some hope that the reforms would result in stabilization. Id.

In discussing the causes of insurance premium increases in Nevada, Ms. Molasky-Arman including in those causes: (a) reinsurance; (b) the lack of competition among insurers; and (c) stock market losses. She did not include in her statement relating to causes jury verdicts and their impact on rates.

With the foregoing background of the alleged “crisis”, the citizens of the State of Nevada were subjected to a media blitz from both proponents and opponents of the ballot initiative. With the fear of unavailability of medical care driving their votes, the citizenry passed the legislation which embodied NRS §41A.035. It is now a confusing contradictory mess to say the least. We will delve into this problem in finer detail in our next EZINE article, or you can write or email us and we will provide you with a list of possible solutions which we are currently taking on behalf of our medical malpractice clients.

Copyright 2008, All rights reserved.

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