The Tennessee General Assembly has passed a tort reform bill placing caps on noneconomic damages and punitive damages in tort cases.

The salient features include a cap of $750,000 per injured plaintiff on noneconomic damages such as damages for pain and suffering, loss of enjoyment of life, and loss of consortium. However, the cap does not apply to economic damages such as loss of past and future earnings, past and future medical expenses, or loss of domestic services.   

There are two exceptions to the cap on noneconomic damages. The first exception raises the cap to $1 million for loss of a limb, death of a parent of a minor, severe burns, and spinal cord injuries leading to paraplegia or quadriplegia.

The second exception removes the cap (1) when intent to inflict serious physical injury is shown, and the plaintiff was, in fact, deliberately injured; (2) when a defendant materially alters or destroys records for the purpose of avoiding liability; and (3) when a defendant was under the influence of an intoxicant, stimulant, alcohol or other drug. For punitive damages, the cap is equal to the greater of twice the compensatory damages or $500,000.¹ The cap on punitive damages is subject to the “second exception” stated above. For manufacturers of drugs and medical devices, a number of special provisions apply to the cap on punitive damages.  

These new laws apply to causes of action accruing after Oct. 1, 2011. The following examples illustrate the effect of caps.

Example 1

Ms. X is 40 years old. After marrying, she decided not to pursue a career and to raise a family. Ms. X was prescribed a medication at the wrong dosage. She developed a severe side effect, which caused significant pain, skin disfigurement, and death one week later. She has one eight-year-old son, who has been diagnosed with post-traumatic stress disorder and is unable to function since her death. The spouse has sued the physician who prescribed the medication.

Damages claimed are:

• Economic Losses: (1) medical bills of $15,000, (2) loss of earning capacity of $485,000 if she had returned to work through her work life expectancy, and (3) value of substitute domestic services of $325,000.
• Noneconomic Losses: Loss of the patient, husband, and son for pain and suffering, loss of consortium, loss of enjoyment of life, disfigurement, negligent infliction of emotional distress, etc.  

There was no damage limit under prior law. Loss of consortium damages in the range of $1 million for each child and the spouse have been awarded in these types of cases. Thus, a verdict up to the range of $3 million was a reasonable possibility.  

Under the new legislation, the maximum damage award would be $1,825,000. The noneconomic damages for the husband and minor child are capped at a total of $1 million.² The damages for economic losses (medical bills, loss of earning capacity, and loss of household services) total $825,000 and are not capped.  

Example 2

Mr. Z is a 52-year-old electrical engineer and businessman in Nashville. He owns a very successful business that is dependent upon his expertise, experience and leadership. During bypass surgery, Mr. Z dies. He is married and has four minor children. Mrs. Z sues his physician.  

Damages claimed are:

• Economic Losses: medical bills of $115,000. Mr. Z’s projected loss of earning capacity is $6 million.  
• Noneconomic Losses: Mr. Z’s claims for pain and suffering, Mrs. Z’s and the children’s claim for loss of consortium and any emotional injuries resulting from Mr. Z’s death.

Under the pre-existing law, there would have been no limit. Under the new legislation, the maximum damage award would be $7,115,000. These damages remain significant in spite of the caps. However, empirically juries appear to award less money to wealthy individuals in spite of proof of loss.  

In conclusion, these examples illustrate that large damage awards may still result when the value of economic damages such as loss of earning capacity, loss of household services, and medical expenses are high. Nonetheless, the legal profession has historically tended to adapt to changes in the law, and the landscape of tort litigation will likely change in Tennessee. The enactment of tort reform in Tennessee will probably eliminate the few staggering verdicts of tens or hundreds of millions of dollars. However, total damage awards in many cases are still likely to fall into the range of $1 to $3 million. In cases with lower exposure, defendants will not feel pressured to settle claims solely to avoid the risk of financial ruin. However, plaintiffs now will focus more resources on presenting proof of loss of earning capacity and loss of domestic services. Practitioners and businesses will want to maintain insurance coverage or reserves commensurate with their exposures under this new legislation.³  

¹ Amendment No. 1 to SB1522 

² As loss of consortium are derivative claims, the claims of children and surviving spouses are limited to an aggregate of $750,000 or $1,000,000 as applicable, pursuant to Section 29-29-102(e) of Amendment No. 1. However, litigants may assert that Section 29-29-102(e) should be interpreted to consider the spouse and each minor child as separate “injured plaintiffs” and permit each a separate capped recovery.

³ Regan, J., Hadley, E. Tort Reform Background and Case Studies. Tennessee Medicine. Vol. 104. No. 5. May 2011. pgs. 39-44.

Edward Hadley is a partner with North, Pursell, Ramos & Jameson, PLC. Dr. Judy Regan is an associate with the Nashville-based law firm. www.nprjlaw.com.

Tags:

Bookmark:

Digg

Facebook

Technorati

Newsvine

Google

Related: