Current Status of the Medical Malpractice Statute

The Medical Malpractice Reform Act of 1985 went into effect on Aug. 15, 1985, amid a flurry of eleventh hour filings which produced lines of people second only to Michael Jackson's victory tour.

At that time, the Chicago Daily Law Bulletin published a series of articles explaining the intricacies of this difficult and obscure act, which I authored based on my experiences as chairman of the Illinois Trial Lawyers Association's ad hoc committee on medical malpractice. Since then I have been asked repeatedly about the fate of the act and its current status, because it is generally known that it has been subjected to a successful constitutional attack before Judge Joseph M. Wosik of the Chancery Division and has just been argued in the Illinois Supreme Court. But the scope of the attack, and the basis for the decision, are not widely known or easily understood.

One reason for this, certainly is to be found in the fact that the legislation, rather than being a unified statute is spread throughout differing parts of the Code of Civil Procedure. Another reason lies in the fact that differing infirmities were urged for differing sections, so that no single basis can be attributed as descriptive of Wosik's action. This article is intended to supply a need for information which so many have expressed to me. It is not intended as an opinion on the merits of opposed positions, or even a scholarly analysis of them, but as a broad outline of the proceedings to date for those practitioners who simply want to know what's going on.

Even before the act became effective, a taxpayer's suit was filed against Roland W. Burris, as state comptroller, and others, on behalf of one Bernice Bernier. The action, filed in the Chancery Division of the Circuit Court of Cook County, asked that the defendants be enjoined from disbursing public funds to implement the Act, and was assigned to Judge Wosik.

The procedure in the trial court was not without unusual features. The defendants advanced a motion for summary judgment, which the plaintiff responded to by requesting an immediate hearing of evidence. Hence, in support of her complaint, evidence was offered to the effect that there was no need for the challenged sections of the act, and that the medical malpractice insurance crisis which was, publicly at least proclaimed as the raise d'etre of the whole legislation, did not, in fact, exist at all. A seven-day trial was ultimately held before Wosik, who was also treated to massive trial briefs by both the parties and the Illinois State Medical Society, a principal sponsor of the act in Springfield.

Based upon the evidence he had heard, Wosik made numerous preliminary findings of fact. He found that "[t]here is no empirical data to support the claim that a medical malpractice insurance crisis exists in the State of Illinois," and that the number of physicians in the state has grown faster than the population as a whole. He found also that, rather than any sharp increase in malpractice filings, it was a reduction in insurance reserves which was responsible for any problem that the companies were experiencing.

Based upon economic and statistical data, Wosik found that 98 percent of the citizens of Illinois could not afford a jury trial that the review panel systems established by the act. He also found that a victim of malpractice who had his judgment reduced by Social Security and private benefits would not be made whole under the modified collateral source rule because the law does not provide for reimbursement to the victim of all the Social Security taxes and insurance premiums that he paid, nor is he entitled to any interest for these sums.

Upon the testimony of economists, Art Dobbelaere and Charles Linke, Wosik also made certain findings concerning the structured judgment provisions of the act, principally that a fixed discount rate of 6 percent allowed defendants to satisfy structured payment obligations with annuities costing far less than the present value of the future damages, and that casualty insurance is a high-risk business, and the deposit of an insurance policy as security for payment of the judgment is not safe. Wosik noted that at least eight insurance companies are currently in liquidation in Illinois.

Having made these findings, the judge, on Dec. 19, 1985, entered an order holding five parts of the act unconstitutional. Sections 2-1012 through 1020, 2-1205, 2-1701 through 1719, 2-1114, and 2-1115. Because his ruling was based on differing reasons, each part will be examined separately.

The first section to fall was Section 2-1013, which creates the requirements of presentation of the malpractice action to the review panel prior to being allowed to having the matter heard by a jury. Because other aspects of the review panel are covered in Section 2-1014 through 2-1020, the panel roster, selection of the panel, etc. it must be supposed that they fall with Section 2-1013, which the order specifically mentions.

With respect to these Sections Wosik made numerous findings, including that it denied to "medical malpractice victims" the right to a trial by jury protected by both the federal and state constitutions, the right to equal access to the courts, due process, and equal protection because, among other reasons, it is inapplicable to federal courts sitting in diversity cases. This section was also held to constitute "special legislation," and authorized review panels to exercise judicial authority as well as creating fee officers in contravention of Article VI, Section 14 of the Illinois Constitution.

It was plaintiff's position that the review panel procedure inflicts a high cost on any litigant who contests its findings with the result that costs are unduly shifted to the plaintiff and jury trials are discouraged in medical malpractice suits, though not in other kinds of litigation. Bernier goes back to Marbury v. Madison (1803) 5 U.S. 137, as authority for her primary contention that access to the courts is a constitutionally protected right. She also argues, for the same point, the recent authority of Illinois' own Supreme Court in Crocker v. Finley (1984) 99 Ill.2d 444, in which a $5 surcharge on matrimonial cases was held unconstitutional.

The expense of this procedure is also the basis for the plaintiff's argument that due process and equal protection are violated by the panel system, because it is only the wealthy which will be able to afford to prosecute an action beyond the panel stage, leaving all others without a remedy. Accordingly, she concludes that, under the strict scrutiny test which must be applied in such a case as this, the statute cannot be shown to further a compelling state interest, because the existence of an insurance crisis cannot be established, nor would these procedures tend to cure it if it did exist.

Another argument which the plaintiff strongly urged was based on the fact that this section would not apply to diversity actions brought in U.S. District Courts throughout the state, and hence discriminated against residents of Illinois as compared with non-residents. Bernier also argues-that the same animus which abolished the masters in chancery also forbids the establishment of these panels, because they would constitute "fee officers" in the judicial system. Finally, she contended that the panels' determination would in reality be judgments, and the jury trial is in reality a trial de novo, which is constitutionally impermissible under Illinois' constitution as interpreted in Grace v. Howlett (1972) 51 Ill.2d 478.

The position taken by the defendants was that the statute was designed to overcome the constitutional defect specified by the Supreme Court's decision in Wright v. Central DuPage Hospital Assn. (1976) 63 Ill.2d 313, a case which held pre-trial review panels to be unconstitutional. It appears that the defense view is that if the criteria of Wright are satisfied, the enactment should be sustained.

Ironically, the plaintiff, in her argument, never placed very much importance on the Wright decision, but largely advanced arguments from the other authorities noted above. In opposition to these arguments, the defendants largely urged the reasoning of sister jurisdictions, noting that similar statutes have "consistently been recognized by the supreme courts of our sister states."

Section 2-1205 was also found to be fatally defective. This is the section which deals with collateral source benefits, providing that the judgment be reduced by one-half of the benefits provided for lost wages, and by 100 percent of the benefits provided for medical charges. The ruling was based on the section's general tendency to discriminate between "victims of medical malpractice and victims of all other torts."

But the court's conclusions of law focused on the relationship between this section and benefits under the Social Security Act. Particularly, Wosik adopted the reasoning that this section had the effect of diverting benefits under the Social Security Act away from the medical malpractice victims, which is both a violation of that act and of the Supremacy Clause. Likewise, the section deprived malpractice plaintiffs of the right to collect disability income and medical expense benefits which other injury victims are allowed to collect and retain.

This, Wosik reasoned, violated both the Illinois and United States Constitutions. In addition, the judge determined that Section 2-1205 impaired numerous contracts in force at the time of the act's passage in violation of Article 1, Section 10 of the U.S. Constitution, as well as Article 1, Section 16 of the Illinois Constitution.

The plaintiff's primary argument, and perhaps one unlooked for by the drafters, is that the abolition of the collateral source rule would reduce the medical malpractice judgment by amounts received for Social Security benefits as well as private benefits, and that such has already been held, by one federal court, in Duran v. Priddy, 534 F.Supp. 30 to be constitutional. Bernier also argued that this section of the Social Security Act which places benefits beyond any claim of creditors (42 U.S.C. §407) is violated by the terms of the act, relying on Philpott v. Essex County Welfare Board (1973) 409 U.S. 413, which held that protection of federal governmental benefits "extends beyond the classic debtor-creditor relationship."

In addition to the foregoing arguments, which arise under the Supremacy Clause of the U.S. Constitution, the plaintiff also argues from Article IV, Section 13 of the Illinois Constitution - the prohibition against "special legislation:" the passage of special laws where general laws could be made applicable. Factually, of course, this argument arises because it is only those having cases against medical professions who stand to have their judgments reduced by benefits paid by collateral sources, plaintiffs suing the other classes of defendants have no such reductions to contend with. Bernier argues that this damage provision in the current act is no better than that which before the Court in Wright v. Central DuPage Hospital (1976) 63 Ill.2d 313, which had put a $500,000 cap on damages.

The defendants contend that the collateral source rule is a creature of the common law which legislatures are free to modify or eliminate altogether, and its passage has no constitutional implications. With respect to running afoul of the Supremacy Clause, the defendants argued that the act does not deprive anyone of his benefits, but merely prevents him from being paid a second time by the tortfeasor. The defendants point to similar types of offsets, such as salary entitlements, which have survived attacks in the past.

Another significant section dealt with in Wosik's order was Section 2-1701, the section which makes Part 17 of the act applicable to all medical malpractice cases. Part 17 includes such features as the "election for periodic payments," the special damage instructions and findings, the lump sum equivalent of future damages, the judgment for present and periodic award, and the security for future payments. In holding Section 2-1701 unconstitutional, it must be assumed that Wosik intended to hold the entire part unconstitutional, because it is only by virtue of the challenged section that the others are applicable to malpractice cases.

The reasons for Wosik's ruling with respect to these sections were very numerous indeed, probably because so many different sections had been incorporated into consideration of the section attacked.

First, and probably foremost among the judge's conclusions was the one that these sections denied malpractice victims the right to have their damages determined by a jury and therefore constitutes a denial of the constitutionally protected right to a jury trial. Wosik also noted that Section 2-1719 fixes a discount value at 6 percent for use in calculating future damages. This he held to be an artificial present value and, as such, constituted a "taking" of property in violation of the Fifth and Fourteenth Amendments and Article I, Section 2 of the Illinois Constitution.

He found also that the structured settlements were violative of due process and equal protection because they deprived malpractice victims of the "present enjoyment and use of the value of monies to which such victims have been found entitled." Likewise, he held that Section 2-1713 denied such victims the right to dispose of periodic payments by will or intestacy secured by Articles I and IV of the Illinois Constitution. That section prescribes the manner of distribution of unpaid payments in the event of the plaintiff's death. This section was also held to be unconstitutionally vague.

Finally, Wosik held that Section 2-1710, that part of the act which provides for security for future payments, to be arbitrary and unreasonable, and hence violative of due process, because that section is satisfied by the deposit of an insurance contract the security of which is subject to the economic strength of the issuing company. The judge found that such an arrangement put the "victim at risk of never receiving his future economic payments." He was also influenced by the fact that such annuity contracts could be purchased for a sum less than the present value of the required payments.

The plaintiff also argued, as with so many other sections of the act, that these sections constitute special legislation in providing for a system of payments for malpractice victims which is different than that provided for victims of other torts. Moreover, even among medical malpractice plaintiffs there is an arbitrary distinction: those having future damages of less than $250,000 are not burdened with the structure payment schedule.

Bernier also argued that due process and equal protection are violated by part 17. Inspired by the reasoning of a New Hampshire decision, Carson v. Maurer (1980) 424 A.2d 825, contending that the plaintiff acquires a property right in his damages at the time the judgment is entered that, in effect, such damages become his property, but that, without compensation or any quid pro quo, he is deprived of their use, control, and management and, indeed, by their deferral. Even their ultimate collection is put at risk.

In her trial brief, the plaintiff said: "He cannot control, invest, or protect it, but must live in hope that the tortfeasor purchased an annuity with a company that will still be around on the due date of the last payment." Additionally, the property right is further interfered with because the act forbids assignments of payments, as well as preventing testamentary dispositions of payments which become due after the plaintiff's death. In making these arguments she relies on Evans v. City of Chicago (1982) 689 F.2d 1286, a 7th U.S. Circuit Court of Appeals ruling, an analogous case which held unconstitutional the city's practice of paying small tort judgments immediately, but delaying payments of judgments in excess of $1,000.

The position taken by the defendants is that plaintiffs have no vested interest in a particular measure of damages nor the timing of the payment of such damages. This position, at least as presented in the proceedings now pending before the Supreme Court, is remarkable in that no Illinois authority could be found to support it. Save for one opinion from the State of Wisconsin, the argument is based entirely on the authority of California cases.

The next area dealt with by the order was the enactment concerning attorney fees. Section 2-1114 undertakes to set limits on contingent fee contracts in cases which arise from malpractice situations. The basic provision of the section was to limit the attorney to statutorily set percentages of the judgment, calculated after reduction to lump sum value. Fees under this section are universally acknowledged, and indeed were intended to be substantially smaller than those available prior to the act, especially in large cases. Wosik concluded that this section was unconstitutional because it infringed upon the separation of powers guaranteed by Article II, Section I of the Illinois Constitution for the reason that contingency fees are properly the subject of judicial, not legislative regulation. He also held that the section tended to deny medical malpractice victims freedom of contract, the right to retain counsel of their choice and access to the courts in violation of the federal and state constitutions, as well constituting special legislation and denying equal protection and due process for failure to accomplish any legitimate legislative objective.

The court accepted the argument of the plaintiff that this section was violative of due process in that its terms could not be seen to be rationally connected to the act. Plaintiff denied that the reduction of attorney fees would reduce insurance premiums, or even assist the victims, relying on studies that established that when contingency fees are reduced the victim's net recovery is, on the average, less. Likewise, plaintiff urged that Article III of the Illinois Constitution forbade the legislature from acting upon the subject of attorney fees. Bernier also argued that the real purpose of the section was to deny malpractice victims access to the courts by limiting fees in large cases, making it more difficult for such plaintiffs to find counsel with the resources necessary to "meet the armor of the insurance industry." And again, the special legislation argument was advanced, based on the fact that "[n]o other common law right of action is saddled with a limitation on the attorneys' fees a claim may pay his lawyer."

The defendants have, on the other hand, denied that limitation of legal fees is an exclusively judicial function, noting that such limitations exist on workers' compensation and Court of Claims cases. With respect to the other arguments advanced against this section, they have elected to rely on a decision that the Supreme Court of California, Roa v. Lodi Medical Group, Inc., 37 Cal.3d 920, which held that a similar statute was declared not to deny medical malpractice plaintiffs their right to counsel or access to the courts.

The final section found to be unconstitutional was Section 2-1115, which states that there shall be no punitive damages in medical or legal malpractice cases. Wosik determined that the fact that two distinct subjects were covered in this section, both medical and legal malpractice, itself rendered the section unconstitutional, as being violative of Article IV Section 8 of the Illinois constitution, because it was not confined to one subject. He also found that it constitutes special legislation and grants to lawyers, doctors and other covered under the section, privileges and immunities which are denied to the population generally.

The basic thrust of the plaintiff's argument for unconstitutionality centers around the fact that the express purpose of the act was to eliminate frivolous malpractice suits, thereby making malpractice insurance more affordable, but that liability for punitive damages is not insurable in Illinois and hence there is no rational nexus between the purpose of the act as a whole and Section 2-1115.

Again, Bernier relied on Grace v. Howlett (1972) 51 Ill.2d 478, as authority for her contention that this section constituted special legislation, because the provisions of this section could have been the subject of a general law, not merely on affecting malpractice cases. Finally, the plaintiff claimed that the inclusion of legal malpractice in this section was simply a case of the legislature attempting to buy off an attack on a "knowingly unconstitutional position." To support this she urged Section 8(d) of Article IV of the Illinois Constitution, which states that "[b]ills ... shall be confined "to one subject," and argued that medical malpractice and legal malpractice are two separate objects.

The defendants answered these arguments by taking the position that the legislature has always regulated punitive damages in particular kinds of cases such as breach of promise of marriage, alienation of affection and criminal conversation. They also argued that the purpose of the legislation is not only to limit the costs of insurance but hte costs of litigation and to that purpose the section is rationally connected. As for the single-subject clause, the defendants contend that malpractice is a single subject and the section is, quite simply, not violative.

In addition to responding to the arguments specifically made by the plaintiff before Wosik, the defendants, on appeal, raised certain arguments of their own about both the propriety of the legislation and the hearing in the trial court. They point to the fact that the act enjoys a presumption of constitutionality, must be sustained if it bears any rational relationship to a legitimate governmental interests and that Wosik's hearing of additional evidence constituted __________ legislative function.

The defendants also argue that the Supreme Court's prior approval in Anderson v. Wagner (1979) 79 Ill.2d 295, of a special limitation period for actions against physicians and hospitals constitutes a recognition that special legislation for such a class of individuals is constitutionally permissible and that medical malpractice is a classification for which a reasonable basis clearly exists and hence satisfies the test announced by the Court only last year in Chicago National League Ball Club, Inc. v. Thompson (1985) 108 Ill.2d 357.

In addition to the parties themselves, the Supreme Court has been generous in allowing the briefs of amici curiae, who have sprung up in great numbers - 17 briefs having been filed. Each amicus, of course, has had its own position to advance and differing aspects of the case or legislation have been emphasized. Certain common themes, however, can be recognized. The amici supportive of the defendants' position have been almost universal in their assertion that the trial court had no right to hear evidence in connection with this matter and that there exists a reasonable basis for the legislature's actions. Amici who have supported the plaintiff, on the other hand, have almost all devoted attention to the position that the act is inherently irrational and advances no legitimate state interest.

The Supreme Court has moved quickly to hear oral arguments, scheduling them within just a few weeks of the filing of the appellant's reply and encouraging many to anticipate that its decision will be similarly expeditious.

Since Wosik's ruling, there has been a general impression that the effect of the act has been suspended, at least in Cook County, while its validity has been pending on appeal. This is not the case. In the Circuit Court of Cook County, the act has been treated as being in full force and effect, although this fact may be masked because its first requirement, the merit letters, was not attacked in the Hernist suit.

Judge Edwin Berman, who is in charge of malpractice litigation, explained that the legislation's own time frame does not require that a panel be called until a case has been at issue for 90 days and this has yet to happen in any case filed under the act. "None of these cases will be _____ until late spring or early summer ________________ fully, the Supreme Court will have ruled by then."

Berman, however, indicated that the review panel preparations were in place, irrespective of how long the court might take to consider to decide Bernier. "We already have 50 doctors for the physician's panel, and 400 attorneys have been qualified. If I had to call a panel tomorrow, I could do it." Berman did note, however, that, in the event that the act is held constitutional, he would request that associate judges be allowed to sit as panel members. As written, the act requires that only circuit judges serve in that capacity.

Now that the Supreme Court has taken the matter under advisement, it is generally hoped that it will reach a decision early enough so that no panel reviews will be required to go forward while its validity is still in question. If the court is to consider all the material placed before it by its very numerous amici, however, it's decision may take a considerable time, and some panels may have to be convened.

Most of all, it is hoped that the Supreme Court's decision will undertake to deal fully with the substance of the issues, and give real guidance to both the courts and legislature, so that its decision will have the effect of settling the fights of plaintiffs and defendants and constitute a clear expression of policy, rather than being, as sometimes seems to happen in cases of this magnitude, an invitation to a score of further challenges and the herald of a decade of legal uncertainty.