Security Provisions of Malpractice Act

Absent an agreement of the parties in medical malpractice cases, in order for the defendant to gain the benefits of a periodic installment judgment, there must be present sufficient security. This requirement is present both early and last in the case, being a requisite not only for the period installment judgment, but also for the initial election to have the case considered for future periodic judgment.

The requisite security is meant to guarantee the future payments and the statute contemplates the participation of an insurance company either as providing a bond, an annuity contract, a guarantee or a collectible policy of insurance. The court must approve the security but the director of insurance is charged with the responsibility of determining financially qualified insurers.

Within 30 days of the time the judgment is subject to enforcement (i.e., the determination of the last post-trial motion) the defendant or defendants must post approved security equal to the total damages - all past damage and the present lump sum equivalent of future damages. If there is more than one defendant, they may act jointly or separately to produce one security package which meets the required amount.

A liability insurer is required to post security to the extent of the policy, if the insured has not done so. If fewer than all defendants join in the posting of the security package, the periodic installment judgment is still deemed secured as to the plaintiff, but the securing defendants acquire rights against any defendant who has not joined in.

If the security is in the form of a bond or a guarantee to pay the judgment, the court will have problem approving it because, on its face, it will undertake to make all necessary payments. If, however, the defendant offers a liability policy, a determination will have to be made as to its adequacy. This determination is made pursuant to Section 2-1714.

The court must first total the periodic base payments and then add that total to the lump sum damages. If the face amount of the policy exceeds this amount, the judgment is deemed to be within the policy limits, and the security regarded as adequate. If, however, the face amount of the policy does not exceed the total sum, the court must determine to what extent it falls short, and allocate proportionately future adjustments to amounts within and amounts in excess of the policy limits. Such a policy does not constitute sufficient security, and the defendant is subject to posting additional security in accordance with the courts finding and allocation.

Posting security or failure to do so

Sufficient security must be posted and approved by the court within 30 days of the judgment becoming enforceable. If it is not, a judgment creditor may move for a finding that the security has not been posted and maintained. Upon the entry of such a finding, the defendant or defendants have an additional 30 days to cure their default.

If the security has not been posted by that time, the court must make the payments, which otherwise would have been subject to periodic installments, currently payable, by calculating their lump sum equivalent and adding it to past damages.

If one defendant is liable for a specific portion of the judgment and fails to post the required security, the modification of the judgment presently payable shall be only to him and that part of the judgment; complying defendants will not be affected.

Where it is apparent that a defendant cannot post adequate security, the plaintiff need not wait to seek relief under Section 2-1711(b). Rather, prior to entry of the judgment, he may bring a petition for a finding that the defendant is incapable of posting the required security and upon such finding, enter a judgment for present payment by reducing future damages to their present lump sum equivalent.

Indeed any part may bring the petition, but if it is brought by a party other than the plaintiff, upon entry of a finding of incapacity, the plaintiff is entitled to elect between a lump sum judgment or one for periodic payments notwithstanding the security problems. Once sufficient security is posted and approved, the periodic installment judgment can take effect.

Two other important consequences also occur. First, the security can act as a supersedeas bond to stay enforcement during an appeal. Second, the judgment debtors on whose behalf the security was posted are discharged, the judgment being deemed satisfied as to them.

Post-judgment collateral source reductions

Another aspect of the new legislation is the ability of defendants to further reduce the judgment after entry due to collateral source payments. Section 2-1205, which applies to all medical malpractice cases provides that the defendant, upon application made within 30 days of entry, may reduce the judgment based on certain benefits paid to the injured party, by an amount not to exceed 50 percent of the total amount of judgment entered on the verdict.

The total reduction is determined by calculating the sum of 50 percent of the lost wages and disability income benefits and 100 percent of most health care benefits actually paid to the injured party. Obviously, the statute can be said to exclude from the reducible amount any money paid by third parties, on behalf of the injured party, for which the injured party could not have directly collected.

Thus, while some will surely argue that the reducible amount automatically includes sums a health care provider will pay for the injured party's further medical care costs, the statute specifically allows reduction only if the sums become payable to the injured party. Hence, counsel will necessarily make a detailed inquiry into the policy provisions of any insurance contract allegedly subject to this provision.

There are certain other limitations on the application of this section. For example, it is available only against a judgment based on negligence or wrongful acts, not intentional torts and is not, like the rest of the enactment, broadly available to all of the "healing arts," but only to licensed hospitals and physicians.

As stated above, a qualified defendant is entitled to a reduction based on two kinds of benefits, lost wages and health benefits. This reduction, however, does not apply to medical charges which "were directly attributable to the adjudged negligent acts or omissions of the defendants found liable. Legislators on both sides of the aisle were miffed at the suggestion that a negligent defendant could reduce the award by sums later paid because of the negligent care, hence, this provision.

This amended section keeps the provision that such reduction shall not apply to the extent there is a right of recoupment through subrogation, trust agreement, lien or otherwise, but does add new language stating that the damages will be increased by any amount the plaintiff has directly paid for insurance on the costs of such benefits for two years prior to his injury or death.

By making these amendments to an existing section, created long before the notion of periodic installment judgments was devised, questions about how this section should be treated where such judgment has been entered are left unanswered.