Liability: hints of "sweet reason" from the Midwest - Legal Landscape - nursing home liability suits reviewed

Nursing Homes, Sept, 2002 by Alan E. Schabes

There is a well-known story about an architect and an attorney who went for a walk on a warm summer afternoon to catch up on old times. At one point, the discussion turned philosophical and the attorney asked the architect, "What do you think was the first occupation created by the Almighty?" The architect responded self-assuredly, "That's easy--architecture. The Almighty created the world out of chaos in six days and rested on the seventh day. It was an amazing architectural feat and couldn't have been done without expert architectural help." Said the attorney, "I thought that was what you were going to say. Clearly, the creation of the world out of chaos in six days was an incredible architectural feat and could not have been done without expert help-but who do you think created the chaos?"

Certainly, "chaos" is one word that comes to mind when long-term care professionals get together to discuss professional liability insurance. "Confusion" is another, and so is "crisis."

This crisis of chaos and confusion was exemplified by an article that appeared in The National Law Journal this past February. It listed the 100 top litigation verdicts for 2001, and showed that four of the top 50 were awarded against nursing home providers for negligence and malpractice. The seventh largest verdict--for a whopping $312,710,000--was handed down by a jury in Fuqua v Horizon/CMS Healthcare Corp. (N.D. Texas, No. 4-98CV1087Y) (February 9, 2001). This suit was filed after the death of Wyvonne Fuqua in 1997. Fuqua had been admitted to the Heritage Western Hills Nursing Home in Fort Worth, Texas, in 1994 following a stroke. In late 1996, Fuqua began developing severe pressure sores. As her condition deteriorated, the nursing home staff allegedly did not apprise the family of Fuqua's condition and did not discharge her to a facility that could adequately treat her pressure sores. By the time Fuqua was discharged to a hospital emergency room in April 1997, she had developed 16 pressure sores, 9 of which were Stage III and 5 Stage IV. Two months after she left the nursing home, Fuqua died.

On February 9, 2001, a Fort Worth, Texas, jury awarded the plaintiff $312,710,000 in compensatory damages, with $310,000,000 of this in the form of punitive damages. The case was ultimately settled in June 2001 for $20,000,000 in cash.

As jury verdicts against long-term care facilities have skyrocketed, so have professional liability insurance premiums. A recent report issued by Aon Insurance predicted that this new "hard" insurance market is likely to be a reality for the long-term care industry for several years to come. It is not unusual for reputable long-term care providers to be presented with liability insurance renewals tagged with premium increases ranging from 30 to 500%. The instability felt by the insurance industry as a result of rising liability losses and exacerbated by media coverage and overall post-9/11 disruption has led to this explosion.

A number of remedies have been suggested. One is statutory tort reform, now under consideration in a number of state legislatures. Ohio, for example, has enacted its version of tort reform. The bill, known formally as Amended Substitute House Bill No. 412 (Am. Sub. H.B. No. 412), represents an interesting and measured approach toward achieving legislative relief for the embattled long-term care industry.

Most tort reform legislation, in Ohio and other states, focuses on three issues: (1) the awarding of punitive damages for nursing home malpractice; (2) the use of nursing home surveys and plans of correction (POCs) as evidence to substantiate instances of nursing home negligence; and (3) the length of the statute of limitations within which the plaintiff would be required to bring a nursing home malpractice case.

As shown by the Fuqua case discussed above, the vast majority of the substantial judicial awards in long-term care malpractice are for punitive damages. Some states have aggressively tried to moderate excessive awards by placing statutory caps on punitive damage awards.. In fact, this was attempted several years ago in Ohio as part of tort reform legislation aimed at general medical malpractice. However, for a number of reasons, the Ohio Supreme Court ruled that this methodology was unconstitutional. In response, the Ohio General Assembly, in Am. Sub. H.B. No. 412, proposed a series of criteria to be considered by a judge or jury before awarding punitive damages, as opposed to trying to impose a cap. These include: (1) the ability of the home to pay the award, based on the home's assets, income and net worth; (2) whether the amount of punitive damages is sufficient to deter future tortious conduct on the part of the nursing home; and (3) the financial ability retained by the home to continue to provide accomm odations, personal-care services and skilled nursing care.

This overall focus on the nursing home's ability to pay damages and the likely impact of this on the home's future could serve to temper the emotions often experienced by judges and juries when large punitive damage awards are imposed on the defendants. The fact that judges and juries will be required to consider the nursing home's financial status when considering the imposition of punitive damages could serve to curb the desire to "send a message" to the home in question and the industry in general.