Q.
On May 23, 2022, Governor Newsom signed into law Bill 35 (“AB-35”), which amends several provisions of the Medical Injury Compensation Reform Act (MICRA) and makes significant changes to the law governing recovery in medical malpractice cases. Most notably, AB-35 makes changes to attorneys’ compensation laws and the amount plaintiffs can receive in medical malpractice lawsuits. These changes and their implications for health care providers are discussed below.
A.
Originally passed in 1975, the law was intended, in the words of the California Supreme Court, to “reduce insurance costs by limiting the amount and timing of recovery in cases of malpractice.” To that end, MICRA includes several provisions designed to limit recovery for malpractice against health care providers. Since 1975, there have been several attempts to change and increase MICRA’s caps and limits.
Until recently, such attempts were not always successful. Now, with the enactment of AB-35, plaintiffs under the 47-year-old MICRA provision will see new noneconomic damages caps and their attorneys will face additional legal fees through a revised contingency fee schedule. The new law takes effect on January 1, 2023, and affects lawsuits filed after that date. Lawsuits filed before December 31, 2022 will be subject to MICRA’s longstanding rules, caps, and limitations on damages.
Below is an analysis of the provisions that remain the same as those in MICRA that were changed by AB-35.
MICRA Changes
Contingency Fee Recovery
Contingency attorneys' fees for individuals seeking damages in these cases are limited by Business and Professions Code Section 6146, which provides for attorneys' fee caps that can be recovered at decreasing rates as various thresholds are reached. Current law provides that an attorney can recover 40 percent of the first $50,000, 33 percent of the next $50,000, 25 percent of the next $500,000, and 15 percent of anything over $600,000.
AB-35 modifies this provision by increasing the attorney fee cap to 25% for settlements executed prior to the filing of a complaint or demand for mediation, and 33% for settlements, mediations, or judgments recovered after the filing of a complaint or demand for mediation. This could lead to more frequent litigation due to higher fees and greater interest in representing these types of claims.
Recovery of Non-Economic Damages
Currently, Civil Code Section 3333.2 limits the amount recoverable for non-economic losses to $250,000. This includes compensation for pain, discomfort, bodily harm, and other non-compensatory damages. In addition, in cases of (wrongful) death, the total amount recoverable by all heirs is $250,000.
AB-35 removes this limitation and imposes new limitations based on whether the conduct involved wrongful death. AB-35 increases the cap on non-wrongful death damages to $350,000, increasing by $40,000 on January 1 each year for 10 years until it is capped at $750,000 in 2023. AB-35 increases the cap on wrongful death damages to $500,000, increasing by $1 million on January 1 each year for 10 years until it reaches a total of $1 million in 2033.
From 1 January 2034, the limits for both will be adjusted upward by 2% to account for inflation.
Periodic Payments
Civil Procedure Code Section 667.7 provides that a superior court may order a judgment in a breach of trust action to be completed by periodic payments upon the request of one of the parties. This provision applies to judgments where the total amount of the award exceeds $50,000.
AB-35 modifies this provision so that judgments cannot be split into periodic payments unless they exceed $250,000. This would require insurers to hold more liquidity to pay out more money more quickly, which would result in higher premiums.
These revisions and amendments to MICRA are argued to strike a careful, patient-centered balance between fair compensation for injured patients and the need for universal, high-quality, cost-effective health care. Supporters of the MICRA amendments report that they are willing to put the interests of California patients ahead of divisive political positions.
The increase in attorney fees that can be collected for lawsuits and the amount that plaintiffs can receive will provide incentives to initiate lawsuits and increase the number of lawsuits. In short, as the compensation limit is raised, it is expected that lawyers will be more active in taking on medical malpractice cases.
Q.
On May 23, 2022, Governor Newsom signed into law Bill 35 (“AB-35”), which amends several provisions of the Medical Injury Compensation Reform Act (MICRA) and makes significant changes to the law governing recovery in medical malpractice cases. Most notably, AB-35 makes changes to attorneys’ compensation laws and the amount plaintiffs can receive in medical malpractice lawsuits. These changes and their implications for health care providers are discussed below.
A.
Originally passed in 1975, the law was intended, in the words of the California Supreme Court, to “reduce insurance costs by limiting the amount and timing of recovery in cases of malpractice.” To that end, MICRA includes several provisions designed to limit recovery for malpractice against health care providers. Since 1975, there have been several attempts to change and increase MICRA’s caps and limits. Until recently, such attempts were not always successful. Now, with the enactment of AB-35, plaintiffs under the 47-year-old MICRA provision will see new noneconomic damages caps and their attorneys will face additional legal fees through a revised contingency fee schedule. The new law takes effect on January 1, 2023, and affects lawsuits filed after that date. Lawsuits filed before December 31, 2022 will be subject to MICRA’s longstanding rules, caps, and limitations on damages. Below is an analysis of the provisions that remain the same as those in MICRA that were changed by AB-35. MICRA Changes Contingency Fee Recovery Contingency attorneys' fees for individuals seeking damages in these cases are limited by Business and Professions Code Section 6146, which provides for attorneys' fee caps that can be recovered at decreasing rates as various thresholds are reached. Current law provides that an attorney can recover 40 percent of the first $50,000, 33 percent of the next $50,000, 25 percent of the next $500,000, and 15 percent of anything over $600,000. AB-35 modifies this provision by increasing the attorney fee cap to 25% for settlements executed prior to the filing of a complaint or demand for mediation, and 33% for settlements, mediations, or judgments recovered after the filing of a complaint or demand for mediation. This could lead to more frequent litigation due to higher fees and greater interest in representing these types of claims. Recovery of Non-Economic Damages Currently, Civil Code Section 3333.2 limits the amount recoverable for non-economic losses to $250,000. This includes compensation for pain, discomfort, bodily harm, and other non-compensatory damages. In addition, in cases of (wrongful) death, the total amount recoverable by all heirs is $250,000. AB-35 removes this limitation and imposes new limitations based on whether the conduct involved wrongful death. AB-35 increases the cap on non-wrongful death damages to $350,000, increasing by $40,000 on January 1 each year for 10 years until it is capped at $750,000 in 2023. AB-35 increases the cap on wrongful death damages to $500,000, increasing by $1 million on January 1 each year for 10 years until it reaches a total of $1 million in 2033. From 1 January 2034, the limits for both will be adjusted upward by 2% to account for inflation. Periodic Payments Civil Procedure Code Section 667.7 provides that a superior court may order a judgment in a breach of trust action to be completed by periodic payments upon the request of one of the parties. This provision applies to judgments where the total amount of the award exceeds $50,000. AB-35 modifies this provision so that judgments cannot be split into periodic payments unless they exceed $250,000. This would require insurers to hold more liquidity to pay out more money more quickly, which would result in higher premiums. These revisions and amendments to MICRA are argued to strike a careful, patient-centered balance between fair compensation for injured patients and the need for universal, high-quality, cost-effective health care. Supporters of the MICRA amendments report that they are willing to put the interests of California patients ahead of divisive political positions. The increase in attorney fees that can be collected for lawsuits and the amount that plaintiffs can receive will provide incentives to initiate lawsuits and increase the number of lawsuits. In short, as the compensation limit is raised, it is expected that lawyers will be more active in taking on medical malpractice cases.