The Fairness for Injured Patients Act (FIPA)
California’s new Fairness for Injured Patients Act (FIPA) has changed medical malpractice law in the State of California in significant ways. On May 23, 2022, Governor Gavin Newsom signed Assembly Bill (AB) 35 into law. AB35 enacted FIPA. FIPA amends several California statutes applicable to medical malpractice claims. Since 1975, the Medical Injury Compensation Reform Act (MICRA) has remained unchanged and has governed California medical malpractice limits. Some parts of FIPA go into effect on January 1, 2023, while other portions took effect when the bill was signed on May 23, 2022.
As discussed below, the most significant change is the cap for non-economic damages for wrongful death medical malpractice actions will increase to $500,000 and grow to $1 million. For all other medical malpractice cases, the cap increases to $350,000 and will grow to $750,000.
Rules Under MICRA
Under the soon-to-be-old MICRA rules, medical malpractice lawsuits have a $250,000 cap on non-economic damages. Non-economic damages compensate for pain, suffering, disfigurement and inconvenience. (Civil Code, § 3333.2, subd. (a).) These damages are different from economic damages, like lost earnings and medical expenses. Economic damages continue to remain available with no limits under both MICRA and now FIPA. Under MICRA, the contingency fee that attorneys can collect are limited to 40% of the first $50,000 recovered, 33% of the next $50,000, 25% of the next $500,000 and 15% of any recovered amount exceeding $600,000. (Bus. & Prof. Code, § 6146, subd. (a).)
According to the Consumer Attorneys of California, MICRA needed to be updated, as the $250,000 cap on non-economic damages has not changed since 1975 and the value of the cap on damages has diminished significantly over the years. Over time, MICRA benefited medical professionals because it was more difficult for plaintiffs to retain lawyers to pursue claims with the $250,000 cap and the contingency fee limits.
FIPA—The Ballot Proposition
FIPA was originally a ballot measure to be voted upon by the California electorate in November 2022. With the enactment of the legislative FIPA, that ballot measure now becomes moot. The ballot version of FIPA sought to reform MICRA and would have adjusted the cap for inflation and allow judges and jurors to decide on compensation above the cap in cases involving “catastrophic injury or death.” This provision is not part of the enacted FIPA.
In opposition to the ballot measure, the American Medical Association argued that almost any case could have been considered to involve catastrophic injury. This would have led to huge jury awards, and in turn would have destabilized the insurance market and increased the cost of care for patients.
In sum, the ballot version of FIPA would have effectively eliminated the cap on non-economic damages in medical malpractice lawsuits. The California Legislative Analyst’s Office found that the proposed law would have created millions of dollars in government expenses which would have been costly for taxpayers.
FIPA—The Law Enacted by the California Legislature and Signed Into Law
To reach a middle-ground, AB35 was introduced in April 2022 as another way to modernize MICRA, but to not go as far as the ballot measure. On May 23, 2022, Governor Newsom signed AB35 into law.
New Caps, New Contingency Limits and Benevolent Gestures Under FIPA
Under FIPA-AB35, the $250,000 cap on non-economic damages created by MICRA has been replaced with two separate caps.
Starting January 1, 2023, the cap will be $500,000 for wrongful death cases. This cap will increase by $50,000 every year on January 1 until it reaches $1 million. (Civil Code, § 3333.2, subds. (c), (g).) In cases that do not involve wrongful death, the cap will be $350,000, and this cap will increase by $40,000 each year until it reaches $750,000. (Civil Code, § 3333.2, subds. (b), (g).) These annual increases will theoretically help the caps keep up with inflation unlike the unchanging caps that were established in 1975 under MICRA. These new caps apply only to claims filed in court or arbitration after January 1, 2023. (Civil Code, § 3333.2, subd. (g).) Claims filed before January 1, 2023 will continue to be governed by the old MICRA caps.
Effective immediately, the new law also changes attorney fee limits, which will be based on the stage of representation at which the amount is recovered. There will be a 25% contingency fee limit for claims that are resolved before a civil complaint is filed or before an arbitration demand is made, and there will be a 33% contingency fee limit for claims resolved after a civil complaint is filed or after an arbitration demand is made. (Bus. & Prof. Code, § 6146, subd. (a).)
Additionally, FIPA-AB35 establishes protections for benevolent gestures and statements of fault by health care providers. This means pre-litigation expressions of sympathy, regret or benevolence, including statements of fault, made by a health care provider to an injured patient or the patient’s family are confidential, privileged, protected and not subject to discovery in any civil action or arbitration, including administrative licensing actions. (Health & Saf. Code, § 104340, subd. (a).) This provision goes into effect immediately.
The law also expands the definition of “health care provider” and creates new definitions for “health care institution” and “unaffiliated” health care providers or institutions. (Civil Code, § 3333.2, subd. (j)(2)(3).) Finally, money judgments against health care providers may be paid by periodic payments if the judgment equals or exceeds $250,000, instead of the old cap of only $50,000. (Code Civ. Proc., § 667.7, subd. (a).)
Under MICRA, California capped pain and suffering awards in medical malpractice cases at $250,000 regardless of how many health care providers were found negligent. The new FIPA legislation allows a patient up to three payments in lawsuits involving multiple physicians, nurses or hospitals. One payment would be linked to a doctor or nurse's negligence, another for a hospital, and a third payment would be permitted for pain and suffering in rare cases involving a separate, unaffiliated provider, which brings the potential total award to $1.5 million.
FIPA’s Effect on Malpractice Defendants and Professional Liability Insurance Companies
AB35 is considered a compromise by various stakeholders. If the law had not passed, the limits established by the 1975 law could have ended in 2023, opening the door for lawsuits seeking infinite amounts in non-economic damages. Furthermore, with many health care workers already leaving the profession, the sunsetting of general damages caps could have pushed more physicians and nurses to leave. FIPA-AB35 applies a phased approach to various caps as a middle ground which is better for health care providers than the overly generous provisions in the ballot proposition.
Nevertheless, the increased caps on non-economic damages will increase the value of medical malpractice cases. The new contingency fee limits should not affect the value of these claims since any settlement or judgment will be the same regardless of the amount the plaintiff’s attorney will collect. However, the new attorney fee limits, coupled with the higher caps on general damages, will likely incentivize plaintiffs’ attorneys to take on more medical malpractice cases. Therefore, an influx of medical malpractice lawsuits in 2023 is expected.
If you would like more information about FIPA, please contact attorney Paul Cardinale with the Medical Defense Law Group at paul.cardinale@med-defenselaw.com or 916-244-9110.
Cardinale Fayard | Medical Defense Law Group© 2023. All Rights Reserved.
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