THE IMPACT OF TORT REFORM ON THE DAMAGE ELEMENT OF PERSONAL INJURY AND MEDICAL NEGLIGENCE CASES

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1 THE IMPACT OF TORT REFORM ON THE DAMAGE ELEMENT OF PERSONAL INJURY AND MEDICAL NEGLIGENCE CASES Michael J. Mohlman Smith Coonrod Mohlman, LLC 7001 W. 79th Street Overland Park, KS Telephone: (913) ; Facsimile: (913) House Bill 393 which became effective August 28, 2005, modified ninetee statutory sections relating to tort damages. Specifically, related to the calculation of economic damages, (Pre- and Post-Judgment Interest); (Death of a Caregiver); (Death of a Minor); and (Periodic Payments of Future Medical Costs), were all impacted by changes in the tort law. Pre- and Post-Judgment Interest Pre- and post-judgment interest used to be limited to nine percent interest in pre- and post-judgment recoveries. Under the new law, the interest rates now vary and are based on the intended Federal Funds Rate. The Intended Federal Funds Rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight. Beginning August 28, 2005, pre-judgment per annum (or simple) interest is the intended Federal Funds Rate plus five percent; post-judgment per annum interest is the intended Federal Funds Rate plus three percent. Evaluating Damages Under HB 393, Kurt V. Krueger and John O. Ward (2006). In order to determine the interest rate, the practitioner will have to determine what the current intended Federal Interest Rate is as published by the Federal Reserve Board 1

2 on the internet site: It is unclear why the intended Federal Funds Rate was selected as the benchmark for pre- and postjudgment interest by the legislature. Death of a Caregiver Under the new law, the Missouri Wrongful Death Statute has been supplemented. Now for the death of a caregiver, a new item of pecuniary damages has been added. The new bill adds language to in stating, If the deceased was not employed full time and was at least fifty percent responsible for the care of one or more minors or disabled persons, or persons over sixty-five years of age, there shall be a rebuttable presumption that the value of the care provided, regardless of the number of persons cared for, is equal to one hundred and ten percent of the state average weekly wage, as computed under , R.S.Mo. This language is interesting in several ways: 1. First of all, the caregiver must not have been employed full time. Therefore, if a caregiver was employed full time but then came home and spent another eight hours caring for their charge, they would not apparently be eligible for a recovery under this statutory section. 2. In addition to not being employed full time, the person must be at least fifty percent responsible for the care of one or more minors or disabled persons, or persons over sixty-five. There could be a question as to whether being fifty percent responsible for care means that the person must actually render at least fifty percent of the care. Nonetheless, regardless of that interpretation, however, the category of persons who were trigger this pecuniary damage are minors, disabled persons, or person over 2

3 sixty-five years of age. Therefore, it could be conceivable that a person providing care to a healthy person over the age of sixty-five could trigger this pecuniary damage loss. 3. If all of the conditions are met, then there is a rebuttable presumption that the value of the care provided is equal to one hundred and ten percent of the state average weekly wage as computed under This new statutory language does not define some of the terms used therein. For example, there is no definition of what constitutes, care provided. There is no criteria by which to determine whether or not a person is employed full time. Full time work is usually described by the Department of Labor as work in excess of thirtyfive hours per week. Missouri s Worker s Compensation Law requires a minimum of thirty hours per week to be considered full time. 5. The language does not specify the type of care to be provided or that was provided. Therefore, it is conceivable that anyone over the age of sixty-five would be covered by these damages whether or not they are disabled or not. 6. The state average weekly wage is published by the Missouri Department of Labor and Industrial Relations. From July 1, 2007 through June 30, 2008 it is at $ One hundred and ten percent of the state weekly wage, therefore, would be $778.09, and multiplying by fifty-two weeks in a year, the amount would be $40, annually. (Sly I adjusted these to the average weekly wage amount for the calendar year noted as per the DOLIR website.) Theoretically, that weekly or yearly wage could be computed out over the life expectancy of the decedent and then calculated to present value and determined as a damage in the case. 3

4 Death of a Minor Where a minor is deceased, the Wrongful Death Statute has been supplemented by the following language: If the deceased is under the age of eighteen, there shall be a rebuttable presumption that the annual pecuniary losses suffered by reason of the death shall be calculated based on the annual income of the deceased s parents, provided that if the deceased has only one parent earning income, then the calculation shall be based on such income, but if the deceased has two parents earning income, then the calculation shall be based on the average of the two incomes. This language is ambiguous and open to numerous interpretations. For example, if a deceased child had one parent earning an income of $100, per year, then the pecuniary loss due to the death of the minor child would be $100, The statute is silent, however, the presumption would be that this would be a damage accruing to the parents for the remainder of their (the parents) life expectancy. Then any allowable nonpecuniary losses would be added to their presumed lifetime amount. It could also be that if one parent had an income of $100, a year, the pecuniary loss due could be calculated based on the presumption that the child would have only the $100, a year and the jury could then be left to try to determine how much of that $100, per year would be used to the benefit of these parents. Periodic Payments of Future Medical Costs HB 393 also changed Missouri s Wrongful Death Statute to specify the calculation of future medical periodic payments. [Why would this be the Wrongful 4

5 Death Statute if there is future medical periodic payments?] Parts 2 and 6 of have been changed. New language has been added. The new language appears in bold: 2. At the request of any part to such action made prior to the entry of judgment, the court shall include in the judgment a requirement that future damages be paid in whole or in part in periodic or installment payments if the total award of damages in the action exceeds one hundred thousand dollars. Any judgment ordering such periodic or installment payments shall specify a future medical periodic payment schedule, which shall include the recipient, the amount of each payment, the interval between payments, and the number of payments. The duration of the future medical payment schedule shall be for a period of time equal to the life expectancy of the person to whom such services were rendered, as determined by the court, based solely on the evidence of such life expectancy presented by the plaintiff at trial. The amount of each of the future medical periodic payments shall be determined by dividing the total amount of future medical damages by the number of future medical periodic payments. The court shall apply interest on such future periodic payments at a per annum interest rate no greater than the coupon issue yield equivalent, as determined by the Federal Reserve Board, of the average accepted auction price for the last auction of fifty-two week United States Treasury bills settled immediately prior to the date of the judgment. The judgment shall state the applicable interest rate. The parties shall be afforded the opportunity to agree on the manner of payment of future damages, including the rate of interest, if any, to be applied, subject to court approval. However, in the event the parties cannot agree, the unresolved issues shall be submitted to the court for resolution, either with or without a post-trial evidentiary hearing which may be called at the request of any part or the court. If a defendant makes the request for payment pursuant to this section, such request shall be binding only as to such defendant and shall not apply to or bind any other defendant. 6. Nothing in this section shall prevent the parties from contracting and agreeing to settle and resolve the claim for future damages. If such an agreement is reached by 5

6 the parties, the future periodic payment schedule shall not apply. These sections require the parties to either agree on a payment schedule for future damages or to have those issues decided at a post-trial hearing. Presumably at such a hearing, the parties, along with whatever expertise would be necessary, would try to work out a payment schedule that equals, in terms of present value, the value of the damage award given by the jury. This whole process is cumbersome and convoluted. The future payments would be determined based on evidence of life expectancy presented by the plaintiff at trial. Therefore, however long the plaintiff argues that they would live the future damages would be divided by that number of years. The jury may have taken more information than simply the plaintiff s arguments into consideration, however. Undoubtedly, often defendants will present differing calculations of life expectancy and it is impossible to determine whether or not the jury has taken the defense arguments in consideration or simply bought off on the plaintiff s evidence. Krueger and Ward use an interesting example in their paper Evaluating Damages Under HB 393. They provide this example: Suppose the plaintiff argued $3,000,000 of future medical damages for 30 years of life expectancy, while the defendant argued $1,000,000 of future medical damages for 10 years of life expectancy. If the jury split the plaintiff s and defendant s arguments at $2,000,000 of future life care costs, the annual payment would be $2,000, = $66,667 per year when, in fact, both sides agree that the life care costs amounted to $100,000 per year. Another problem is that under the new bill and, in contravention to , the total award of medical damages is not expressed at present value. 6

7 Finally, the application of simple interest to future payments makes no sense where periodic payments are calculated for medical costs calculated at present value using compound growth and interest rates. This particular section could create numerous problems because it will have an impact on settlement and trial strategy by both plaintiffs and defendants. 7