2013 Medical Malpractice Trend Review

2013 Medical Malpractice Trend Review An annual retrospective study of significant hospital and medical professional liability verdict and settlement trends across the United States of America. 1

Medical Malpractice Trend Review / Contents 3 / Foreword 4 / About the 2013 Medical Malpractice Trend Review 5 / Summary of the 2012 California Cases 8 / Digging into the Details 13 / National Survey of Awards Exceeding $5 Million 23 / Final Thoughts on the National Survey About The Risk Authority For over 20 years, The Risk Authority (TRA) has used its accumulated knowledge and experience to get results across the five dimensions of healthcare risk management: ª Enterprise Risk Management ª Medical Malpractice and Patient Safety ª Claims and Litigation ª Worker s Compensation ª Risk Financing TRA originated from servicing the day-to-day risk management needs of the Stanford University Medical Center. It s where our leaders honed their skills, and it s a position we still pioneer to this day. Years of practical, real-world experience have led to proven results and now we are offering those same benefits to other organizations. We are uniquely positioned to understand your specific needs because we conquer those same ones every day. Working as your partner, we can provide your organization with the same knowledge, tools, training and strategies that will identify opportunities for improvement, ensure quantifiable return on your investment and reduce your risk costs. It s a perspective and a level of service you ll find nowhere else. TOMORROW S RISK MANAGEMENT TODAY To learn more, contact us at www.theriskauthority.com 2

Foreword To Our Readers On behalf The Risk Authority (TRA), we are pleased to present the 40 th edition of the Medical Malpractice Trend Review, an annual retrospective study of significant hospital and medical professional liability verdict and settlement trends across the United States of America. Since 2010, TRA has assumed support for this important work from the Medical Underwriters of California, who had previously sponsored the report. The Review has been authored and published annually since 1975 by Ron Neupauer, retired President of Medical Underwriters of California, which is the management company for Medical Insurance Exchange of California (MIEC), a physician-owned professional liability insurer. Much of the information that has been developed and tracked over the span of almost four decades remains intact and is contained within the 2013 review. In this new edition you will notice the review s title has changed. Historically, we have studied verdicts and settlements in California that exceed one million dollars. In this 2013 review, we have continued the same study in California and have now expanded the scope to include verdicts and settlements across the nation that exceed five million dollars. You will also notice a change in our brand as Stanford Risk Consulting is now The Risk Authority, however, the methodologies and limitations of this Review have not changed. In the coming year, we will be announcing, with Ron Neupauer, some exciting new enhancements to the 41 st edition of the Review that will enable even more insight into large loss malpractice cases in California and across the nation. We look forward to producing future editions of the Medical Malpractice Trend Review as part of Stanford Hospital & Clinics overall mission to care, educate and discover. In the meantime, we welcome your comments and questions which can be sent to riskmanagement@theriskauthority.com. In partnership, Jeffrey F. Driver Chief Executive Officer, The Risk Authority Chief Risk Officer, Stanford University Medical Center 3

2013 Medical Malpractice Trend Review This is our 40th survey of healthcare liability verdicts and settlements involving at least $1 million in awards. Beginning in 1988 the study has expanded to add a national survey of malpractice verdicts and settlements that exceed $5 million, as reported by media sources. In the five years since then, we have identified 180 such cases, with total awards of $3.4 billion. 40th survey involving $1M of awards 180 cases $3BIL of awards About the 2013 Medical Malpractice Trend Review For purposes of this survey, we use verdict or settlement sums as described in printed and online media articles. When specific mention is made of post-trial reductions to a different sum, or when application of tort reform caps reduces a verdict to a lower specified sum, we adjust the data accordingly. However, most of the articles simply report on the verdict, sometimes mentioning that the defendant(s) have or will file appeals, or that some unspecified modification may occur. In those instances we use the original verdict total. Defense costs are not a part of the study. We also warn readers that this is by no means a comprehensive listing of all malpractice verdicts or settlements that exceeded the dollar thresholds of the survey. Settlements in particular often require confidentiality by all parties as part of the agreement, thus no public notice is taken. To avoid possible duplicates in the national survey, we have included only those cases where the name of the plaintiff(s) was mentioned by the media article(s) describing the case. The 2013 Medical Malpractice Trend Review is not intended to be and should not be taken as legal advice. The contents of this study are intended for information and educational purposes only. The study does not provide and is not intended to be viewed as providing all available information on the subject matters. The opinions expressed and materials provided do not represent any official position of Stanford University or any of its affiliates including Stanford University Medical Center, its faculty, staff or employees. 4

California The trade publications we survey for this part of our study described 20 California malpractice and healthcare liability verdicts and settlements in 2012, where at least $1 million was awarded. The number was up from 15 in each of the prior two years, but still well below the all-time high of 48 in 2003. Far more significantly, five jumbo awards, each exceeding $10 million boosted 2012 s total awards to an all-time record of $238.1 million. in total awarded Summary of the 2012 California cases ª All-time record $238.1 million in total awarded. ª The 2012 awards exceeded 2011 s totals by almost $200 million. ª The 2012 awards exceeded the previous record year of 1999 by $84 million. ª The average award in 2012 was 3.5 times the average of the prior four years. ª Five Mega-verdicts of more than $10 million drove up the total and the average. ª California juries were willing to award huge damages in cases with inflammatory circumstances and/or severe injury requiring lifelong care. Punitive damages were included in two of the cases. ª California s MICRA tort reforms were mentioned as a factor in reducing the total award in six cases, but did not prevent the awarding of huge damages for future economic loss. ª University-affiliated, county or federal government hospitals were mentioned as prime defendants in five of the cases. Jumbo verdicts lead the way to a year of record awards ª Five enormous verdicts, including an appellate court affirmation of an earlier verdict, together involved $195.6 million of awards, 82% of what was awarded in all 20 cases. 5

in total awarded ª All five involved hospitals or large medical group defendants. Several also involved medical device manufacturers and individual healthcare providers. ª Two of the huge verdicts occurred in Santa Clara and San Luis Obispo, considered relatively conservative Northern California counties. ª The media descriptions in two of these jumbo verdicts included some references to reductions or offsets due to application of MICRA s limitations on non-economic damages and periodic payment provisions. ª One verdict included $65 million in punitive damages rendered against a hospital for its failure to properly supervise and remove a healthcare worker who sexually assaulted a patient. ª A second verdict also included $7 million in punitive damages, when the jury was informed about a doctor s financial interest in a medical device that was implanted in a patient and caused injury. ª In another case, the hospital settled during trial, saddling an obstetrician with a $74.2 million birth injury verdict. 5 verdicts involved ª Another verdict came in at over $22 million but was reduced by $6 million through application of the $250,000 statutory cap on non-economic damages. A hospital had settled its liability during trial, leaving a large medical group as the primary remaining defendant. The plaintiff alleged that an unnecessary cerebral angiogram caused permanent damage to a patient. ª The federal appellate case affirmed an earlier California verdict against a military obstetrician sued under the Federal Tort Claims Act. The judges determined that a $25+ million present value award made under California law was appropriate. Having five $10 million+ awards in 2012 is unprecedented for California. By comparison, only 13 awards over the prior 10 years exceeded $10 million, and only one of them was over $20 million. The influence of these huge cases caused quite a change from the recent trends as we can see in the following charts. They remind us how volatile and unpredictable malpractice risk can be, even in California with its widely recognized MICRA tort reform laws. Very large verdicts receive widespread publicity and raise the bar for settlement negotiations in many other cases that involve similar catastrophic injuries. 6

Total, median and average indemnity awarded by year 2003-2012 Total indemnity awarded in the last 10 years is $1.1 billion. The annual total had been trending downward until it jumped to $238.1 million in 2012. The median award in 2012 was $3.5 million, second only to 2010 s record $4.77 million. The linear trend (yellow line in the graph) shows the upward progression in median awards over the last decade. Average indemnity also ballooned in 2012 after staying in a narrow range for the prior nine years. 40-year trend in number of cases with at least $1 million indemnity In the 40 years of this study, we have found 293 reports of California malpractice cases with awards of at least $1 million. The annual number peaked at 48 in 2003 and has drifted lower for almost a decade until it climbed back up to 20 in 2012. Total $300 and median awards by year 2003-2012 $6 $250 $5 $200 $4 $150 $3 $100 $2 60 50 40 30 20 $50 $1 10 50 45 40 35 30 25 20 15 10 $- $- 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 48 31 29 37 33 Total awarded Median award Number of awards exceeding $1 million and average indemnity awarded 0 $- 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 5 0 5 5 5 2 12 7 13 15 13 16 19 15 30 15 12 11 17 30 19 Cases over $1 million 33 32 30 29 28 28 28 26 25 15 15 Number of California cases with awards over $1 million 1973-2012 39 38 20 Average indemnity 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 24 40 48 31 29 37 33 30 19 15 15 20 $14 $12 $10 $8 $6 $4 $2 7

Digging into the Details In each of the following categories we ll compare 2012 s cases with those of the prior decade. Northern/Southern California; Verdict, Settlement, Arbitration (2012 cases) Total Award ARBITRATION SETTLEMENT VERDICT Total Pct. North $ 5,500,000 $ 12,600,000 $ 98,615,773 $ 116,715,773 49.0% South $ 3,024,204 $ 35,409,489 $ 82,982,250 $ 121,415,943 51.0% Total $ 8,524,204 $ 48,009,489 $ 181,598,023 $ 238,131,716 100% Number of cases ARBITRATION SETTLEMENT VERDICT Total North 1 3 5 9 South 2 5 4 11 Total 3 8 9 20 Average award ARBITRATION SETTLEMENT VERDICT Total North $ 5,500,000 $ 4,200,000 $ 19,723,155 $ 12,968,419 South $ 1,512,102 $ 7,081,898 $ 20,745,563 $ 11,037,813 Total $ 2,841,401 $ 6,001,186 $ 20,177,558 $ 11,906,586 Almost half of 2012 s cases arose from incidents in Northern California counties. By contrast, less than 25% of cases over the past decade were in Northern California Similarly, driven by two of the jumbo awards, 49% of the total awarded in 2012 arose from care provided in Northern California counties, compared with just 30% over the past decade. Verdicts were once again the most expensive and volatile method of resolution. In 2012 the average verdict was more than three times the average settlement amount and six times the average arbitration award. The effect of the very large verdicts was also most evident. 8

Location within the healthcare system & severity of injury The location of incidents in the 2012 cases was distributed almost identically to that of the prior 10 years. Number of cases Hospital- OR & Labor Hospital-ER & other Hospital Total Non-hospital 2012 8 (40%) 8 (40%) 16 (80%) 4 (20%) 2002-2011 130 (43.8%) 107(36%) 237(79.8%) 60 (20.25) In 2012, 92% of the total indemnity awarded was for incidents that occurred within hospitals, compared with 84% over the prior 10 years. This increase in hospital-located incidents may reflect the recent changes in healthcare delivery in California. A growing number of California physicians have become employees of hospitalbased medical foundations or very large medical groups. Plaintiff attorneys, recognizing the high costs associated with bringing a malpractice suit to conclusion, are focusing their attention on cases that have high potential verdict value and involve deep-pocketed, corporate defendants who are less likely to be viewed sympathetically by juries. Severity of injury With one exception, the distribution of awards by severity of injury in the 2012 cases closely resembled the prior 10 years pattern, with over 86% going to patients who suffered major permanent or major grave injury. The remaining 14% was awarded in wrongful death and all other types of injury cases. The exception in 2012 was a verdict for posttraumatic stress disorder (listed in NONE/ EMOTION line of the chart) following a sexual assault by a hospital employee. The verdict included $65 million in punitive damages as part of a total $67.3 million award. The punitive damage verdict came because the jury heard testimony that five other women had been assaulted by this employee, and although the hospital denied knowledge of these incidents, the jury concluded it had a responsibility to better investigate the allegations. The plaintiff attorney stated in a video that the jury wanted to send the medical system a message and did so with this punitive damage award. Total awarded DrsOffice/other HOSP/L&D HOSP/O.R. HOSP/OTHER Total DEATH $ 3,016,389 $ 1,274,204 $ 4,290,593 MAJOR/grave $ 3,500,000 $ 104,909,489 $ 20,489,384 $ 128,898,873 MAJOR/perm $ 1,750,000 $ 11,600,000 $ 5,000,000 $ 18,350,000 MAJOR/temp $ 12,690,000 $ 12,690,000 MINOR/perm $ 3,610,000 $ 2,000,250 $ 5,610,250 NONE/emotion $ 1,056,000 $ 67,236,000 $ 68,292,000 Total $ 18,996,000 $ 104,909,489 $ 18,226,389 $ 95,999,838 $ 238,131,716 Pct 8.0% 44.1% 7.7% 40.3% 100.0% 9

Severity of injury Cont. Number of cases DrsOffice/other HOSP/L&D HOSP/O.R. HOSP/OTHER Total DEATH 1 1 2 MAJOR/grave 1 3 3 7 MAJOR/perm 1 3 2 6 MAJOR/temp 1 1 MINOR/perm 1 1 2 NONE/emotion 1 1 2 Total 4 3 5 8 20 Pct. 20.0% 15.0% 25.0% 40.0% 100.0% Average award DrsOffice/other HOSP/L&D HOSP/O.R. HOSP/OTHER Total DEATH $ 3,016,389 $ 1,274,204 $ 2,145,297 MAJOR/grave $ 3,500,000 $ 34,969,830 $ 6,829,795 $ 18,414,125 MAJOR/perm $ 1,750,000 $ 3,866,667 $ 2,500,000 $ 3,058,333 MAJOR/temp $ 12,690,000 $ 12,690,000 MINOR/perm $ 3,610,000 $ 2,000,250 $ 2,805,125 NONE/emotion $ 1,056,000 $ 67,236,000 $ 34,146,000 Total $ 4,749,000 $ 34,969,830 $ 3,645,278 $ 11,999,980 $ 73,258,880 Treatment categories Three birth injury awards, 15% of the cases, accounted for over 44% of the total indemnity in 2012, leading all other categories. In the prior 10 years birth injury cases also represented the highest percentage of cases and total awards, both at 29%. The average birth injury award in 2012, at almost $35 million, was almost 10 times the average of the prior 10 years, again driven by the jumbo verdicts. 10

Average award ARBITRATION SETTLEMENT VERDICT Total % Anesth related $ 2,500,000 $ 2,500,000 1.0% Birth injury $ 5,500,000 $ 25,184,489 $ 74,225,000 $ 104,909,489 44.1% Diag Error $ 3,500,000 $ 3,500,000 1.5% Drug/Rx $ 1,274,204 $ 1,500,000 $ 2,774,204 1.2% Fail to treat $ 1,750,000 $ 5,425,000 $ 7,175,000 3.0% Other $ 68,292,000 $ 68,292,000 28.7% Surg error $ 3,500,000 $ 6,626,389 $ 10,126,389 4.3% Treatment error $ 7,900,000 $ 30,954,634 $ 38,854,634 16.3% Total $ 8,524,204 $ 48,009,489 $ 181,598,023 $ 238,131,716 100% 3.6% 20.2% 76.3% 100% Number ARBITRATION SETTLEMENT VERDICT Total % Anesth related 1 1 5.0% Birth injury 1 1 1 3 15.0% Diag Error 1 1 5.0% Drug/Rx 1 1 2 10.0% Fail to treat 1 2 3 15.0% Other 2 2 10.0% Surg error 1 2 3 15.0% Treatment error 2 3 5 25.0% Total 3 8 9 20 100.0% 15.0% 40.0% 45.0% 100.0% Time elapsed from incident to resolution of the case The average time from incident to resolution of the 2012 California cases was four years and four months, seven months longer than the average over the prior 10 years. Two cases that resolved in 2012, but arose from incidents in 1997 and 2003, contributed to this longer average elapsed time. 11

Primary defendant / specialty Hospitals were identified as the primary defendants in six of the 2012 cases. Among medical specialties, obstetricians were again involved in the most cases (six), as well as the highest total ($113.8 million) and average ($19 million) awards. The mega-verdicts greatly influenced other specialties high average awards, as seen in the following tables: Total award North South Total ANESTHESIOLOGY $ 2,500,000 $ 2,500,000 BARIATRIC SURG $ 3,500,000 $ 3,500,000 ENDOCRINOLOGY $ 1,274,204 $ 1,274,204 GENERAL SURG $ 5,600,000 $ 5,600,000 HOSPITAL $ 4,516,389 $ 73,461,250 $ 77,977,639 NEURORADIOLOGY $ 16,264,384 $ 16,264,384 OB/GYN $ 83,335,000 $ 30,434,489 $ 113,769,489 ORTHOPEDICS $ 12,690,000 $ 12,690,000 PSYCHIATRY $ 1,056,000 $ 1,056,000 RADIOLOGY $ 3,500,000 $ 3,500,000 Total $ 116,715,773 $ 121,415,943 $ 238,131,716 Number of cases North South Total ANESTHESIOLOGY 1 1 bariatric surgery 1 1 Endocrinology 1 1 GENERAL SURGERY 1 1 HOSPITAL 2 4 6 NEURORADIOLOGY 1 1 OB/GYN 3 3 6 ORTHOPEDICS 1 1 PSYCHIATRY 1 1 RADIOLOGY 1 1 Total 9 11 20 In recent years we have seen more cases where a hospital, medical group or other corporate entity is the primary defendant. Among individual defendants, obstetricians remain the specialty most often and most expensively involved in these large cases. Average award North South Total ANESTHESIOLOGY $ 2,500,000 $ 2,500,000 bariatric surgery $ 3,500,000 $ 3,500,000 Endocrinology $ 1,274,204 $ 1,274,204 GENERAL SURGERY $ 5,600,000 $ 5,600,000 HOSPITAL $ 2,258,195 $ 18,365,313 $ 12,996,273 NEURORADIOLOGY $ 16,264,384 $ 16,264,384 OB/GYN $ 27,778,333 $ 10,144,830 $ 18,961,582 ORTHOPEDICS $ 12,690,000 $ 12,690,000 PSYCHIATRY $ 1,056,000 $ 1,056,000 RADIOLOGY $ 3,500,000 $ 3,500,000 Total $ 12,968,419 $ 11,037,813 $ 78,342,443 12

Seven year history of California cases over $1 million 2012 2011 2010 2009 2008 2007 2006 Number of cases 20 15 15 19 30 33 37 Total Indemnity $ 238,131,716 $ 39,880,917 $ 75,573,587 $ 70,505,418 $ 82,286,542 $ 136,079,534 $ 119,827,077 Average Indemnity $ 11,906,586 $ 2,658,728 $ 5,038,239 $ 3,710,811 $ 2,742,885 $ 4,123,622 $ 3,238,570 The influence of the very large 2012 cases is evident in the total and average movement over the 7 year period. National survey of awards exceeding $5 million In the spring of 2008 we began to assemble a national database of malpractice verdicts and settlements exceeding $5 million in awards. We used a combination of print and online media sources of articles. Our database has grown to 180 such verdicts and settlements, with total awards at $3.38 billion. The average award is $18.8 million and the median $10.85 million. These totals include six cases that appeared in articles during January 2013. The following commentary and tables include only the 174 cases reported through year-end 2012. We have entered an era of mega-verdicts ª 14 of the awards, all jury verdicts, exceeded $50 million, including five at over $100 million ª Only two of these mega-verdicts came prior to 2011, three were reported in 2011, and then eight more in 2012 ª Half were rendered in New York state, two in California, and one each in Florida, Michigan, Pennsylvania, Maryland and Connecticut. ª The total awarded in just these 14 was an astonishing $1.26 billion! That s 37% of the total awarded in all 180 cases in our database. We re pretty sure that every one of these megaverdicts was appealed by the defendant(s) or settled subsequent to trial for an amount that is less than what the juries initially awarded. But the headline value of the original verdicts is what gets reported by the media and tends to stick in people s memories. No one knows all the factors driving this trend to ever larger verdicts. Perhaps it has something to do with the state of the economy in recent years, or with the growing de-personalization of healthcare delivery, or the ever larger number of Americans who lack health insurance. We do know that the injuries to the plaintiffs (none were wrongful death cases) were serious, permanent, devastating. Over half the cases involved injuries to newborns. We also know that all 14 arose from events that occurred within a hospital, meaning that juries perceived a deep pocket defendant, although hospitals settled their liability before or during trial in several of the cases. Egregious behavior by defendants or employees of defendants angered juries and led to several large punitive damage awards. No plaintiff attorney had more than one of these cases. All the verdicts received substantial local and in some cases, regional or national publicity and notoriety. 13

Here are some quotations from attorneys representing the plaintiffs in these cases. Through this prism we can see how they couch arguments to persuade juries that a huge award is justified. Over the course of less than a month, medical personnel mismanaged (the plaintiff s) medications, failed to respond swiftly to crises and did not provide essential treatments. The doctor in this case shouldn t have been doing the surgery and should not have been managing this patient because he did not have proper credentials to do this surgery He (the ER doctor) reads the (EKG) results as reassuring that there was just a hysterical female in his emergency room.. The jury was mad at (the defense) expert, who was this arrogant little twit who didn t know what he was talking about. He performed an ultrasound examination with outdated, insensitive and poorly maintained equipment provided to him by the hospital There was ample opportunity to deliver the kid on time. The (defendant doctor) must have been overwhelmed because he was the only doctor there, or he would have seen this ahead of time. 14

National survey awards by year and state Total awarded: 2008 2009 2010 2011 2012 Total AL $ 20,000,000 $ 15,000,000 $ 35,000,000 AR $ 20,000,000 $ 20,000,000 AZ $ 7,275,160 $ 7,275,160 CA $ 10,100,000 $ 22,000,000 $ 12,500,000 $ 7,600,000 $ 206,699,873 $ 258,899,873 CO $ 5,300,000 $ 5,300,000 CT $ 42,150,000 $ 69,119,989 $ 111,269,989 DC $ 5,363,499 $ 5,363,499 DE $ 6,250,000 $ 6,250,000 FL $ 42,000,000 $ 64,600,000 $ 75,700,000 $ 78,900,000 $ 250,050,000 $ 511,250,000 GA $ 13,800,000 $ 13,800,000 HI $ 6,100,000 $ 11,000,000 $ 17,100,000 IA $ 5,500,000 $ 5,500,000 ID $ 5,000,000 $ 5,000,000 IL $ 50,150,000 $ 45,300,000 $ 73,800,000 $ 50,250,000 $ 76,378,008 $ 295,878,008 IN $ 8,100,000 $ 5,000,000 $ 13,000,000 $ 26,100,000 KY $ 9,864,176 $ 10,407,839 $ 20,272,015 LA $ 24,200,000 $ 24,200,000 MA $ 13,500,000 $ 21,400,000 $ 14,050,000 $ 5,800,000 $ 54,750,000 MD $ 80,620,000 $ 80,620,000 MI $ 144,000,000 $ 144,000,000 MN $ 23,200,000 $ 23,200,000 NC $ 31,870,000 $ 5,000,000 $ 36,870,000 NJ $ 18,842,278 $ 18,173,273 $ 18,000,000 $ 8,500,000 $ 18,905,700 $ 82,421,251 NM $ 19,345,000 $ 44,500,000 $ 63,845,000 NY $ 57,785,992 $ 290,489,847 $ 12,200,000 $ 104,900,000 $ 403,630,092 $ 869,005,931 OH $ 22,646,023 $ 16,915,000 $ 17,800,000 $ 57,361,023 OR $ 29,400,000 $ 29,400,000 PA $ 52,200,000 $ 10,157,934 $ 64,812,661 $ 110,190,148 $ 237,360,743 SC $ 12,000,000 $ 12,000,000 TN $ 29,710,000 $ 22,200,000 $ 46,346,720 $ 98,256,720 TX $ 18,000,000 $ 10,375,725 $ 10,100,000 $ 38,475,725 UT $ 16,000,000 $ 16,000,000 VA $ 9,000,000 $ 9,000,000 WA $ 14,800,000 $ 14,800,000 WI $ 39,684,982 $ 17,300,000 $ 23,300,000 $ 13,710,000 $ 93,994,982 WY $ 9,000,000 $ 9,000,000 Total $ 404,973,451 $ 606,038,120 $ 335,683,659 $ 625,447,650 $ 1,366,677,039 $ 3,338,819,919 15

The trend toward ever higher awards is clear. In 2008, the media reported 32 such cases, with total indemnity of just over $400 million. Four years later the number of cases had almost doubled to 58, and the total awarded more than tripled, to $1.37 billion. The average amount awarded has increased from $12.65 million in 2008, to $23.6 million by 2012. The biggest increases were in New York, which had four cases in 2008 with total awards of $57.8 million, growing to nine cases in 2012, with $403.6 million in awards. California also saw a big jump in the number of $5 million+ cases from two in 2008 to seven in 2012. California s total awards in the cases over $5 million increased from $10.1 million in 2008, to $206.7 million in 2012. $5 million+ cases: Total awarded by year $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 2008 2009 2010 2011 2012 Number of Cases over $5 million The number of verdicts and settlements exceeding $5 million is also on the rise 70 60 50 40 30 20 58 32 30 29 25 10 0 2008 2009 2010 2011 2012 16

Number of cases with over $5 million awarded The number of verdicts and settlements exceeding $5 million is also on the rise Malpractice verdicts and settlements of $5 million or more occurred in 36 states over the past five years. 2008 2009 2010 2011 2012 Total AL 1 1 2 AR 1 1 AZ 1 1 CA 2 2 1 1 7 13 CO 1 1 CT 2 2 4 DC 1 1 DE 1 1 FL 2 4 5 3 4 18 GA 2 2 HI 1 1 2 IA 1 1 ID 1 1 IL 5 3 5 4 8 25 IN 1 1 1 3 KY 1 1 2 LA 1 1 MA 1 2 2 1 6 MD 3 3 MI 1 1 MN 1 1 NC 2 1 3 NJ 1 2 1 1 3 8 NM 2 1 3 NY 4 7 2 4 9 26 OH 1 2 2 5 OR 3 3 PA 3 2 4 5 14 SC 1 1 TN 2 1 4 7 TX 2 1 1 4 UT 1 1 VA 1 1 WA 1 1 WI 3 1 1 1 6 WY 1 1 Total 32 30 25 29 58 174 17

By category of service/allegation: Birth injury cases dominated in the national picture, as they did in California. Over the four year period of the national reports, birth injury cases accounted for 26.7% of all the cases and 37.7% of the total awards. No other category reached 20% of either the number or the total awards. Total awarded Category 2008 2009 2010 2011 2012 Anesthesia $ 10,500,000 $ 26,300,000 $ 10,500,000 $ 40,221,570 Birth injury $ 160,738,301 $ 287,739,847 $ 124,300,000 $ 225,119,989 $ 475,417,620 Drug / Rx $ 10,100,000 $ 40,850,000 Failure to treat $ 25,800,000 $ 17,500,000 $ 56,107,934 $ 47,990,000 $ 151,979,560 failure/delay in diagnosis $ 36,000,000 $ 71,913,273 $ 5,000,000 $ 87,342,661 $ 261,856,991 Other $ 5,000,000 $ 12,500,000 $ 7,000,000 $ 76,536,000 Post Surg treatment $ 27,800,000 $ 6,120,000 $ 6,200,000 $ 29,095,000 $ 184,000,000 Surgical related $ 91,550,168 $ 119,165,000 $ 66,200,000 $ 113,000,000 $ 36,500,000 Treatment error $ 47,584,982 $ 77,300,000 $ 65,375,725 $ 95,300,000 $ 99,315,298 Total $ 404,973,451 $ 606,038,120 $ 335,683,659 $ 625,447,650 $ 1,366,677,039 Number of cases Category 2008 2009 2010 2011 2012 Anesthesia 1 2 1 3 Birth injury 10 9 7 5 17 Drug / Rx 1 4 Failure to treat 3 2 6 2 6 failure/delay in diagnosis 4 6 1 8 14 Other 1 1 1 2 Post Surg treatment 2 1 1 2 2 Surgical related 6 6 5 5 3 Treatment error 5 4 4 4 7 Total 32 30 25 29 58 18

Cases concentrated in four states: Number of $5 million+cases 35 The distribution by state is noteworthy. Four states: Florida, Illinois, New York and Pennsylvania accounted for 85 of the 180 cases (47%) and $1.933 billion in awards (57%). Only five states California, Florida, Illinois, New York and Pennsylvania had more than 10 such cases over the five-year span. In total they accounted for 96 of the cases or 55% of the total. 25 20 15 10 5 0 2008 2009 2010 2011 2012 FL,IL,NY,PA All other states California had five verdicts and settlements greater than $10 million in 2012. However, the average California award is still only 86% as much as in the four other states with the largest awards. California s MICRA is most likely responsible. Total awarded cases over $5 million FL,IL,NY,PA These four states had almost as many cases over $5 million as did the other 46 in every year since 2008 All other states $1,447,225,237 $1,933,094,682 Even more significantly, Florida, Illinois, New York and Pennsylvania cases accounted for more in total awards than did the other 46 states in three of the five years, and their recent trend is steeper than the other 46 states. These four states each contain plaintiff-friendly metro areas. None has been able to enact and maintain effective tort reform measures for medical liability. Total awarded by year in $5 million+ cases $900 $800 $700 $600 $500 $400 $300 $200 $100 0 2008 2009 2010 2011 2012 FL,IL,NY,PA All other states 19

Hospital located cases The trend to ever higher awards against hospitals is clear in the following chart. While the total awarded in cases that occurred outside hospitals remained fairly steady from 2008 to 2012, total awards resulting from care within hospitals rose dramatically 600 500 400 300 200 2008 2009 2010 2011 2012 100 $ DrsOffice/othr HOSP/E.R. HOSP/L&D HOSP/O.R. HOSP/OTHER 20

Prime defendant Hospitals were identified as the chief defendants in 50 of the 174 cases (28.7%) reported between 2008 and 2012. Physicians were often included in the descriptions but the media articles did not identify a particular specialist or simply reported that the verdict or settlement was against the hospital. Among physician and other healthcare providers, obstetricians were named in 48 cases (27.6%), and emergency medicine specialists in nine (5.2%). No other specialty was mentioned more than six times. 2008 2009 2010 2011 2012 Total ANESTHESIOLOGY 1 1 1 3 6 ATHLETIC MEDICINE 1 1 BREAST SURGERY 1 1 CARDIOLOGY 1 1 CARDIO SURGERY 1 1 1 3 CRITICAL CARE 1 1 DERMATOLOGY 1 1 EMERGENCY MEDICINE 2 3 1 3 9 ENDOCRINOLOGIST 1 1 FAMILY MEDICINE 1 1 GASTROENTEROLOGY 1 1 GENERAL SURGERY 2 1 1 4 GENETICS 1 1 HOSPITAL 9 2 7 8 24 50 INFECTIOUS DISEASE 1 1 INTERNAL MEDICINE 1 1 1 2 5 INTERVENIONAL CARDIOLOGY 1 1 NEONATOLOGY 1 1 2 NEUROLOGY 1 1 NEURORADIOLOGY 1 1 2 NEUROSURGERY 1 2 1 4 NURSE MIDWIFE 1 1 2 OB/GYN 10 11 6 10 11 48 ONCOLOGY 1 1 ORAL SURGERY 1 1 2 ORTHOPEDICS 3 4 7 OTOLARYNGOLOGY 1 1 2 PAIN MANAGEMENT 1 1 2 PEDIATRICS 1 1 2 PLASTIC SURGERY 1 1 2 PODIATRY 1 1 PSYCHIATRY 1 1 PULMONARY DISEASES 1 1 RADIOLOGY 1 1 1 1 2 6 Total 32 30 25 29 58 174 21

Prime defendant continued The cases where hospital defendants were chiefly identified also accounted for more of the total awards ($1.2 billion, 37%). Obstetricians obviously were involved in most of the birth injury cases and accounted for $1.1 billion, 34% of the total awards. Emergency medicine specialists were next, with $90.6 million, 2.7% of the total. 2008 2009 2010 2011 2012 Total ANESTHESIOLOGY $ 10,500,000 $ 20,000,000 $ 10,500,000 $ 40,221,570 $ 81,221,570 ATHLETIC MEDICINE $ 10,100,000 $ 10,100,000 BREAST SURGERY $ 9,000,000 $ 9,000,000 CARDIOLOGY $ 6,000,000 $ 6,000,000 CARDIO SURGERY $ 9,864,176 $ 15,000,000 $ 7,000,000 $ 31,864,176 CRITICAL CARE $ 34,000,000 $ 34,000,000 DERMATOLOGY $ 5,000,000 $ 5,000,000 EMERGENCY MEDICINE $ 21,900,000 $ 38,850,000 $ 9,000,000 $ 20,814,078 $ 90,564,078 ENDOCRINOLOGIST $ 6,832,875 $ 6,832,875 FAMILY MEDICINE $ 6,250,000 $ 6,250,000 GASTROENTEROLOGY $ 6,120,000 $ 6,120,000 GENERAL SURGERY $ 22,550,000 $ 17,500,000 $ 6,000,000 $ 46,050,000 GENETICS $ 13,135,000 $ 13,135,000 HOSPITAL $ 86,100,000 $ 29,200,000 $ 99,600,000 $ 133,377,661 $ 882,214,937 $ 1,230,492,598 INFECTIOUS DISEASE $ 8,000,000 $ 8,000,000 INTERNAL MEDICINE $ 6,100,000 $ 8,500,000 $ 10,375,725 $ 11,163,499 $ 36,139,224 INTERVENIONAL CARDIOLOGY $ 5,157,934 $ 5,157,934 NEONATOLOGY $ 11,500,000 $ 7,050,000 $ 18,550,000 NEUROLOGY $ 10,000,000 $ 10,000,000 NEURORADIOLOGY $ 14,000,000 $ 16,264,384 $ 30,264,384 NEUROSURGERY $ 5,000,000 $ 41,615,000 $ 23,000,000 $ 69,615,000 NURSE MIDWIFE $ 11,400,000 $ 5,000,000 $ 16,400,000 OB/GYN $ 178,124,293 $ 317,729,847 $ 96,800,000 $ 290,319,989 $ 249,047,497 $ 1,132,021,626 ONCOLOGY $ 13,500,000 $ 13,500,000 ORAL SURGERY $ 14,800,000 $ 11,000,000 $ 25,800,000 ORTHOPEDICS $ 45,500,000 $ 38,225,360 $ 83,725,360 OTOLARYNGOLOGY $ 13,000,000 $ 8,600,000 $ 21,600,000 PAIN MANAGEMENT $ 6,300,000 $ 36,000,000 $ 42,300,000 PEDIATRICS $ 60,000,000 $ 28,450,000 $ 88,450,000 PLASTIC SURGERY $ 20,500,000 $ 60,000,000 $ 80,500,000 PODIATRY $ 8,100,000 $ 8,100,000 PSYCHIATRY $ 9,300,000 $ 9,300,000 PULMONARY DISEASES $ 5,000,000 $ 5,000,000 RADIOLOGY $ 10,084,982 $ 7,173,273 $ 7,500,000 $ 7,600,000 $ 25,407,839 $ 57,766,094 Total $ 404,973,451 $ 606,038,120 $ 335,683,659 $ 625,447,650 $ 1,366,677,039 $ 3,338,819,919 22

Most of the cases reported were jury verdicts Not surprisingly, 77% of the cases and 87% of the total awards came via jury verdicts rather than settlements. Verdicts are public records thus are reported widely by the media. Settlements generally involve lesser sums and often include confidentiality agreements, allowing the defendant healthcare providers and institutions to avoid negative publicity. Only two of the reported cases were the results of formal arbitration. Long delays These national cases of more than $5 million took longer to resolve than the California cases. The average elapsed time from date of treatment to date of verdict or settlement was 6.4 years in the 167 cases where this information was included in the description. California cases of $1 million or more have been taking an average of around four years to resolve. The reasons could include: ª more congested court calendars, especially in urban areas where many of these cases were tried Total awarded 2008-2012- VERDICTS, Arbitration awards, setlements 1,600 1,400 1,200 1,000 800 600 400 200 0 2008 2009 2010 2011 2012 VERDICT SETTLEMENT ARBITRATION ª highly contested and protracted pre-trial discovery, given the severity of the injuries and the high damages ª delayed discovery of the cause of an injury, especially in the birth injury cases, a few of which took nearly 20 years Final thoughts on the national survey 1The number of very large malpractice verdicts has increased dramatically in the last few years. 2Deep-pocketed corporate or institutional defendants are most often the targets of very large verdicts. 3Birth injury cases continue to be the most frequent and most expensive of these very large cases. 4The cases are concentrated in four states well known for generous verdicts and a lack of tort reform. 23

Other studies reach similar conclusions An October 2012 study by ASHRM and Aon contains voluminous loss information from a database of hospitals around the country. Most of them have self-insurance or captive insurance programs. Their loss experience is therefore not included in the standard, regulated insurance industry (or AM Best s) data and reports. The ASHRM/Aon study limited claims to $2 million to avoid the distorting influence of very large claims. However, a brief discussion of the influence and distribution of claims above $2 million is contained deep in the report. It highlights so-called High Risk Jurisdiction Severity Trends concluding that the (severity) trend differences become more pronounced for the high severity locations identified above (which are mostly the same areas identified in our survey). The high risk venues not only show larger dollar values, but also a faster growth in indemnity cost year on year: the median indemnity amount is growing at 11.2% per annum and large claims in the same venues are growing at 5.4%. Another 2012 study by global insurer Zurich notes that very large claims (over $5 million indemnity) have never comprised more than 0.65% of the total claims universe, but did rise from 0.27% of all claims in 2006, to 0.61% in 2009. The study did not state what percentage of the total loss costs these very large claims represented. 24

About the Author Ron Neupauer has been involved in medical liability insurance since 1971 and is the retired president of Medical Underwriters of California, the management company for Medical Insurance Exchange of California (MIEC), California s first physician-owned medical liability insurer. From 1975 to 2008 he served in various management positions at MIEC, retired from his position as CEO at the end of 2008, and has served as a consultant to the company since then. He has also served on committees and the board of the Physician Insurers Association of America and since 2010 on the board of another physician-owned insurer based in California. Acknowledgements We d like to acknowledge Brad Briegleb, Esq., Vice President of Claims and Litigation Strategy, The Risk Authority, for his leadership and support on this project and Bonnie Beganovic of MIEC s staff, who expertly assembles and catalogues the data elements form the publications surveyed for the report. We thank MIEC for its long-term support of this annual review and analysis and look forward with enthusiasm to its continuation. 25

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