Will Florida's New Law Stop a Dangerous Game?

The unwilling bellwether state for the nursing home liability crisis has tried to put on the brakes

Florida's nursing home industry has been going through a crisis that might be a sign of what's to come throughout long-term care nationally. It's a sort of domino effect.

The way the game was played out in Florida was this: The first "domino" was excessive litigation, often the result of the attorneys' fee provision, which led to settlements that carried enormous attorneys' fees no matter how small the settlement. This hit the next "domino": skyhigh insurance rates for facilities. The "game" ended with many facilities having to claim bankruptcy and thus close down. Because of this game:

* Nursing homes in Florida were three times more likely to be sued than nursing homes in other states.

* The average amount of claims against nursing homes in Florida was two-and-one-half times greater than the average amount of claims in the other 49 states.

* The average cost of liability insurance per nursing home in Florida was eight times the national average.

To address some of these concerns, Florida Governor Jeb Bush signed into law on May 15, 2001 (Senate Bill 1202), legislation that produced new nursing home and long-term healthcare reforms. Although these reforms are a good start, the industry still has a long way to go before its problems are resolved.

The initial nursing home reforms that were proposed to the Florida Senate mirrored the state's medical malpractice statute, including placing caps on noneconomic damages, applying medical malpractice exemptions for wrongful death cases so adult children of nursing home residents would have no recovery and eliminating punitive damages altogether. However, the final bill became a watereddown version of its predecessor, lacking many of the significant changes initially envisioned. Nevertheless, the new long-term healthcare reforms are a step in the right direction and will hopefully increase the quality of care and decrease the amount of nursing home litigation.

Among all of the reforms, the most significant litigation changes were confined to:

* Punitive damages

* Elimination of entitlement to attorneys' fees

* Reduction in the statute of limitations and mandatory presuit mediation

In addition to litigation changes, nursing home reform has also improved the quality of care by significantly raising staffing level and training requirements, increasing regulatory oversight and requiring nursing homes to implement risk management programs. Although the importance of improving quality of care by raising standards should not be underestimated, the focus of this article will be on the significant legal changes that were adopted relating to long-term healthcare. For example:

No more "gold" dominoes. Fondly referred to by the plaintiffs bar as the "pot of gold at the end of the rainbow," the attorneys' fee provision entitled many attorneys in the past to an amount over and above the recovery record. No matter how minimal the violation or how nominal the damage award, an attorney could claim fees calculated upon hundreds of hours of legal work. It was not unusual to see minimal damage awards accompanied by an enormous award for attorneys' fees.

The new nursing home reforms eliminate the attorneys' fee provision for cases involving injury or death. Before this reform came into effect, a lawyer would simply need to prove a violation of the state's Patient's Bill of Rights to entitle him or her to an award of attorneys' fees over and above the recovery award.

Because of the new reforms, plaintiffs' attorneys' fees will be paid as a percentage of the recovery, as in most personal injury cases. Consequently, fees will be paid from the damage award as opposed to being added on top of the damage award. (The exception to the elimination of the automatic attorneys' fee provision is when a resident prevails in seeking injunctive relief or a claim for administrative remedy. If the resident prevails on this theory, there will be an assessment against the defendant for reasonable attorneys' fees not to exceed $25,000.) With the elimination of the attorneys fee provision, some attorneys will now think twice before pursuing legal actions that might not yield the "pot of gold" they once did.

Three-tiered damages. One of the most significant litigation changes can be seen in the punitive damages reform, which applies to nursing home and assisted living facility cases. Before the reform, there was no limit if the defendant's conduct met a certain standard. The new punitive damages reform follows a threetiered approach.

The first tier limits punitive damages to $1 million or three times the amount of compensatory damages, whichever is greater, in cases where an employer participated in the wrongful conduct, condoned or ratified the conduct, or if the employer engaged in gross negligence that contributed to the injury. (The knowledge requirement regarding an employer who condones, ratifies or consents to the conduct of the employee has been removed.)

The second tier is limited to $4 million or four times the amount of compensatory damages, whichever is greater, if the defendant's wrongful conduct was motivated solely by unreasonable financial gain, and the unreasonably dangerous nature of the conduct was actually known by the managing agent or officer.

The third tier is unlimited punitive damages when the defendant had specific intent to harm the claimant.

However, in an "industry concession," any award of punitive damages is to be divided between a plaintiff and the state's Long-Term Care Facility Improvement Trust Fund. Also, the new caps apply to all cases occurring after May 15, 2001. For cases that occurred on or before that date, a legal action must have been instituted before October 5, 2001, to fall under the prereform law.

Statute of limitations. The new reform adopts a two-year statute of limitations, the same limitation period applicable to professional malpractice actions in Florida, and sets a standard for negligence in nursing home lawsuits. Prior to the reform, the statute of limitations was four years. Under no circumstances may an action be commenced more than four years from the date of an incident. There is a six-year statute of limitations on cases where it is alleged that wrongful conduct went undiscovered as a result of fraud.

The new reforms establish a negligence cause of action for injuries, death or violation of rights, and sets forth the criteria for establishing this cause of action. To establish negligence, a resident must prove:

* The defendant owed a duty to the resident.

* The defendant breached that duty.

* The breach of duty was the legal cause of the damages to the resident.

* The resident sustained a loss as a result of that breach.

The new bill clarifies that the injuries must have been the result of the negligence on the part of the nursing home.

Notification. An important part of the reform is the implementation of a mandatory 75-day presuit notice, and an investigatory procedure for alleged violations of resident rights and negligence resulting in personal injury or death. This reform harmonizes these statutes somewhat with Florida's medical malpractice laws. Under the reform, a suit may not be filed for 75 days after a notice of intent to initiate suit has been mailed to the facility. Presuit investigation includes informal exchange of documents and unsworn statements.

During the presuit phase, the claimant's attorney must:

* specify the basis of the claim;

* identify which of the resident's rights were allegedly violated; and

* provide a description of the alleged resultant injuries.

Unlike Florida medical malpractice actions, however, no expert affidavit is needed to support a claim.

In an effort to promote use of alternative dispute resolution and relieve the pressure on Florida's courts, presuit mediation is mandatory and is to be completed within 105 days after the presuit notice is mailed. A suit cannot be initiated until mediation is completed.

These mandatory presuit provisions should "weed" out the less meritorious cases and facilitate early settlement in the more meritorious cases. They should also have the effect of forcing plaintiffs attorneys to know their cases before filing suit.

Is the game over? Maybe. It remains to be seen whether the dominoes have stopped falling, i.e., whether the reforms will result in a drop in litigation with a simultaneous drop in insurance premiums and the return of the insurers who are on the run from Florida. Ongoing implementation of these reforms--and time--will tell whether Florida can stop this dangerous game before it goes national.

Suzanne Singer is an associate with the law firm of Rumberger, Kirk & Caldwell, PA, with offices throughout Florida and in Birmingham, Alabama. For further information, phone [phone] or e-mail [e-mail].