Cleveland Clinic Health System Obligated Group - FMSbonds.com

Malpractice Lawsuits and Malpractice InsuranceThe ability of, and the cost to, the Obligated Issuers to insure or otherwise protect themselves againstmalpractice claims may adversely affect their future results of operations or financial condition. For furtherinformation, see “PART II. THE OBLIGATED GROUP — K. LIABILITY CONSIDERATIONS ANDLITIGATION” in APPENDIX A hereto.The ability of health care providers to obtain malpractice insurance in Ohio and Florida, like most of therest of the United States, has significantly deteriorated as rates for such insurance have increased, commercialproviders have reduced their participation in, or withdrawn entirely from, the medical malpractice insurance realm,and PHICO, a Pennsylvania private malpractice insurer that had written such medical malpractice policiesnationally, was declared insolvent. In addition, the events of September 11, 2001 and the attendant decline infinancial markets and their impact on insurance companies’ assets had an adverse impact on the medical malpracticeinsurance market. However, in 2003, both Ohio and Florida enacted legislation to limit amounts of money injuredpatients may recover in medical malpractice lawsuits. Although this legislation is intended to stabilize the liabilityinsurance market, this will only occur over time, if at all.In 2003, Ohio enacted legislation to limit amounts of money injured patients may recover in medicalmalpractice lawsuits. Although this legislation is intended to stabilize the liability insurance market, this effect willonly occur over time, if at all. The central benefit of the Ohio reforms is a complex cap on non-economic damagesin medical malpractice cases. The basic cap is the larger of $250,000 or three times economic damages, subject to amaximum of $350,000 per plaintiff and a maximum of $500,000 per occurrence. These maximum amounts increaseto $500,000 per plaintiff and $1 million per occurrence if the plaintiff has suffered permanent and substantialphysical deformity, loss of use of a limb, loss of a bodily organ system, or permanent physical functional injury thatprevents him from being able to independently care for himself and perform life sustaining activities. The cap doesnot limit the non-economic damages that family members can recover in a wrongful death case, but it does limit theright of a decedent’s estate to recover for damages like conscious pain and suffering that the decedent experiencedprior to death.In addition, in 2005, Senate Bill 80 became law in Ohio. This law extended many of the 2003 Ohiomedical malpractice reforms to other areas of tort law, and, among other things, established a cap on non-economicdamages in non-catastrophic cases and imposed a cap on punitive damages.The Ohio Supreme Court recently affirmed the constitutionality of several provisions of the 2005 tortreform act in Arbino v. Johnson & Johnson. Decided on December 27, 2007, the Ohio Supreme Court upheld theconstitutionality of the caps on non-economic damages and punitive damages, and further found that neither capviolated the separation of powers or single subject rule. The Ohio Supreme Court did not rule, however, on achallenge to the collateral source provision, as the court concluded that the plaintiff did not have standing tochallenge that provision.In Florida, a comprehensive tort reform statute took effect September 15, 2003, for lawsuits filed on orafter that date. The most important provisions of the statute are those related to damage caps. All the caps are onnon-economic damages only. These are somewhat complicated, because there are separate caps for “practitioners”(primarily doctors) and non-practitioners (primarily hospitals). In both cases, the caps depend on the seriousness ofinjury.Non-economic damages from all non-practitioners (including hospitals) are limited to $750,000 perclaimant and $1.5 million in the aggregate. The $750,000 is increased to $1.5 million in cases of death or apermanent vegetative state, and can be increased to $1.5 million for catastrophic injuries if the court makes anappropriate finding that manifest injustice would otherwise result. The caps include a hospital’s vicarious liabilityfor its employees and agents.Non-economic damages from all practitioners (including doctors) are limited to $500,000 per claimant and$1 million in the aggregate. The $500,000 is increased to $1 million in cases of death or a permanent vegetativestate, and can be increased to $1 million for catastrophic injuries if the court makes an appropriate finding that42