For several years, the medical professional liability insurance industry has routinely seen a sharp increase in spike verdicts. These large verdicts have partly driven the insurance market to raise premiums and reduce scheduled credits; a period often referred to as a hard market. Some of these verdicts have resulted in such exorbitant amounts that they have garnered their own nicknames:
According to Risk Placement Services, the average nuclear verdict for a medical liability insurance claim is $36.8 million as of 2022. That is well above the Thermal Nuclear Verdict benchmark. Of course, when we see increases like these, it begs the question of what can be driving these changes in the market, and there are quite a few reasons.
For starters, there has been an erosion of tort reform. Many legislative bodies previously put legal measures in place to limit the amount of punitive damages paid in a claim. These tort reforms are now being modified to allow for larger payouts to claimants. We’ve also seen an increase in litigation funding as third parties agree to fund cases and arbitration costs in exchange for up to 40% of any award that is paid out.
Finally, these increases can be attributed to public sentiment and desensitization. We’re living through a period of unprecedented inflation; as the cost of basic things like groceries and utilities skyrocket, large numbers have started to lose their punch in the eyes of juries. There is also the assumption that large corporations, insurance companies, and healthcare systems have the cash flow to make these payouts.
But even large well-insured entities have a limit to what they can reasonably be expected to pay per claim.
Thankfully, many states and regions have taken steps to mitigate these rising costs. While some tort reforms have been adjusted to allow larger punitive payouts, other provisions are still in place to limit the payouts, namely cap limits. Cap limits vary by region but are nevertheless vital in hedging off the financial exposure of large verdicts. The limits can be applied to either economic or non-economic damages.
Economic Damages - are quantifiable payouts with an exact number. This can cover medical bills, lost wages, and loss of future earning capacity. It is less common to see these types of damages capped as there is a precise amount of indemnity payment.
Non-Economic Damages - are less corporeal and are, therefore, harder to quantify. Think of things like pain and suffering, emotional distress, or loss of enjoyment of life. These damages are far more subjective, so governing bodies usually focus more on limiting these when making payouts to claimants.
There are no federal regulations on cap limits, and the limits vary wildly by state. Below we examine what torts, if any, are in place throughout the Mid-Atlantic region.
Virginia
Virginia has one of the strictest cap limits as it applies to the total amount of damages paid out, not just non-economic damages. The Virginia Cap Limit has been increasing annually by $50,000 since 1999. It will continue to increase yearly until 2031, when it reaches $3 million. Here is a breakdown of the cap limits as of today:
7/1/2022 – 6/30/2023 - $2.55 million
7/1/2023 – 6/30/2024 - $2.6 million
Significantly, because of the annual increase in cap limits, it matters when a claim is filed. If a claim were to be filed on June 28, 2023, the maximum a claimant could hope to see is $2.55 million. However, if the same claim were filed on July 3, 2023, the maximum the claimant could be eligible to receive would be $2.6 million.
Maryland
Maryland has a cap only for non-economic damages; no legislation exists to cap economic damages. The Maryland cap for non-economic damages will increase by $15,000 annually for the foreseeable future. Unlike Virginia, Maryland has no final cap limit they are incrementally working towards. Here The non-economic damages can be paid out in addition to the economic damage’s indemnity payment. Here is the breakdown of the non-economic cap limits of today:
1/1/2023 – 12/1/2023 - $875K
1/1/2024 – 12/1/2024 - $890K
Like Virginia, the amount a claimant is eligible to receive is determined by when they file. It is also important to note that juries are not usually privy to information on cap limits when reaching a verdict. That is how we get a settlement of $25 million in a state where a cap limit exists. The judge will correct the amount after the fact.
North Carolina
North Carolina currently has a cap of $500K for non-economic damages applied following a claim. This cap can occasionally be adjusted to account for inflation, but unlike Virginia and Maryland, it is not an annual increase. It is adjusted on an as-needed basis.
Washington D.C.
Washington D.C. does not currently have any cap limits, that is, for both non-economic and economic damages. The amount paid out for a claim is determined solely by the jury.
The above is merely an overview of the cap limits by region and should not be considered an all-inclusive explanation of the laws. Torts are subject to change over time, and exceptions apply in some cases when there is more than one named plaintiff or for mother-child injuries.