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No Fault Compensation for Medical Injuries Journal of Contemporary Health Law & Policy (1985-2015) Volume 8 Issue 1 Article 16 1992 No Fault Compensation for Medical Injuries Josephine Y. King Follow this and additional works at: https://scholarship.law.edu/jchlp Recommended Citation Josephine Y. King, No Fault Compensation for Medical Injuries, 8 J. Contemp. Health L. & Pol'y 227 (1992). Available at: https://scholarship.law.edu/jchlp/vol8/iss1/16 This Essay is brought to you for free and open access by CUA Law Scholarship Repository. It has been accepted for inclusion in Journal of Contemporary Health Law & Policy (1985-2015) by an authorized editor of CUA Law Scholarship Repository. For more information, please contact [email protected]. NO FAULT COMPENSATION FOR MEDICAL INJURIES Josephine Y King* INTRODUCTION A nation that implements a reasonably adequate health insurance pro- gram spares its citizens some of the anxiety and deprivation accompanying the incidence of injury, disease, or other illness. With accessible, publicly supported health care, persons suffering such disabilities would not be con- cerned about proof of misconduct on the part of any actor as a prerequisite to economic recovery. Nonetheless, the question of misconduct or fault must be dealt with somewhere in the legal system, particularly if it rises above the level of ordinary negligence. These issues can be more effectively approached by licensing authorities, formulating standards of treatment, in- telligently and courageously enforcing professional standards, and ultimately by application of the criminal law. In focusing on the victim's disability, this Essay urges a separation of the compensation goal from the putative deter- rent function of tort law.' While the system of vindicating wrongs through tort litigation has histori- cally served either as a substitute for or as an adjunct of more rigorous crimi- nal penalties, the development of third party insurance, and the possibility or requirement of purchasing protection through indemnification has stunted, blunted, or obliterated a fear of personal liability on the part of the tortfeasor. Furthermore, if the disability is the result of an act of a manufac- turer or other corporation or government, the cost of any judgment is passed on to the public through increased prices or taxes. Although law students are taught that a judgment for the plaintiff in a tort action serves as compensation for the injury suffered by the victim and as an incentive to the tortfeasor to conform his conduct to the standards of the law, the reality is that a tort judgment accomplishes neither objective ade- * Professor of Law, Director, Center for Health Law and Policy Studies, Pace Law School. This Article is based on a paper delivered before the Ninth World Congress of Medi- cal Law, Gent, Belgium, August 20, 1991. 1. See generally David S. Starr, The No-Fault Alternative to Medical Malpractice Litiga- tion: Compensation, Deterrence, and Viability Aspects of a Patient Compensation Scheme, 20 TEX. TECH L. REV. 803 (1989) (suggesting that the tort system is inadequate to compensate the injured patient). 228 Journal of Contemporary Health Law and Policy [Vol. 8:227 quately, if at all. In fact, many claims of injury based on tortious conduct- defendant's violation of a duty owed to the plaintiff-either never reach the courts2 or, if litigated successfully, result in a recovery which is not ration- ally related to the nature and scope of the wrong.' The latter proposition operates in both directions. Some victims are paid far more than the eco- nomic cost of their injury, usually by settling with insurers who are uncer- tain of the outcome of litigation or estimate the cost of defending the insured as exceeding the payoff of a nuisance claim by a moderate sum. Thus, even though that claim has little or no merit, an insurer may offer a settlement with the victim. In other cases, a few victims of injury, whether in the hospi- tal or on the highway, obtain very substantial sums based not only on the nature and severity of the illness but also, and perhaps even more so, upon appeal to the sympathy of the jury and display of histrionic talents on the part of counsel.4 Advocating a no fault approach to personal injury is not new in the United States, as exemplified by a universal acceptance of a strict liability scheme of workers' compensation. Nevertheless, the movement in the late 1960s and 1970s for no fault reparations for motor vehicle accidents aroused fierce opposition from American negligence lawyers and, initially, the insur- ance industry.' The insurance industry soon succumbed, however, realizing that Congress might legislate in the field and impose federal regulation. Be- cause the insurance industry preferred to continue its symbiotic relationship with state insurance departments, it suggested various limited state-based no fault plans.6 After more than a decade of politics and proposals, approxi- mately one-half of the states have implemented some form of first party no fault coverage for injuries due to vehicle accidents.7 2. HARVARD MEDICAL PRACTICE STUDY, PATIENTS, DOCTORS, AND LAWYERS: MEDICAL INJURY, MALPRACTICE LrrIGATION, AND PATIENT COMPENSATION IN NEW YORK, chs 7, 10 (1990). 3. For data and commentary on the operation of the tort system in vehicle accident personal injury cases, see NEW YORK INS. DEP'T, AUTOMOBILE INSURANCE... FOR WHOSE BENEFIT? (1970); ALFRED F. CONARD ET AL., AUTOMOBILE ACCIDENT COSTS AND PAY- MENTS: STUDIES IN THE ECONOMICS OF INJURY REPARATION (1964); ROBERT E. KEETON & JEFFREY O'CONNELL, BASIC PROTECTION FOR THE TRAFFIC VICTIM: A BLUEPRINT FOR REFORMING AUTOMOBILE INSURANCE (1965). See also INSTITUTE OF MEDICINE, NA- TIONAL ACADEMY OF SCIENCES, BEYOND MALPRACTICE: COMPENSATION FOR MEDICAL INJURIES 12-13 (1978); DEPARTMENT OF HEALTH, EDUCATION AND WELFARE, REPORT OF THE SECY'S COMM'N ON MEDICAL MALPRACTICE 101 (1973), DHEW Pub. No. (05) 73-88. 4. JEFFREY O'CONNELL, THE LAWSUIT LOTTERY: ONLY THE LAWYERS WIN 8 (1979). 5. See KEETON & O'CONNELL, supra note 3, at 133-34; Josephine Y. King, Accident Reparation: Reappraisaland Reform, 3 CONN. L. REV. 268, 293 nn.143, 144 (1970-71). 6. See Josephine Y. King, The Insurance Industry and Compensation Plans, 43 N.Y.U. L. REV. 1137, 1152-1164 (1968) (presenting five different proposals by the industry in 1968). 7. JOSEPHINE Y. KING, No FAULT AUTOMOBILE ACCIDENT LAW §§ 2.1-2.32 (1987). 1992] Medical Injury Compensation VARIATIONS OF No FAULT No fault is not a monolithic concept. In its purest form, which could be designated type A, no fault is a first party insurance system which compen- sates only for net economic loss. Specifically, net economic loss includes medical and rehabilitative expenses, wage loss, and substitute services un- compensated from any other source. Therefore, collateral payments such as health, accident, and employers' sick leave compensation would be primary. However, no provision for pain and suffering reparations exists. Through the first party insurance mechanism, the insured looks to his or her own insurer to recover out-of-pocket loss, regardless of who was at fault in caus- ing the injury. The insured files a claim against his or her insurer; only when there is a controversy over coverage or the amount of payment which cannot be settled by negotiation or arbitration will the matter reach the courts. In the United States, no fault automobile compensation is a variation of type A, although it falls notably short of conforming to the pure scheme since states permit tort actions for noneconomic loss if a very serious injury has occurred and the victim can prove fault.' In the absence of serious in- jury, economic loss is covered up to a specified amount regardless of fault. A type B scheme, which is surfacing in malpractice reform, is a third party insurance system which requires health care providers to purchase in- surance to indemnify them for recoveries awarded to injured patients.9 No fault entitles patients to recover if they can show the requisite injury and causation. However, proof of negligence on the part of the health care pro- vider is not a condition precedent to recovery. Type B plans generally allow recovery for some noneconomic loss. The right to judicial review in cases of serious injuries with provable fault is not clearly delineated. Nonetheless, it would be difficult to justify a compensation system which would refuse to allow litigation in a case involving the intentional commission of an injurious act. A variable which might appear in either type A or type B depends on whether purchase of the first party or the third party insurance is compul- sory. Permitting participation on a voluntary basis weakens the system, reveals doubts in the feasibility of no fault, or simply reflects a political com- promise to pursue an incremental rather than a total commitment to radical change. 8. See, e.g., MICH. COMP. LAWS ANN. §§ 500.3101-.3179 (West 1983 & Supp. 1991); N.Y. INS. LAW §§ 5101-5108 (McKinney 1985 & Supp. 1992). 9. For a description of various statutory schemes for insuring health care providers, see Ronald S. Latz, No-Fault Liability and Medical Malpractice: A Viability Analysis, 10 J. LEGAL MED. 479, 493-97 (1989). 230 Journal of Contemporary Health Law and Policy [Vol. 8:227 MEDICAL ADVERSITY INSURANCE AND DESIGNATED COMPENSABLE EVENTS Professor Clark Havighurst and Dr. Lawrence Tancredi advanced a chal- lenging and complex compensation scheme in the early 1970s. " This type B no fault scheme, which is similar to workers' compensation, requires institu- tional and individual health care providers to purchase "medical adversity insurance" covering their patients."' A patient experiencing injury as a re- sult of a "compensable event" would be entitled to indemnification for medi- cal and hospital bills and lost wages up to a specified maximum.
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