Subject Matter: TN Tort Reform Update
Good evening. I hope the week is going well for you and that Spring is arriving. Please consider this to serve as an update on tort reform efforts in Tennessee and a follow-up to the reports sent since Gov. Haslam announced his tort reform package on 2-17-11.
The House Judiciary Committee’s subcommittee charged with reviewing bills to change Tennessee’s tort system has set hearings on the Gov. Haslam’s "Civil Justice Act" (SB1522, HB2008). The 3-23-11 session will allow groups interested in the legislation — both pro and con — to testify. Committee Chair Eric Watson (R-Cleveland) has said he hopes and expects that the panel can discuss and vote on the measure at its 3-30-11 meeting.
Attached is the bill and the highlights include the $750K cap on non-economic damages; punitive or exemplary may not exceed an amount equal to the greater of two times the total amount of compensatory damages awarded or $500K; health care actions would include actions for custodial care (to address the expanded claims identified in the recent TN SC French case); and changes to the collateral source rule and Consumer Protection Act. Below is a summary of the bill if you’d like to review the finer points.
The firm is one of the sponsors for the Legislative Conference on 3-28 and 3-29 and we will be meeting with legislators during those days. We also will be providing information about how to support the coalition and contact legislators and will be asking you to facilitate circulating this information to your facilities.
We will keep you closely posted on tort reform developments and let us know if you have any questions or comments or need more information.
Have a great night. Rebecca
*****HB 2008 SUMMARY******
by *McCormick, Dennis. (*SB 1522 by *Norris, Kelsey.) Civil Procedure – As introduced, enacts the "Tennessee Civil Justice Act of 2011." – Amends TCA Title 20; Title 27; Title 29 and Title 47.
This bill revises various provisions of present law and enacts new provisions of law in regard to civil actions in this state.
Under present law, when a corporation, partnership or individual has an office or agency in any county for the transaction of business, actions growing out of, or connected with, the business of that office or agency, may be brought in the county in which the office or agency is located.
This bill rewrites the above provision to instead provide that for all civil actions, if the defendant is not a natural person, the claim must be brought in:
(1) The county where the plaintiff resides;
(2) The county where all or a substantial part of the events or omissions giving rise to the claim occurred; or
(3) The county where the defendant’s principal office in this state is located, or, if the defendant does not maintain an office in this state, the county where the defendant’s agent for service of process is located.
STAY OF EXECUTION ? BOND
Under present law, if a plaintiff in a civil action obtains a judgment under any legal theory, the amount of the appeal bond necessary to stay execution during the course of all appeals or discretionary reviews of that judgment by any appellate court is set in accordance with applicable laws or court rules, except that the total appeal bond that is required of all appellants may not exceed $75 million, regardless of the value of the judgment. If an appellee proves by a preponderance of the evidence that an appellant is dissipating assets outside the ordinary course of business to avoid payment of a judgment, a court may enter orders that:
(1) Are necessary to protect the appellee; and
(2) Require the appellant to post a bond in an amount up to the total value of the judgment.
This bill rewrites the above provisions to provide that if a plaintiff in a civil action obtains a judgment under any legal theory, the amount of the appeal bond necessary to stay execution during the course of all appeals or discretionary reviews of that judgment by any appellate court may not exceed $25 million. Absent unusual circumstances, and subject to the $25 million limitation, the total amount of the required bond or equivalent security for any case may not exceed 125 percent of the judgment amount. For purposes of determining the amount of the required bond, the court would not include punitive or exemplary damages in the judgment amount. If an appellee proves by a preponderance of the evidence that an appellant is dissipating assets outside the ordinary course of business to avoid payment of a judgment, a court may enter orders that:
(1) Are necessary to protect the appellee; and
(2) Require the appellant to post a bond in an amount up to 125 percent of the judgment amount, which shall exclude any punitive or exemplary damages.
If the appellant establishes by clear and convincing evidence at a post judgment hearing that obtaining a bond in an amount required by this bill will render the appellant insolvent, the court will establish a bond in an amount that would allow the appeal of the judgment to proceed. This bill states that this provision authorizes action under extraordinary circumstances and should be narrowly construed.
DAMAGES IN HEALTH CARE LIABILITY ACTIONS
Under present law, in a medical malpractice action in which liability is admitted or established, the damages awarded may include (in addition to other elements of damages authorized by law) actual economic losses suffered by the claimant by reason of the personal injury including, but not limited to, cost of reasonable and necessary medical care, rehabilitation services, and custodial care, loss of services and loss of earned income, but only to the extent that such costs are not paid or payable and such losses are not replaced, or indemnified in whole or in part, by insurance provided by an employer either governmental or private, by social security benefits, service benefit programs, unemployment benefits, or any other source except the assets of the claimant or of the members of the claimant’s immediate family and insurance purchased in whole or in part, privately and individually.
This bill rewrites the above provisions. Under this bill, in any health care liability action in which liability is admitted or established, the damages awarded may include, in addition to other elements of damages authorized by law, actual economic losses incurred by the claimant by reason of the injury. Actual economic losses include, but are not limited to, the costs of reasonable and necessary medical care, rehabilitation services and custodial care, loss of services, and loss of earned income. Such recoverable damages do not include charges to the extent that they have been discounted or forgiven or are subject to discounts or forgiveness for any reason, including, without limitation, discounts arising from a financial relationship with a health insurer or other payor.
This bill defines "health care liability action" as any civil action, including claims against the state, alleging that a health care provider or providers have caused an injury related to the provision of or failure to provide health care services, regardless of the theory of liability on which the action is based. Health care services includes not only care by physicians, nurses, licensed practical nurses, orderlies, certified nursing assistants, technicians and other agents, employees and representatives of the provider, but also includes staffing, custodial or basic care, positioning, hydration, grooming and similar patient services. Any such civil action or claim would be subject to the present law provisions governing malpractice regardless of any other claims, causes of action, or theories of liability alleged in the complaint, provided that these provisions would not apply to claims against the state to the extent that such provisions are inconsistent with or conflict with the provisions governing the claims commission.
This bill limits the damages that may be awarded in personal injury actions. Under this bill, in any personal injury action, the prevailing plaintiff may be awarded:
(1) Compensation for economic damages suffered by the injured plaintiff;
(2) If the action is a health care liability action, compensation for the noneconomic damages suffered not to exceed $750,000 per occurrence;
(3) If the action is not a health care liability action, compensation for noneconomic damages suffered by each injured plaintiff not to exceed $750,000.
Under this bill, if liability is found in a personal injury or wrongful death action, then the trier of fact, in addition to other appropriate findings, must make separate findings for each claimant specifying the amount of:
(1) Any past damages; and
(2) Any future damages and the periods over which they will accrue, on an annual basis, for each of the following types of damages: medical and other costs of health care; other economic damages; and noneconomic damages.
The calculation of all future medical care and other costs of health care and future noneconomic losses must reflect the costs and losses during the period of time the claimant will sustain those costs and losses. The calculation for other economic losses must be based on the losses during the period of time the claimant would have lived but for the injury upon which the claim is based.
In any tort action in which liability is admitted or established, the damages awarded may include, in addition to other elements of damages authorized by law, economic losses incurred by the claimant by reason of the injury. Economic damages do not include charges to the extent that they have been discounted or forgiven or are subject to discounts or forgiveness for any reason, including, without limitation, discounts arising from a financial relationship with a health insurer or other payor.
Under this bill, in any action in which punitive damages are sought:
(1) Punitive damages may not be awarded if the claimant does not prove by clear and convincing evidence that the defendant against whom punitive damages are sought acted maliciously, intentionally, fraudulently or recklessly;
(2) In any action in which the claimant seeks an award of punitive damages, the trier of fact in a bifurcated proceeding must first determine whether compensatory damages are to be awarded and in what amount, before addressing any issues related to punitive damages;
(3) If an award of compensatory damages has been made against a party, the court will commence an evidentiary hearing to determine whether punitive damages may be considered by the same trier of fact. The court will determine whether the issue of punitive damages may be submitted to the trier of fact; and, if so, the trier of fact will determine whether to award punitive damages and in what amount;
(4) In all cases involving an award of punitive damages, the trier of fact, in determining the amount of punitive damages, must consider, to the extent relevant, certain factors detailed in this bill, such as the defendant’s financial condition and net worth and the reprehensibility of the defendant’s wrongdoing. The trier of fact will be instructed that the primary purpose of punitive damages is to punish the wrongdoer and deter similar misconduct in the future by the defendant and others while the purpose of compensatory damages is to make the plaintiff whole;
(5) Punitive or exemplary damages may be awarded in a civil action, but such damages may not exceed an amount equal to the greater of two times the total amount of compensatory damages awarded or $500,000;
(6) The limitation on the amount of punitive damages imposed by (5) may not be disclosed to the trier of fact, but will be applied by the court to any punitive damages verdict;
(7) The limitation on the amount of punitive damages imposed by (5) will not apply to actions brought for damages or an injury resulting from an act or failure to act by the defendant:
(A) If the defendant was convicted of a felony under the laws of this state or under federal law which caused the damages or injury; or
(B) If the defendant was under the influence of alcohol or under the influence of drugs other than lawfully prescribed drugs administered in accordance with a prescription; and
(8) The culpability of a defendant whose liability is alleged to be vicarious will be determined separately from that of any alleged agent, employee or representative.
The seller of a product other than the manufacturer would not be liable for punitive damages, unless the seller exercised substantial control over that aspect of the design, testing, manufacture, packaging or labeling of the product that caused the harm for which recovery of damages is sought; the seller altered or modified the product and the alteration or modification was a substantial factor in causing the harm for which recovery of damages is sought; or the seller had actual knowledge of the defective condition of the product at the time he supplied the same.
Punitive damages would not be awarded in a civil action involving a drug or device if the drug or device which allegedly caused the claimant’s harm:
(1) Was manufactured and labeled in relevant and material respects in accordance with the terms of an approval or license issued by the federal food and drug administration; or
(2) Was an over-the-counter drug marketed pursuant to federal regulations, was generally recognized as safe and effective and as not being misbranded pursuant to the applicable federal regulations, and satisfied in relevant and material respects each of the conditions contained in the applicable regulations and each of the conditions contained in an applicable monograph.
The provisions described immediately above would not apply in an action against a manufacturer of a drug or device if the claimant establishes by clear and convincing evidence that the manufacturer in violation of applicable regulations of the food and drug administration withheld from the food and drug administration information known to be material and relevant to the harm that the claimant allegedly suffered or misrepresented to the food and drug administration information of that type.
Punitive damages will not be awarded when a defendant in any civil action demonstrates by a preponderance of the evidence that it was in substantial compliance with applicable federal and state regulations at the time of the alleged wrongdoing.
Under present law, compliance by a manufacturer or seller with any federal or state statute or administrative regulation existing at the time a product was manufactured and prescribing standards for design, inspection, testing, manufacture, labeling, warning or instructions for use of a product, raises a rebuttable presumption that the product is not in an unreasonably dangerous condition in regard to matters covered by these standards.
This bill rewrites the above provision. Under this bill, a manufacturer or seller would not be liable for exemplary or punitive damages if:
(1) The product alleged to have caused the harm was designed, manufactured, packaged, labeled, sold, or represented in relevant and material respects in accordance with the terms of approval, license or similar determination of a government agency; or
(2) The product was in compliance with a statute of this state or the United States, or a standard, rule, regulation, order, or other action of a government agency pursuant to statutory authority, when such statute or agency action is relevant to the event or risk allegedly causing the harm and the product was in compliance at the time the product left the control of the manufacturer or seller.
The above would not apply if the claimant establishes that the manufacturer or seller, at any time before the event that allegedly caused the harm, sold the product after the effective date of an order of a government agency that ordered the removal of the product from the market or withdrew the agency’s approval of the product, or if the manufacturer or seller, in violation of applicable regulations, withheld or misrepresented to the government agency information material to the approval and such information is relevant to the harm which the claimant allegedly suffered.
Under present law, no product liability action may be commenced or maintained against any seller when the product is acquired and sold by the seller in a sealed container and/or when the product is acquired and sold by the seller under circumstances in which the seller is afforded no reasonable opportunity to inspect the product in such a manner which would or should, in the exercise of reasonable care, reveal the existence of the defective condition. These provisions do not apply to:
(1) Actions based upon a breach of warranty, express or implied; or
(2) Actions where the manufacturer of the product or part in question is not subject to service of process in this state and where service cannot be secured by the long-arm statutes of Tennessee; or
(3) Actions where the manufacturer has been judicially declared insolvent.
Also under present law, no product liability action, when based on the doctrine of strict liability in tort, may be commenced or maintained against any seller of a product that is alleged to contain or possess a defective condition unreasonably dangerous to the buyer, user or consumer unless the seller is also the manufacturer of the product or the manufacturer of the part thereof claimed to be defective, or unless the manufacturer of the product or part in question is not subject to service of process in this state or service cannot be secured by the long-arm statutes or unless such manufacturer has been judicially declared insolvent.
This bill rewrites the above provisions regard the bringing of a products liability action. Under this bill, no product liability action may be commenced or maintained against any seller, other than the manufacturer, unless:
(1) The seller exercised substantial control over that aspect of the design, testing, manufacture, packaging or labeling of the product that caused the alleged harm for which recovery of damages is sought;
(2) The seller altered or modified the product, and the alteration or modification was a substantial factor in causing the harm for which recovery of damages is sought;
(3) The seller gave an express warranty;
(4) The United States manufacturer or distributor of the product or part in question is not subject to service of process in this state and the long-arm statutes do not serve as the basis for obtaining service of process; or
(5) The manufacturer has been judicially declared insolvent.
CLASS ACTION IMPROVEMENTS ACT
This bill enacts the Class Action Improvements Act of 2011.
Under the Act, the court of appeals would hear appeals from orders of trial courts granting or denying class action certification if a notice of appeal is filed within 10 days after entry of the order. All proceedings in the trial court would be automatically stayed pending the appeal of the class certification ruling.
CONSUMER PROTECTION ACT
This bill revises the Consumer Protection Act, as follows:
(1) This bill specifies that the Act does not apply to securities or the marketing or sale of securities.
(2) This bill specifies that enforcement of certain provisions of the Act is vested solely with the attorney general (SEE NOTE).
(3) Under present law, if the court finds that the use or employment of the unfair or deceptive act or practice was a willful or knowing violation of the Act, the court may award three times the actual damages sustained and may provide such other relief as it considers necessary and proper. This bill specifies that the court may not award exemplary or punitive damages for the same unfair or deceptive practice.
(4) Present law requires that a copy of any notice of appeal in regard to a private action under the Act be served by the appellant upon the director of the division of consumer affairs in the department of commerce and insurance, who in the public interest may intervene on appeal. This bill revises this provision to require notice to the attorney general instead of the director and, accordingly, it would be the attorney general who may intervene on appeal instead of the director.
(5) This bill provides that no class action lawsuit may be brought to recover damages for an unfair or deceptive act or practice declared to be unlawful by the Act.
NOTE: The subsection designations for Section 29-39-103 in Section 6 need to be corrected. Also, in Section 12 of this bill, it is not clear to which provision of law the section would apply, because the directory language refers to TCA 47-18-104(b)(27) but the amendatory language refers to (b)(29(.
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Firm/Company: The Adelman Law Firm
Document Date: January 1, 1970
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