In response to soaring U.S. medical liability insurance premiums that have periodically threatened to drive doctors out of business and harm patient care, many states have enacted reforms in the laws governing medical malpractice lawsuits. In some instances, however, such civil liability reforms intended specifically to restrict lawsuits against healthcare providers have also had an unintended consequence: they have shifted a larger share of the liability burden to medical device manufacturers. The effect of such reforms can be to create strains in the relationships between device manufacturers and their customers.

For medical device manufacturers that find themselves named as codefendants in lawsuits with doctors and hospitals, the most difficult aspects of this issue arise from two legal trends. The first trend relates to the enactment of tort reforms applicable to malpractice cases, in which restrictions are routinely placed on the amount of jury awards for noneconomic damages, such as pain and suffering.

The second trend is the increasing use of the doctrine of joint and several liability, which makes all defendants potentially liable for 100% of damages, without regard to their actual degree of fault.

Another factor that complicates this situation has nothing to do with legal doctrine and everything to do with the power of personal connections. Patients may not know anything about the medical device company involved in their case, but they have a personal relationship with their healthcare provider. Consequently, patients are typically reluctant to seek judgments that would tap into the personal assets of their physicians, but they don't mind going after manufacturers.

The Spread of Damage Caps

Healthcare providers depend on medical malpractice insurance to cover the risk that a patient will be injured. But at various periods over the past 30 years, medical malpractice insurance has become extremely expensive or hard to find, sometimes creating crisis conditions for doctors in high-risk specialties.

In response to the pleas of such healthcare professionals, a number of state legislatures have enacted tort reform legislation that establishes maximum amounts or other limitations on jury awards to injured patients for noneconomic damages.¹ Such noneconomic damages are intended to compensate injured patients for intangible losses, such as pain, suffering, emotional distress, loss of companionship, and enjoyment of life. They are fundamentally different from economic damages, which compensate patients for quantifiable monetary losses, such as past and future earnings, and medical bills. And they are also unlike punitive damages, which are awarded to punish the defendant and deter others from similar conduct. (Some states have limits on those awards, too.)

According to the National Conference of State Legislatures (Denver, CO), 26 states have implemented tort reforms that cap noneconomic damages paid by healthcare providers or hospitals.² In one of these states, Illinois, the noneconomic damage caps enacted by the state legislature were declared unconstitutional by a circuit court judge in late 2007.³ That decision has been appealed to the Illinois Supreme Court, which may issue its ruling before the end of 2008.⁴

Five other states have placed maximum limits on the total recovery that can be awarded in medical malpractice cases, including both economic and noneconomic damages.

Another half dozen states cap damages in personal injury lawsuits for all defendants—not just healthcare providers. In these states, medical device manufacturers and healthcare providers are on an even playing field.

When noneconomic damages owed by healthcare provider defendants are limited by law, plaintiffs and their attorneys typically look for other defendants whose liability is not capped. In some cases, healthcare providers may align themselves with the plaintiffs in their case against a medical device manufacturer—even when the real cause of the plaintiff's injury may be medical malpractice. Experience shows that when this occurs, it can create significant tension between the medical device manufacturer and its healthcare provider customer.

Joint and Several Liability

The problem of limitations on the amounts of medical malpractice damages is exacerbated in states that also apply a legal doctrine known as joint and several liability. This doctrine dictates that each defendant in a tort lawsuit is individually liable for the entire amount of a judgment, regardless of its degree of fault. By way of contrast, in states that apply proportional or several liability, defendants are responsible only for the portion of the damages caused by their own negligence. During the 1980s and 1990s, many states abolished or modified their application of joint and several liability (see Table II). In a dozen states, defendants are never liable for damages representing more than their share of fault. But about 10 states have pure joint and several liability—either by statute or common law—and another 28 states still offer some form of joint and several liability.

For example, in some states defendants are jointly liable for monetary losses, but not for other types of damages, such as those awarded for pain and suffering. In other states, joint liability applies only to defendants who are found to be at least 25%, 50%, or 60% negligent. Michigan abolished joint and several liability for all lawsuits except certain medical malpractice actions. And other states make defendants jointly liable only in cases involving environmental claims or defective products.

Perfect Storm

For medical device manufacturers, the combination of medical malpractice damage caps and joint and several liability is creating a ‘perfect storm' environment.

When the liability of healthcare providers or hospitals is limited by statute, medical device manufacturers become plaintiffs' next targets, regardless of any actual finding of medical negligence. In states with joint and several liability, a medical device manufacturer can end up paying the lion's share of an award, even if the jury finds that it bears only a small share of the responsibility.

Even when a jury has recognized that a doctor was at fault, limits on malpractice damages can still create issues for medical device manufacturers. In states where limits on malpractice damages have been enacted, doctors can buy inexpensive malpractice insurance policies that will only pay for damages within the state's low limits. Consequently, in cases where the caps do not apply—such as in states that waive damage limits in cases involving gross misconduct—the doctor may not have enough insurance coverage to pay more than the state's maximum damage liability.

Even in states without restrictions on the amount of damage liability, doctors do not always buy insurance policies with limits sufficient to fund a lifetime of care for an injured patient. Instead, they rely on the widely accepted notion that patients are reluctant to pursue a large judgment against a doctor with whom they have a longstanding personal relationship.

Under these circumstances, it is understandable why medical device manufacturers are frequently inclined to settle patient injury lawsuits—even when they are not at fault.

Avenues of Attack

In their effort to pursue large claims against medical device manufacturers, plaintiffs attack where device companies are most vulnerable. For instance, they often allege that the medical device manufacturer did not adequately train doctors or did not provide updated training when there were changes to a product.

Another common allegation is promotion of off-label use of a device. In the United States, all medical devices must receive FDA clearance or approval prior to being placed on the market, and device manufacturers are not allowed to promote a product for any use that is not expressly approved by FDA. However, doctors are permitted to prescribe and use devices in ways that are not approved.

Some off-label uses of certain devices are common practice and are considered medically necessary for patient care. But this practice may also expose device makers to lawsuits. A medical device manufacturer cannot tell doctors that they may use a product in an unapproved manner. But when a doctor's use of a product in an unapproved manner causes a patient injury—whether or not the manufacturer promoted the use—the manufacturer is often brought into the litigation on allegations of promotion of off-label usage.

Medical device manufacturers may also be targets when doctors and hospitals fail to follow manufacturers' instructions to maintain equipment properly, or when they use products after their expiration date. For example, consider the following scenarios.

In cases similar to these, the manufacturer may be held liable for damages, even though the end-user did not follow the manufacturer's instructions, failed to maintain the device in the prescribed manner, or used the device well after its expiration date.

Illustrations

A few scenarios shed light on the problem facing medical device companies in states that limit damages against healthcare providers.

Cascading Errors and Device Misuse. Consider a child who suffers complications after routine surgery. Soon after the surgery, the child struggles to breathe. Instead of clearing the airway of blood that had accumulated, the doctor gives the child a tranquilizer to calm the child's thrashing. The child's blood pressure drops, putting the child into cardiac arrest. The doctor uses an adult-sized self-reinflating bag to get air into the child's lungs. The adult-sized bag is too large for the child and does not seal correctly. Unable to get the air needed, the child suffers brain damage.

A lawsuit is filed against the doctors, the hospital, and the bag manufacturer shortly after state-enacted limits on medical malpractice damages go into effect. In defense, the doctor insists a design defect in the self-reinflating bag was responsible for the child's injuries. Tests reveal no problem with the bag, and there are no prior reports of any alleged defect.

In this scenario, the injured child surely would win a great deal of sympathy and a large jury verdict. But with noneconomic damages against all the doctors capped at $250,000, and both economic and noneconomic damages against the county-owned hospital capped at $100,000, the medical device manufacturer becomes the deep pocket for pain and suffering damages.

Gross Negligence. Another scenario illustrates how a doctor who acts with gross negligence can deflect responsibility to a device maker. A doctor uses a laser to smooth out rough spots on a patient's face. It is the doctor's first time using the device, and the doctor causes severe burns. Had the doctor read the device's instructions for use, he would not have used general anesthesia, set the laser much higher than recommended, or made more than one pass with the laser.

In this instance, the doctor's liability for noneconomic damages was capped at $350,000 by statute and a ballot initiative that removed exceptions for gross negligence. The case settles for several times that amount.

In most cases, this state's law assigns damages based on proportional liability—defendants are only required to pay damages according to their degree of fault. But product liability is one area where joint and several liability applies. In this case, the medical device manufacturer would have been liable for a full jury award even if it was found to be only 1% at fault.

Risk Management

Medical device manufacturers must be cognizant of the fact that laws limiting the liability of healthcare providers put them at greater risk of product liability litigation—even if their product is not defective. Prudent manufacturers will take steps that reduce their risk and improve their ability to defend against such attacks.

Prevent Injuries. The most obvious step is one that all device manufacturers should be taking anyway: employ best practices to prevent injuries. Adequate warnings, effective training, and the use of human factor analysis to avoid physician error will help provide a strong defense against allegations. One example of a best practice is to create a representative physician group to provide input on labeling during the review process.

Build Relationships. Even in cases where doctors unfairly deflect blame, manufacturers may be reluctant to aggressively counterattack against customers who have supported their products. But physician-customers with whom a company has a strong and trusting relationship will be less likely to assist a plaintiff in making a case against a manufacturer that is not at fault.

It is not enough for companies to select doctors who are recognized in the field and will be impressive from a marketing perspective. The best companies put a premium on building relationships, train sales representatives on relationship-building, and have a mechanism for evaluating those relationships. Companies that outsource distribution to a contract sales force have less control over their relationships with doctors, and may be more likely to be pulled into a lawsuit.

Excellent Training. Medical device companies need to ensure that doctors using their products, members of the company's sales force, and contract distributors are all well trained and receive ongoing training. Intermediaries must know exactly what kind of training and warnings a doctor needs. The medical device company should keep everyone on a training schedule and keep track of that schedule. Any time there are modifications to a product, there must be training regarding those changes. In addition to product training, sales representatives must be trained in communications and compliance, so that they are careful in how they communicate with doctors, especially with regard to off-label use.

Disclaimers and Limitations. Sales representatives should be made aware of the importance of disclaimers and limitations. Since such disclaimers and limitations are directed to physicians—who are considered learned intermediaries—they can be stronger and more technical than if they were intended for a consumer audience.

Postmarket Surveillance. Active monitoring of physician feedback and adverse events can help avoid litigation. When a company can demonstrate that it is actively responding to physician feedback, it not only improves its relationship with doctors, but strengthens its defense if there is litigation.

Insurance Issues. Medical device manufacturers should choose an insurance carrier with expertise that can help reduce their exposure to litigation. The carrier should be aware of emerging litigation trends and able to craft a litigation strategy to avoid conflicts with physicians whenever possible.

Companies should also reconsider the practice of adding doctors to their insurance coverage as ‘additional insureds.' Granting such status to a physician can place the company in the position of funding the defense of an individual who may ultimately point the finger at the company as part of a settlement with the plaintiff. It's more appropriate to let the contract set the parameters of defense and indemnity, with the insurance as a funding mechanism for that agreement.

Lobby for Change. State limits on noneconomic damages may play a role in preventing a liability crisis and making losses more predictable. However, they create an unlevel playing field when they apply to just one set of potential defendants.

Medical device companies have an obligation to help their state legislators understand the unintended consequences of limits on noneconomic damages for healthcare providers and joint and several liability. Such policies may help the healthcare provider community and its malpractice insurers. But unless they are applied uniformly to manufacturers as well as healthcare providers, they may have a devastating affect on the business and insurance costs of medical device manufacturers.

References

1. Medical Injury Compensation Reform Act (MICRA; California State Legislature, 1975).

2. “State Medical Liability Laws, 2007” [table, online] (Denver, CO: National Conference of State Legislatures, Committee on Law and Criminal Justice, 2008 [cited 18 December 2008]); available from Internet: www.ncsl.org/standcomm/sclaw/StateMedliablitylaws2007.htm.

3. Lebron v. Gottlieb Memorial Hospital, Cir. Ct. Cook County, IL, no. 2006 L 12109 (November 13, 2007).

4. Lebron v. Gottlieb Memorial Hospital, Illinois Sup. Ct., nos. 105741 and 105745 (cons.).

Bradley M. John is a vice president of Chubb & Son and worldwide life sciences casualty manager for Chubb Commercial Insurance (Whitehouse Station, NJ). Sonia M. Valdes is an assistant vice president with Chubb & Son (Warren, NJ) and claims manager for Chubb's life sciences line of business.

© 2008 Canon Communications LLC

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