Fred J. Hiestand
Fred J. Hiestand
Medical Injury Compensation Reform Act of 1975: Looking Back, Looking Forward, an Interview With Tort Reform Attorney, Fred Hiestand, General Counsel of Civil Justice Association of California.
Robert Marcelis
Fred J. Hiestand - General Counsel for Civil Justice Association of California
Posted Friday, March 3, 2017

The State Legislature passed MICRA in 1975. For those that are not familiar with MICRA, could you provide some background?

Soon after Jerry Brown was elected Governor in 1974, the two main medical liability insurance companies writing policies in California for physicians, Travelers and Argonaut, announced premium rate increases of 400% and 300%. They also said that this was the last year they were going to insure doctors for professional negligence. In response, doctors said and did different things that created uncertainty about the continued availability of health care services: went without insurance, limited their practices, refused to take any but emergency cases, threatened to leave the state and threatened to cease their practices until medical liability insurance became available and affordable.

The Governor, faced with what most viewed as a medical liability insurance crisis, called a special session of the California Legislature on medical liability. In the proclamation calling that special session, the Governor outlined recommendations for the Legislature to consider: a ceiling on the amount of non-economic damages recoverable at $250,000, a shortened and clearer statute of limitations, a sliding scale for attorney contingency fee compensation so that in cases with severely injured patients, the patients would recover more of the total award or settlement and the attorney less, periodic payment of damages for future loss, and letting the jury know about the plaintiff’s right to double recovery (collateral sources) for injuries sued upon.

Could you discuss your involvement and work related to MICRA?

The work I did for the Legislature and Governor on liability issues is best understood with reference to the times when I did the work. From 1973 to 1975 I was Counsel to the Assembly Select Committee on Medical Malpractice, chaired first by Henry Waxman and then, after he left for Congress in 1974, by Howard Berman, who also went to Congress a few years later. That Committee’s charge was to hold hearings and investigate whether a medical malpractice crisis was brewing and likely to occur and, if so, what could or should be done to avert or respond to it. The Committee predicted an “imminent crisis” in the cost and availability of medical liability coverage based on the weight of evidence provided by people who were supposed to best know what was happening in this field.

When Jerry Brown became Governor in 1974 and had the med mal crisis dumped in his lap, I moved over to the Governor’s office to advise and work with him in addressing it. All proposals in the Governor’s proclamation calling a special session on medical malpractice – most of which were recommendations of the Select Committee – became the Medical Injury Compensation Reform Act of 1975 (MICRA).

After MICRA was enacted, the Legislature – prompted by the medical malpractice insurance crisis – decided to look at other fields of liability through a joint committee of the Assembly and Senate. They formed the Joint Legislative Committee on Tort Liability, with Assemblyman Jack Knox as Chairman and Martha Gorman and I as General Counsel. This Committee was to find if there were other liability areas festering and in need of legal reform to ward-off likely problems. 

Could you further explain what the crisis meant to physicians and consumers of medical services?

As mentioned, plaintiffs were recovering more because more were suing and recovering ever-larger settlements and awards. Liability insurers did not anticipate and charge a sufficiently high premium to cover these projected future losses. The “chickens came home to roost” when insurers realized they had not anticipated the extraordinary growth in the frequency and severity of claims and awards, and charged premiums in 1974 that, for the first time in several years were based on current statistics showing an explosive growth. It came as a shock to everyone.

Doctors, hospitals, and patients were scared. Doctors and hospitals feared they could go belly-up if sued by a patient who had a bad outcome; and patients feared they wouldn’t be able to get access to health care because no one would treat them.

Without MICRA, there would be a reduction in the number of health care providers willing and able to care for Californians. Fewer doctors and hospitals would, in a rational world, reasonably translate to reduced services and less adequate care for those in need of it.

Could you explain the nature of non-economic damages versus other types of damages?

In the development of common (judge made) law, the court first recognized that recovery should be available for those suffering harm occasioned by another’s careless conduct, what it called “actual” or “economic damage.” This meant measureable, quantifiable damages, like lost wages, real or personal property and the like. Later, courts began to allow recovery for an altogether different category of loss--- noneconomic damage. This includes immeasurable, unquantifiable things like “pain and suffering.” Over time this immeasurable category of damage, especially in medical liability cases, but generally in all tort cases, began to outstrip the economic damages. This reasonably required medical malpractice insurers to anticipate larger future losses and charge, accordingly, a larger premium. One sure way of keeping that immeasurable, fast-growing component of damages more predictable and “reasonable” is to set a “ceiling” or “cap” ($250,000) on what most defendants can be required to pay in a case. Since in several categories of personal injury cases - such as legal malpractice or workers’ compensation - noneconomic damages are not recoverable, it seemed fair to place a ceiling on such recoverable damages for professional medical negligence.   

Are damages for pain and suffering limited in other tort cases or in other areas of the law?

Legislatures can, and regularly do, limit damages or eliminate entire causes of action. Two examples: no noneconomic damages recovery by plaintiffs in legal malpractice actions, comparative (percentage of negligence) for noneconomic damages in negligence cases, and no pain and suffering damages in workers’ compensation cases.

How many other states followed California’s lead in this area of the law and are those caps different?  

More than half the states now limit the amount of recoverable non-economic damages in medical liability, a few in all liability cases. The damage ceilings vary from $250K to $1 M, depending on the state and when the laws were enacted.

In 1975, were there any initial legal challenges to MICRA or any significant movement in the Legislature to repeal MICRA?

There was strong opposition to MICRA when it was being considered by the Legislature. The main opponents were personal injury lawyers represented then by the California Trial Lawyers Association (CTLA), which changed its name many years ago to the Consumer Attorneys of California. The State Bar also opposed MICRA at the time.

Legal challenges to MICRA came, of course, after it became law and took until 1985 to get sorted out with respect to the facial constitutional arguments.

Could you elaborate on those facial constitutional arguments and some of those cases?

The first case to be decided by the California Supreme Court 8 years after MICRA’s enactment was American Bank & Trust v. Community Hospital, 33 Cal. 3d 674 (1983). In a closely decided (4-3) opinion, the majority found the periodic payment provision of the law- i.e., section allowing future damages to be paid over time instead of in one lump-sum- violated equal protection because it treated medical malpractice plaintiffs differently from others who sued for recovery of their personal injuries. Justice Stanley Mosk wrote the majority opinion and Justice Otto Kaus, the dissent. Two justices in the majority were temporary appointments by Chief Justice Bird, who was herself in the majority, to sit on this case in place of the two vacant positions.

Immediately after American Bank & Trust was decided, the health care providers (who were the real parties in interest) petitioned for rehearing, which is rarely granted. Before the Court voted on the rehearing petition, Governor Brown appointed two new justices, Cruz Reynoso and Joseph Grodin, to fill the vacant positions on the court and they voted with the previous dissenters, Kaus and Broussard, to rehear American Bank & Trust.  This time, the Court decided narrowly (4-3) the opposite way, with Kaus writing the majority opinion upholding MICRA against constitutional attack and Mosk writing the dissent. American Bank & Trust v. Community Hospital, 36 Cal. 3d 359 (1984). Only one temporary justice, Feinberg, was in the majority this time and another temporarily sitting justice, Rattigan, joined the dissenters. Justice Reynoso recused himself because while he was serving earlier on the Third District Court of Appeal, he authored an opinion upholding against constitutional attack the limit in MICRA on noneconomic damages, Fein v. Permanente Medical Group, 33 Cal. App. 3d 135 (1985).

The California Trial Lawyers Association opposed MICRA’s enactment and continues to oppose it. Can you explain why?

Money. Restrictions on damages, a sliding contingency fee scale for plaintiff attorney fees, and letting juries know about collateral sources of compensation for plaintiffs, means less money in the pockets of plaintiff lawyers. That was the motivation for the organized personal injury plaintiffs’ bar to oppose MICRA in the Legislature. After MICRA became law, the plaintiffs’ bar continued to attack it in the courts, arguing that it violated various constitutional rights, principally the California and federal constitutional guarantees to equal protection of the laws.

The State Legislature did not include a COLA (cost-of-living-adjustment) when it passed MICRA.  The $250,000 cap remains the same today. According to the Consumer Attorneys of California, a plaintiff would need to recover $1,006,910 this year to equal the purchasing power of $250,000 in 1975. Why did the State Legislature omit a COLA, and is this fair?

Yes, it is fair. As I said before, this category of damage defies any objective measurement. It is purely subjective; the dollar value for a person’s pain and suffering worth could range between zero and infinity depending upon whom you ask. Being immeasurable, it didn’t go down in value, however; only up, and at an escalating rate the system could not continue to endure.

As an interesting political footnote, the principal author of MICRA, then Assemblyman Barry Keene, offered to amend the bill to allow for inflation indexing of the “cap” if the CTLA would remove its opposition to the bill. CTLA refused, feeling confident the California Supreme Court would invalidate the “cap” on the ground it violated the federal and state constitutional guarantees to equal protection.  

Looking back, would you change anything about MICRA?

Sure. I’d add gloss to it from the many appellate opinions that have since interpreted MICRA’s provisions and clarified their scope and effect with respect to fact-pattern applications no one could have foreseen.

For example, in Yates v. Pollack, 194 Cal. App. 3d 195 (1987), an intermediate appellate opinion clarifying that the noneconomic damage ceiling in MICRA does not represent an unconstitutional exercise of the Legislature's power, and does not allow an award of $250,000 to each individual plaintiff, but rather limits the total recovery for such damages in any single action to $250,000.  

Looking forward, recently, plaintiffs in other states challenged the constitutionality of MICRA reform measures. Could you briefly discuss those cases, your involvement, and the legal issues?

Wherever you have plaintiff lawyers, and I don’t know anywhere in this country where we don’t, you will have challenges to laws that limit liability, damages, discovery or anything else that tamps down on how much some people can get from others for conduct that occasions them harm.

Most recently the federal 11th Circuit Court of Appeal certified to the Florida Supreme Court several questions about whether that state’s limit of non-economic damages ($1 M) in medical malpractice cases violates the Florida Constitution’s guarantees to equal protection, right to trial by jury, access to the courts and separation of powers. CJAC filed a friend of the court brief with the Florida Supreme Court to help acquaint it with California’s experience concerning MICRA’s cap and the constitutional challenges made to it. A challenge made in another state’s highest court to invalidate its damage cap could, if successful, have a deleterious effect on future challenges to California’s cap; while conversely, California’s consideration and rejection of constitutional claims made against MICRA similar to those asserted against another state’s cap should be of help to that state’s highest court.

CJAC sees MICRA as a “model” for other states to emulate. Accordingly, whenever a MICRA type analogue from another state is challenged in that state’s courts, it will get our attention and perhaps prompt our involvement.  

Is it possible that the United States Supreme Court may reverse these cases?

While anything’s possible, this is most unlikely.

In fifty years, do you see more states adopting MICRA reform measures or more states abandoning these measures?

I see austerity as our future, which means more cost cutting and efficiency measures, including restrictions on litigation and recoverable damages. The only way to avoid this is if we somehow become an economy of all around affluence, where we can offer to all “from each according to his ability, to each according to his needs.” 

About the Interviewee:

Fred Hiestand has nearly 30 years of appellate experience. He has participated as counsel in more than one hundred reported federal and state appellate cases, and has appeared in oral argument before the California Supreme Court. During his extensive career, Hiestand, has served as counsel to the California Legislature’s Joint Committee on Tort Liability, the Assembly’s Select Committee on Medical Malpractice, and to former California Governor Jerry Brown on medical liability. Hiestand is currently General Counsel to the Civil Justice Association of California, an organization that works in the state Legislature and the courts to reduce unwarranted and excessive litigation that increases business expenses.

Telephone Interview with Fred Hiestand, general counsel, Civil Justice Association of California (October 17, 2011).