The Tennessee Supreme Court is weighing the state’s limit on punitive damages in medical and other liability cases. A ruling to lift the ceiling could mean unlimited awards against physicians and other defendants.
From life insurance to medical liability
The case, Lindenberg v. Jackson National Life Insurance Co., originated in a dispute between an insurance company and the beneficiary of a life insurance policy. The company withheld the proceeds of the policy from the ex-wife of the deceased policyholder based on concerns over competing claims.
A jury in December 2014 found the insurance company had breached the terms of the policy contract and awarded the ex-wife $350,000 in actual damages, totaling the face amount of the policy. In addition, jurors awarded her $3 million in punitive damages. The insurance company asked a court to overturn the punitive damages award, citing a 2011 state law that caps punitive awards at $500,000 or twice the amount of actual damages, whichever is higher.
A federal judge heard the plaintiff’s arguments that the cap violates her right to a jury trial and encroaches on the powers of the courts. The judge in November referred the question to the Tennessee Supreme Court.
The case holds broader implications than for the scenario in question because lifting the cap on damages could leave physicians exposed to unlimited awards for punitive damages.
What physicians are saying
The limit on awards ensures fairness and predictability in liability cases, the Litigation Center of the AMA and State Medical Societies, the Tennessee Medical Association and 20 other insurers and employers argued in an April 15 friend-of-the-court brief.
The organizations underscored that the 2011 law should remain in place, citing laws in other states and previous court rulings as evidence that the cap does not violate the right to a jury trial or encroach on the powers of the courts.
“Both sound legal and economic public policies support Tennessee’s reasonable limits on punitive damages,” the organizations said in their brief. They also made the case that the cap helps the state compete economically with other states and nations—physicians and others make decisions on where to set up business, in part, on the risk of excessive punitive awards.
“If Tennessee’s legal climate is viewed as having excessive, unpredictable and disproportionate liability exposure,” the brief said, “then job-creators, physicians and others will have an incentive to go where they will receive fairer treatment.”
The Tennessee law and others like it were enacted to combat a wave of punitive awards that had grown out of all proportion to actual damages, the brief said, and physicians face inflated penalties without the cap.
Additional medical liability cases in which the AMA Litigation Center is involved
- Find out how the AMA is working to uphold a statute of limitations on wrongful deaths
- Read about how a case in Oregon could increase liability exposure and redefine injury
- Learn how one of the nation’s leading medical liability reform laws could be undercut in a state supreme court
- Understand the implications of a case that is set to decide on censorship in the exam room
- See the outcome of a court’s decision regarding protected patient safety information
