Rising Medical Malpractice Payouts Drive Push for Tort Reform

Medical professionals, insurance companies and government representatives are calling for tort reform, and warning that without it, Alabama is going to struggle economically.

Claim severity has increased significantly in the past few years, especially for medical malpractice. According to the Alabama Department of Insurance, total payouts from insurers rose by 140 percent from $9.6 million in 2020 to $23.5 million in 2024.

Margaret Nekic, CEO of Inspirien, and William McGowin, general counsel for Inspirien, described the current state of the medical malpractice legal field as an uphill battle.

With venue shopping, no caps on damages, and an increase in plaintiff ads, everything seems to be stacked against the medical professional defendants. These lawsuits increase malpractice insurance costs, and the fear of lawsuits leads physicians to practice defensive medicine. It's becoming harder to recruit doctors when surrounding states have caps on damages, and other tort reform legislation already in place.

"We're not trying to block plaintiffs from getting what they deserve– reasonable compensation for damages. We're against the nuclear verdicts," McGowin said.

The Medical Liability Act of 1987 put a $1 million cap on damages in medical malpractice cases in Alabama. However, this bill was ruled unconstitutional in the 1995 Smith v Schulte case. In that trial, the jury awarded $4.5 million to the plaintiff, and the supreme court reduced the amount to $2.5 million.

Since this decision, medical malpractice damages have skyrocketed. In the Mobile County Circuit Court last month, a jury awarded $50 million for a wrongful death medical malpractice case. That's up from a $35 million judgement in a similar case in the same venue four years earlier.

"If the cap had held, we would be around $2.5 million now, but they raised it to $2.5 million in 1995," Nekic said. "If you look at consumer price index, that amount would be about $5 million in today's world, but the supreme court has raised it significantly in recent years. These escalating jury awards are unsustainable."

Before trial, plaintiff lawyers get to select a venue, which plays a huge role in the case according to McGowin.

"The plaintiff lawyers are always trying to shop venue," he said. "Venue is probably the number one thing they look at when they file a lawsuit. Our big metropolitan areas have become very plaintiff friendly – Mobile, Montgomery and Jefferson County.

"Some of our biggest settlements have been in cases where our hospital and doctors didn't even practice in that county, but they're sued there. We've got to change the venue statute in medical malpractice."

McGowin and Nekic have also seen the negative effects the global pandemic has had on the medical field, malpractice cases and lawsuits in general. "Since Covid, you can't turn on the television without seeing a plaintiff lawyer ad, " McGowin said.

The pandemic put a halt to most lawsuits, causing a backlog of court proceedings. Since the courts reopened, the cost of settlements and awarded damages drastically increased.

"You're faced with jurors who are not knowledgeable about healthcare, and you don't have judges who are trying to manage expectations," Nekic said. "Plaintiff's attorneys are advertising everywhere and saying they're getting multi millions. It's a jackpot justice."

Some hospitals and healthcare providers have insurance to cover the cost of damages while others do not. Either way, their rates will increase.

"That's the misconception that the general public doesn't understand. This money has got to come from somewhere," McGowin said. "It costs the average family in Alabama about $3,000 a year in litigation cost, so somebody's paying for it and it's the consumer. Something's got to be done, or we're going to lose business to the adjacent states, especially in healthcare but in other industries as well."

To implement caps again, the supreme court could simply rule that the court back in 1995 was wrong and caps are constitutional. Then the cap of about $2.5 million would be effective again.

"Medical professionals are being very cautious with patients because they don't want to get sued. They're practicing defensive medicine instead of what they really wanted to do, which was to help people," Nekic said.

Alabamians for Legal Reform (ALR) is working to get this message out, and it's expected that tort reform will be a big topic in next year's legislative session.