AB 35: New Medical Malpractice Rules in California

Since 1975, the Medical Injury Compensation Reform Act (MICRA) has established medical malpractice limits in California. Starting in 2023, this law is changing. Governor Gavin Newsom has signed AB 35 into law, creating new medical malpractice rules in California.

Rules Under MICRA

Under the old MICRA rules, medical malpractice lawsuits had a $250,000 cap on non-economic damages. Additionally, the contingency fee that attorneys could collect were limited to 40% of the first $50,000, 33% of the next $50,000, 25% of the next $500,000 and 15% of any amount exceeding $600,000.

According to the Consumer Attorneys of California, this law needed to be updated. The $250,000 has not been increased in more than four decades, and because of inflation, the value of the cap on damages has diminished significantly in that time.

The Fairness for Injured Patients Act

The Fairness for Injured Patients Act (FIPA) sought to reform MICRA. According to Consumer Watchdog, which endorsed FIPA, the act would have adjusted the cap for inflation and allow judges and jurors to decide on compensation above the cap in cases involving catastrophic injury or death.

AMA states that almost any case could have been considered to involve catastrophic injury under FIPA. This would have led to huge jury awards, and this in turn would have destabilized the insurance market and increased the cost of care for patients.

According to the Doctors Company, a coalition of physicians, dentists, nurses, hospitals, safety net clinics and other healthcare providers strongly opposed FIPA, which was seen as effectively eliminating the cap on non-economic damages in medical malpractice lawsuits.  The Legislative Analyst’s Office found that the law could create government costs of millions of dollars, and this could have been costly for taxpayers.

The Introduction of AB 35

According to the National Law Review, AB 35 was introduced in April 2022 as another way to modernize MICRA. The new law had support from both houses as well as Californians Allied for Patient Protection, Consumer Attorneys of California and patient and healthcare advocate groups. Additionally, passing AB 35 would mean that FIPA would be withdrawn from the November ballot.

On May 23, 2022, the Office of Gavin Newsom announced that the bill had been signed into law.

Changes under AB 35

Under the new rules, the $250,000 cap on non-economic damages created by MICRA will be replaced with two separate caps.

• In wrongful death cases, the cap will be $500,000. This cap will increase by $50,000 every year on January 1 until it reaches $1 million.
• In cases that do not involve wrongful death, the cap will be $350,000, and this cap will increase by $40,000 each year until reaching $750,000.

These annual increases will help the caps keep up with inflation, unlike the unchanging caps that were established in 1975 and haven’t been increased in the years since.

The new law will also change attorney fee limits, which will be based on the stage of representation at which the amount is recovered. According to the California Medical Association (CMA), there will be a 25% contingency fee limit for claims that are resolved prior to a civil complaint being filed or an arbitration demand being made, and there will be a 33% contingency fee limit for claims resolved after a civil complaint is filed or an arbitration demand is made.

Additionally, CMA says that the new law establishes protections for benevolent gestures and states of fault by healthcare providers. Pre-litigation expressions of sympathy, regret or benevolence, including statements of fault, made by a healthcare provider to an injured patient or their family will be subject to new discovery and evidentiary protections.

Reactions to AB 35

Assembly Majority Leader Eloise Gómez Reyes said, “I’m proud to have worked together with all stakeholders to get this done. AB 35 provides a better system for both providers and patients, creating a fair process that will have a real impact on Californians for decades to come.”

According to North Bay Journal, AB 35 is considered a compromise by various stakeholders. If the law had not passed, the limits established by the 1975 law could have ended in 2023, opening the door for lawsuits asking for infinite amounts in non-economic damages. Furthermore, with many healthcare workers already considering leaving the profession, the sunsetting of non-economic damage caps could have pushed more doctors to leave.

The new medical malpractice rules will go into effect on January 1, 2023 and may impact healthcare providers’ insurance needs and risk management strategies.

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