On May 23, 2022, Governor Newsom signed into law Assembly Bill No. 35 (“AB-35”) which recasts several provisions of the Medical Injury Compensation Reform Act (“MICRA”) and represents important changes to the law as it concerns recovery in cases of medical professional negligence.  Most notably, AB-35 brings with it changes to laws concerning attorney compensation and the amounts plaintiffs may receive under claims for medical malpractice suits.  These changes and their effect on healthcare providers are discussed below. 

Originally passed in 1975, the Act was intended, in the words of the California Supreme Court, “to reduce the cost of insurance by limiting the amount and timing of recovery in cases of professional negligence.” (Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital (1994) 8 Cal. 4th 100, 112.)  To do this, MICRA contains several provisions designed to restrict recovery of damages in cases of professional negligence against healthcare providers.  Since 1975, there have been multiple attempts to change, alter and increase the caps and limitations of MICRA.  

Until recently, those attempts have always been unsuccessful.  Now, with AB-35’s enactment, Plaintiffs under the 47-year old MICRA provisions will see a new non-economic damages limit and their attorneys will be rewarded with additional legal fees through a revised contingency fee schedule.  The new law goes into effect on January 1, 2023 and effects those lawsuits that are filed after that date.  Lawsuits filed on or before December 31, 2022 will follow the long-standing MICRA rules, caps and limitations.

Below is an analysis of the provisions of MICRA that have been changed by AB-35 and those that have remained the same.

CHANGES TO MICRA

Contingency Fee Recovery

Contingent attorney fees for individuals seeking damages in such cases are limited under Business and Professions Code section 6146, which provides a cap on fees with attorneys able to collect a declining percentage of damages as they reach various thresholds.  The current system provides that an attorney can collect 40% of the first $50,000 recovered; 33% of the next $50,000; 25% of the next $500,000; and 15% of anything that exceeds $600,000.

AB-35 modifies these provisions by raising the cap for attorney fees to a flat 25% for settlements executed prior to the filing of a civil complaint or demand for arbitration, and 33% for recovery under settlements, arbitrations, or judgements after the civil complaint or demand for arbitration is filed.  This may trigger more frequent litigation brought on by higher fees and greater interest in representing these types of claims. 

Non-Economic Damage Recovery

Currently, Civil Code section 3333.2 limits the amount recoverable for noneconomic losses to $250,000.  This includes compensation for pain, suffering, inconvenience, physical impairment, disfigurement, and other nonpecuniary damage.  Additionally, in a wrongful death case, the total amount that any heirs can recover is $250,000.

AB-35 removes this limit and imposes new limits depending whether the action is one involving wrongful death.  For claims not involving wrongful death, AB-35 raises the cap on damages to $350,000, increasing by $40,000 every January 1st for 10 years until noneconomic damages are capped at $750,000 in 2023.  For claims involving wrongful death, AB-35 similarly raises the cap on damages to $500,000, to be increased by $50,000 every January 1st for the next 10 years up to a total of $1,000,000 in 2033.  

Beginning January 1st, 2034, the limits for both will be adjusted upward by 2% to account for inflation. 

Periodic Payments

Section 667.7 of the Code of Civil Procedure requires that the superior court order judgements in malpractice suits to completed in periodic payments if one of the parties requests it.  This provision applies to judgements where the total amount of the award exceeds $50,000.  

AB-35 modifies this provision so that judgements may not be split into periodic payments unless they exceed $250,000.  This will require insurers to retain greater liquidity to pay out more money more quickly, likely increasing premiums as a result.  

Expansion of Inadmissibility of Benevolent/Sympathetic Gestures

Finally, MICRA makes statements, writings, or benevolent gestures expressing sympathy for the pain, suffering, or death of someone involved in an accident inadmissible as evidence of an admission of liability for the purposes of civil suit.  

AB-35 expands this protection, covering the above types of communication as well as those that suggest fault, protecting them as confidential, privileged, and protected, preventing their use as evidence of liability “for any other purpose.”  This change will have a limited impact on insurers, but provides more protection for practitioners involved in malpractice suits.  

UNCHANGED MICRA PROVISIONS

Collateral Source Evidence

Civil Code section 3333.1 allows defendants to introduce evidence of amounts payable to the plaintiff by their insurer for medical expenses.  This provides the jury with an opportunity to reduce damages for medical expense in recognition of the fact that the plaintiff has already been compensated for these expenses by their insurer.  This section also prevents recovery by the collateral source taken from the amount plaintiffs receive.  

AB-35 makes no changes to this section.

One and Three Year Statute of Limitations

Under Code of Civil Procedure sections 340.5 and 364, MICRA limits the statute of limitations in malpractice actions to the sooner of 3 years from the date of injury, or 1 year after the plaintiff discovered or should have discovered the injury.  MICRA also requires the issuance of a 90 days’ notice of intent to sue.  

AB-35 leaves these provisions unmodified. 

Contractual Arbitration of Disputes

Section 1295 of the Code of Civil Procedure is designed “to encourage and facilitate arbitration of medical malpractice disputes.” (Reigelsperger v. Siller (2007) 40 Cal. 4th 574, 578.)  Specifically, the statute requires that contracts for medical services containing arbitration clauses list such provisions in the first article of the contract and note that signing the contract waives the right to jury trial in favor of arbitration.  

AB-35 leaves this law unchanged as well. 

CONCLUSION

It is being argued that these revisions and modifications to MICRA strike a prudent and patient-focused balance between fair compensation to injured patients and the need for universal, high-quality, and cost-effective health care.  The proponents of the MICRA revisions report a willingness to put the interests of California patients ahead of divisive political positions.

Although this may be true, the above changes to the amount of attorney fees collectible for malpractice suits and the increased amount available to Plaintiffs will likely lead to an increase the number of lawsuits, the number of attorneys incentivized to initiate litigation and substantially greater amounts of monetary damages at stake.