On July 23, 2012, the State of Michigan Supreme Court (“Michigan Supreme Court”) decided a case in which the issue was how to apply Michigan’s cap on noneconomic damages when a medical malpractice jury renders a verdict but there was a settlement reached with some medical malpractice defendant(s) before the trial. In the particular case before the Michigan Supreme Court, the plaintiff had settled with two hospitals before trial in the amount of $195,000 and thereafter filed a medical malpractice case against a physician who the plaintiff claimed was also responsible for her injuries.
After a four-day trial, the medical malpractice jury returned its verdict in favor of the plaintiff and against the defendant physician in the amount of $1,524,831.86 ($124,831.86 for economic damages and a total of $1.4 million for noneconomic damages).
In medical malpractice cases in Michigan, the collateral source rule requires a circuit court to reduce a jury’s award of economic damages by the amount already paid by collateral sources, such as insurers or other providers. MCL 600.6303. In the case before the Michigan Supreme Court, the plaintiff’s total economic damages were eliminated by the collateral source rule because the plaintiff received and will continue to receive supplemental security income benefits from the Social Security Administration.
The Michigan cap on noneconomic damages in effect at the time was $394,200. The trial judge therefore reduced the medical malpractice jury’s verdict to $394,200 (the plaintiff would therefore receive a total of $589,200 ($394,200 plus the $195,000 already received from the settlement with the two hospitals)).
The major issue on appeal was whether the trial judge’s method of applying the cap on noneconomic damages and applying the collateral source rule reduction as to the jury’s verdict was correct.
In deciding the case, the Michigan Supreme Court stated that “Because in some instances a jointly and severally liable tortfeasor settles before trial, the common-law setoff rule is necessary to ensure that the plaintiff does not recover more than a single recovery for the single injury. The common-law setoff rule entitles the remaining tortfeasors, who are still liable for the entire injury, to set off the amount of the cotortfeasor’s settlement from any verdict rendered against them…where the Legislature has retained joint and several liability, the common-law setoff rule remains intact…we hold that the common-law setoff rule remains the law in joint and several liability medical malpractice cases.”
The Michigan Supreme Court then went on to hold “Because a medical malpractice plaintiff cannot by operation of law recover more noneconomic damages than the statutory limit, it follows that a plaintiff’s full recovery of noneconomic losses for the single injury—assuming the jury verdict exceeds the cap—is legislatively predetermined to be limited to the statutory amount. If a plaintiff has been partially compensated through a prior settlement from a jointly and severally liable tortfeasor, then the common-law setoff rule, consistent with its purpose and the statute, must be applied to ensure that the plaintiff is not compensated beyond statutorily permissible limits. To achieve this result, the settlement must be subtracted from a jury verdict after application of the noneconomic damages cap, as well as the collateral source rule; otherwise, the plaintiff could recover more than his or her full compensation, that is, the plaintiff could recover the settlement amount, plus the amount of the cap and the amount of statutorily permissible economic damages, if any.”
The Michigan Supreme Court concluded “Accordingly, we hold that where principles of joint and several liability apply in a medical malpractice case and a codefendant has settled a plaintiff’s claim before trial, a circuit court must first apply to the jury’s verdict the noneconomic damages cap, as well as any other statutorily required adjustments, before reducing the award by the amount of the codefendant’s settlement. Here, plaintiff received a settlement from codefendants in the amount of $195,000. At a later trial against defendant, the jury returned a verdict for plaintiff for $1,524,831.86. Given our holding, it was error for the lower courts to apply the setoff against the jury’s verdict. Rather, the proper order of operation was to first apply both the collateral source rule and the noneconomic damages cap to arrive at the final judgment, which is plaintiff’s full compensation for her injury as determined by the Legislature. Because plaintiff has already received partial compensation for that injury, application of the common-law setoff rule requires that codefendants’ settlement be subtracted from the final judgment so that plaintiff does not receive more than a single recovery for her single injury. Consequently, plaintiff is entitled to a judgment against defendant in the amount of $199,200.” ($1.4 million jury verdict for noneconomic damages reduced to $394,200 cap on noneconomic damages less $195,000 settlement setoff )
Source: Myriam Velez v. Martin Tuma, M.D. No. 138952
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