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Article 4590i Provides A Cap For Actual Damages But Not For Punitive Damages In A Medical Malpractice Case

This article was edited and reviewed by FindLaw Attorney Writers | Last reviewed March 26, 2008

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FACTS OF CASE

Horizon/CMS Health Care Corporation v. Auld, 43 S.Ct.J. 1151 is a nursing home case brought under the Texas Survival Statute. The suit was originally filed by the next friend for Martha Hary against Horizon/CMS Health Corporation, the owner of Heritage Western Hills Nursing Home, alleging that Ms. Hary received medical care and treatment that was both negligent and grossly negligent. Ms. Hary died of a heart attack before the case was tried. As a result, her administratrix, Lexa Auld, continued to prosecute the case through a survival action.

The case was tried to a jury which awarded a verdict of $2.371 million in actual damages. This included $1.75 million for physical pain and mental anguish, $150,000.00 for disfigurement, $250,000.00 for impairment, and $220,941.73 for past medical expenses. The jury also found that the nursing home was grossly negligent and awarded $90 million in punitive damages.

The court entered judgment by applying the cap to actual damages required by Article 4590i which then reduced the actual damages to $1,320,261.40. Judgment for actual damages together with medical expenses was rendered for $1,541,203.13.

The court furthermore reduced the punitive damage award from $90 million to $9,483,766.92 based upon the cap on punitive damages as required by '41.007 of the Texas Civil Practice and Remedies Code. Punitive damages were calculated by multiplying the total damages awarded by four (4). The Supreme Court noted in a footnote that neither party contested whether the punitive damages should be multiplied by the capped or uncapped damage awards. The Supreme Court simply accepted the trial court's finding that the punitive damage award was determined by multiplying the total damages, regardless of the Article 4590i cap.
Judgment was also entered for prejudgement interest at the rate of 10% per annum on all actual damages.

  1. APPLICATION OF ARTICLE 4590i TO AWARD OF PUNITIVE DAMAGES

  2. Section 11.02 of Article 4590i, which is more popularly known as the Texas Medical Liability and Insurance Improvement Act (hereinafter referred to as Athe Act) provides:

    1. in an action on a health care liability claim where final judgment is rendered against a physician or health care provider, the limit of civil liability for damages of the physician or health care provider will be limited to an amount not to exceed $500,000.
    2. Subsection (a) of this section does not apply to the amount of damages awarded on a health care liability claim for the expenses of necessary medical, hospital, and custodial care received before judgment or required in the future for treatment of the injury.

    Article 4590i, '11.04 provides that the $500,000.00 limit on damages is to be adjusted yearly according to the Consumer Price Index. As a result, the Court noted in footnote 2, Aat the time of judgment in this case, the adjusted cap was $1,320,261.40." 43 S.Ct.J. at 1152

    Horizon argued that the cap on damages required by '11.02 should also cap the punitive damages. More specifically, Horizon argued that any damage award in this case could not exceed the adjusted cap of $1,320,261.40 together with any award for past medical expenses.

    The Court held that punitive damages in a medical malpractice case are not limited by the provisions of 4590i. The Court was impressed with the fact that the Texas Medical Association, which lobbied for passage of the Act, has repeatedly stated that the cap in Article 4590i, '11.02 (a) does not include punitive damages. The Court held that punitive damages were limited by the provisions of Texas Civil Practice and Remedies Code, '41.007 which limited punitive damages to four (4) times the amount of actual damages. (Please note that '41.007 has been amended to '41.008 which has further limited punitive damages) As a result, the Supreme Court upheld the actions of the trial court in reducing the punitive damages from $90 million to $9,483,766.92.

  3. PRE-JUDGMENT INTEREST

  4. The Court pointed out that while '11.02(a) of Article 4590i limits the amount of actual damages, '11.02 (b) states that this limit of damages does not apply to expenses for medical care in the past or in the future. The issue before the Court was whether prejudgement interest is also subject to the cap of '11.02 (a). The Court found that with the exception of medical care expenses in the past or in the future, prejudgement interest and all other damages are subject to the cap of '11.02 (a). Therefore, any judgment for actual damages including prejudgement interest is limited by the provisions of '11.02(a)

  5. APPLICABILITY OF ARTICLE 4590i TO A SURVIVAL CLAIM

  6. The Plaintiff argued that application of the damage cap of Article 4590i violated the open-courts provisions of the Texas Constitution. The Court again restated its position that both wrongful death claims and survival claims are statutory claims and as such are not subject to challenges under the open-court provisions of the Texas Constitution. As a result, even though the Court held in Lucas v. United States, 757 SW2d 687 (Tex. 1988) that the cap on damages of Article 4590i was unconstitutional as applied to a common law injury claim, the cap on damages has been held to be constitutional as it applies to a survival claim or wrongful death claim. See Bala v. Maxwell, 909 SW2d 889 (Tex. 1995)

  7. ADMISSIBILITY OF SURVEY REPORTS

  8. The Supreme Court also dealt with an issue that is a thorn in the side of any nursing home in defending a nursing home case. Texas Human Resources Code '32.021 (i), (j), as amended in 1997 provides that survey reports are admissible A . . . if offered to establish warning or notice to the institution of a relevant finding. The Supreme Court acknowledged the possible prejudicial effect of introduction of the survey reports into evidence. While the Court realized that the survey reports may not be admissible for some purposes, such survey reports are admissible for other purposes. Therefore, a defendant must request a limiting instruction to the jury as to the general admission of the survey reports. The Court furthermore held that a witness for Horizon had opened the door to the admission of such survey reports by incorrectly testifying that Horizon would have been cited by the Texas Department of Human Services if any deficiencies had been found in any inspections by the Texas Department of Human Services.

  9. ANALYSIS OF CASE

  10. The limitation of actual damages of '11.02 (a) of Article 4590i applies to both common law damages and prejudgement interest. However, punitive damages are limited by the provisions of Chapter 41 of the Civil Practice and Remedies Code.

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