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PENNSYLVANIA SUPREME COURT

Businesses are carefully watching the Pennsylvania Supreme Court. While it has been generally balanced in the past, its membership shifted in 2016 after the earlier election of several candidates supported by the plaintiffs’ bar. Plaintiff-friendly justices now have a dominant majority. During the past year the court has certainly done so, rendering decisions affecting asbestos litigation, medical liability and workers’ compensation claims. It also issued a highly anticipated ruling on requirements for “bad faith” lawsuits against insurers, which may not invite a huge new wave of litigation but failed to limit such claims to those involving actual misconduct. On the positive side, the Keystone State’s high court deserves praise for upholding a longstanding statute providing a remedy to victims of lawsuit abuse.

BACKTRACKING ON FLAWED EXPERT TESTIMONY IN ASBESTOS LITIGATION

In the past Pennsylvania’s Supreme Court repeatedly rejected testimony by plaintiffs’ experts claiming that exposure to a single fiber of asbestos from a defendant’s product makes that defendant responsible for the plaintiff’s development of an asbestos-related disease, even if the plaintiff had much greater exposure to asbestos from other sources. The court called this “any exposure” theory a “fiction” and properly required experts to show that a plaintiff was exposed to a sufficient level of asbestos from a defendant’s product to have caused his injury. In November 2016, however, the court’s new majority upheld a verdict that embraced a “cumulative exposure” theory, which was really the “any exposure” theory by a different name.

That case, Rost v. Ford Motor Co., involved a plaintiff who did not work directly with asbestos but claimed he was exposed to dust from Ford products containing asbestos while laboring as a “gofer” in an auto repair garage for just three-months. The plaintiff’s expert did not account for the plaintiff’s other occupational exposure to asbestos at high levels elsewhere over at least a 10-year period. And while the high court did not expressly overrule its precedents, it paid scant attention to additional causation factors in this case, such as dose, scientific studies or literature, and a comparative assessment of plaintiff’s exposures.

As a result of the decision, observers note, “[a]sbestos defendants, particularly low-dose asbestos defendants, are in a precarious situation in Pennsylvania.” The court’s 4-2 decision also held appropriately that the trial court’s practice of consolidating unrelated asbestos cases violated the state’s civil procedure rules, but it found Ford suffered no prejudice from the error.

MAKING IT MORE DIFFICULT TO TREAT PATIENTS

Doctors have a duty to provide their patients with information about the alternatives, risks and benefits of medical procedures in order to obtain informed consent. In June 2017 a divided Pennsylvania Supreme Court ruled that surgeons must personally fulfill this obligation. They cannot rely on their professionally trained medical staffs to convey information to patients and answer their questions and concerns.

In Shinal v.Toms, a 4-3 Court revived a medical liability case after ruling that a jury, which sided with the defense, was improperly allowed to consider evidence that qualified members of a brain surgeon’s staff had provided information to a patient about the risks of a procedure she opted to undergo. Instead, the court ruled, a physician’s duty to obtain informed consent was “nondelegable.”

In dissent, Justice Max Baer expressed concern with the “far-reaching, negative impact” of the decision on how physicians serve their patients,” Baer wrote. “For fear of legal liability, physicians now must be involved with every aspect of informing their patients’ consent, thus delaying seriously ill patients’ access to physicians and the critical services that they provide. Courts should not impose such unnecessary burdens upon an already strained and overwhelmed occupation when the law does not clearly warrant this judicial interference.”

The Pennsylvania Medical Society concurred with Justice Baer, saying the ruling
“could have significant ramifications for Pennsylvania physicians” who seemingly can
“no longer rely on the aid of their qualified staff in the informed consent process.” Others observe that the decision “ignores the realities of modern team medicine and will drive up the cost of medical care.”

CREATING TURMOIL IN THE WORKERS’ COMP SYSTEM

On the same day as the informed consent decision, the Pennsylvania Supreme Court struck down a significant element of the state’s Workers’ Compensation Act (WCA) that directed physicians to determine a worker’s degree of impairment based on methodology provided by the American Medical Association (AMA). Now, as a result of this decision, employers face uncertainty, more litigation and higher workers’ comp insurance premiums.

Under Pennsylvania’s workers’ compensation law, once an employer has paid 104 weeks of total disability benefits, it can have a doctor conduct an impairment rating evaluation (IRE) to determine a worker’s degree of disability. If the level of impairment is below 50%, the employer can then file to change the employee’s disability from “permanent total” to “permanent partial status,” which confines benefit payments to no more than 500 weeks. The level of impairment is determined based on the “most recent edition” of an AMA guide. This provides certainty for claim outcomes and an incentive to return to work or settle the claim.

In Protz v. Workers’ Compensation Appeal Board the court ruled that the statute’s reference to the AMA guidelines, which are regularly updated, represented an unconstitutional delegation of legislative authority, and that the o ending language was not severable from the WCA. The ruling shocked employers, who can no longer rely on IRE evaluations. Without the ability to follow the AMA’s guidelines for evaluating a workers’ level of impairment, employers face greater exposure to long term workers’ compensation claims.

Workers’ comp lawyers call Protz “the most significant workers’ compensation ruling in Pennsylvania in the past 30 years” and predict it will lead to thousands of workers seeking more benefits. Immediately after the decision, law firms specializing in workers’ comp claims advised workers whose benefits had expired to contact an attorney to seek reinstated benefits.

Already the Pennsylvania Compensation Rating Bureau has filed a 6% loss cost increase as a direct result of the Protz decision. Insurers expect the decision to “increase costs for employers and add a level of uncertainty to the workers compensation claims process going forward.”

Adding to the mounting concerns of Pennsylvania employers’ and their insurers, the Philadelphia Inquirer published in September 2017 results of a lengthy investigation into questionable conduct and potential conflicts of interest on the part of partners at the area’s dominant workers’ comp claims law firm, Pond Lehocky. The story reports:

Three partners at the firm and its chief financial officer are majority owners of a mail-order pharmacy in the Philadelphia suburbs that has teamed up with a secretive network of doctors that prescribes unproven and exorbitantly priced pain creams to injured workers — some creams costing more than $4,000 per tube.
Pond Lehocky sends clients to preferred doctors and asks them to send those new patients to the law firm’s pharmacy, Workers First. The pharmacy then charges employers or their insurance companies for the workers’ pain medicine, sometimes at sky-high prices, records show.

COULD BE WORSE: CLARIFYING ‘BAD FAITH’ LAWSUITS

Last year this report expressed concern that a case before the Pennsylvania Supreme Court presented it with an opportunity to dilute the standard for bringing “bad faith” lawsuits, which allege that an insurer did not properly or promptly pay an insurance claim. Overall, the court’s unanimous ruling in Rancosky v. Washington National Insurance Co., could have been worse. The court took a middle-of-the-road approach that observers view as either maintaining the status quo or increasing liability in some cases.

Although the legislature created bad faith actions 27 years ago, this was the first time the Pennsylvania high court had considered the standard for such claims. The court’s decision requires plaintiffs to show an insurer knowingly or recklessly refused coverage without a reasonable basis. The court also, to its credit, found that plaintiffs must present “clear and convincing evidence” supporting their claim, rejecting the lower “preponderance of the evidence” standard sought by plaintiffs’ lawyers. And the decision continues to recognize that a merely incorrect decision by an insurer does not automatically demonstrate bad faith.

But the high court predictably failed to go as far as insurers had hoped. It refused to find that actual “bad faith” is always required in a bad faith claim. Rather, the court found that a plaintiff does not need to show an insurer denied a claim as a result of a “dishonest purpose” or “motive of self-interest or ill will.” Such conduct is merely a factor to consider, not required, the court ruled.

Of greatest concern, however, is the court’s determination that the bad faith statute does not require proof of an improper motive for the imposition of punitive damages on top of actual damages, interest and attorneys’ fees. Chief Justice Thomas Saylor’s concurring opinion does remind trial courts that punitive damages must reflect the reprehensibility of the specific conduct at issue and cautions against awarding punitive damages that violate constitutional standards. But leaving such judgments to lower courts, particularly in plaintiff-friendly jurisdictions such as Philadelphia, may prove to be an act of misplaced good faith.

GOOD NEWS: UPHOLDING A REMEDY FOR VICTIMS OF LAWSUIT ABUSE

While the high court expanded liability in several areas this year, it preserved a Pennsylvania statute that has long protected litigants from lawsuit abuse.

The Dragonetti Act, passed by the General Assembly and signed into law in 1980, gives civil defendants who prevail at trial a statutory cause of action for “wrongful use of civil proceedings.” Under the law those who bring lawsuits in a “grossly negligent manner or without probable cause” and act primarily for an improper purpose may be required to compensate victimized defendants. Such compensation may include any financial loss or emotional distress that resulted from the proceedings. Punitive damages may be imposed when appropriate. In Villani v. Seibert, the law was challenged as violating the judiciary’s exclusive power to regulate the practice of law under the Pennsylvania Constitution.

The court’s 5-1 ruling in April 2017 recognized that the statute’s purpose is to “compensate victims of frivolous and abusive litigation and, therefore, has a strong substantive, remedial thrust.” It declined “to recognize generalized attorney immunity from the substantive principles of tort law” established by the legislature. In other words, the court found that when an attorney injures someone through wrongful conduct, he or she should be subject to liability just like anyone else. In a concurring opinion, Justice Baer emphasized the difference between the judiciary’s exclusive authority to discipline attorneys and the legislature’s role in providing a remedy for victims of lawsuit abuse.

The ruling is not only a victory in preserving the Dragonetti Act, it also solidifies the Pennsylvania legislature’s authority to respond to other troubling attorney practices in the future. Observers note, however, that the court left open the door to future challenges to the statute and the possibility that the court could yet find it unconstitutional if applied to cases in which plaintiffs’ are attempting to expand the law or seek punitive damages.

THE UNKNOWN: PRODUCT LIABILITY LAW REMAINS UNCERTAIN

Product liability law in Pennsylvania remains uncertain in the wake of the state high court’s November 2014 ruling in Tincher v. Omega Flex Inc. The lengthy decision swept away decades of Pennsylvania precedent. Three years on many questions remain unanswered. Some judges have adhered to earlier rulings that disadvantage defendants, such as a state appellate court ruling in April 2017 that a products liability defendant still cannot introduce evidence showing its product to be in compliance with federal regulatory and industry standards. That court affirmed a $55 million Philadelphia verdict against Honda in a crashworthiness case. Pennsylvania defense attorneys also anticipate that plaintiffs’ lawyers will use Tincher to make broader and more costly discovery requests of their clients.