W.Va. SC to hear appeal of nursing home in $91M case

CHARLESTON, W.Va. (Legal Newsline) -- The West Virginia Supreme Court is scheduled Wednesday to hear the appeal of a high-profile $91 million jury award in a nursing home death case.

In 2011, a Kanawha County jury awarded the estate of Dorothy Douglas $11.5 million in compensatory damages and $80 million in punitive damages.

In 2005, Douglas had been a patient at Heartland of Charleston, a 184-bed nursing and rehabilitation center then owned by HCR Manorcare. The estate alleged Heartland failed to feed and care for Douglas, who died 18 days after leaving the center.

HCR Manorcare appealed, but Kanawha Circuit Judge Paul Zakaib in April denied a new trial, saying the verdict was not unconstitutional or excessive. So, Manorcare then appealed to the state Supreme Court, arguing that the Medical Professional Liability Act, which includes a $500,000 cap on non-economic damages in medical malpractice cases, applies to nursing homes.

Zakaib wrote that "this verdict sends a clear 'deterrence' message to a multi-million dollar nursing home corporation that its misconduct will not be tolerated in West Virginia."

The executive director of the West Virginia State Medical Association said he expects shock waves if the state Supreme Court upholds the verdict and jury award, which eventually was reduced by $400,000

"Now this case at $80 million in punitive damages and $11.5 million in compensatory, this is a big shock," said Evan Jenkins, who also is a state senator from Cabell County. Now a Republican, Jenkins also is seeking the U.S. House of Representatives seat currently occupied by Democrat Nick Rahall.

He said those following the case believe this ruling could bring more instability to West Virginia, which already suffers from its reputation as a litigious, anti-business state.

The West Virginia Association for Justice filed a friend of the court brief on behalf of the plaintiffs urging the Court to affirm the verdict in the case.

The brief, filed by WVAJ President-Elect Anthony J. Majestro, focused on whether the trial court had the right to consider the fact that the defendants had purchased a $125 million insurance policy to cover possible punitive damages.

"Punitive damages are awarded in cases only where the defendants' misconduct goes beyond mere negligence," Majestro said. "In the Heartland case the plaintiffs alleged that an elderly woman was placed in the care of the defendants, and that defendants went two weeks without providing her adequate food and water. That kind of conduct is completely unacceptable.

"The Court and the jury awarded high punitive damages in this case to punish the Heartland defendants for their egregious behavior and to help ensure that all nursing homes meet their duties to the patients in their care."

Majestro said the WVAJ believes that, based on existing case law, the court acted properly when it considered the fact that the defendants had purchased punitive damage insurance, and that the punitive damages would be paid by their insurer.

"Any court reviewing a jury's award of punitive damages should be permitted to take into account how much of the award will be shifted to the defendants' insurance company before it determines whether the award is excessive," he said. "It is also contradictory for the defendants to claim that the award is unfair because they had no idea that a jury might impose such a high punitive damage award.

"They purchased $125 million in punitive damage insurance. You don't do that unless you believe you could be facing a big verdict down the road."

Benjamin Bailey is a partner at the Charleston law firm of Bailey & Glasser, which was retained by Manorcare to handle the appeal. He says the verdict surprised the health-care community because previous courts that faced the same issue held that MPLA caps applied.

"This court raised eyebrows when it ruled otherwise," Bailey said. "I think most health-care providers are concerned that it will increase uncertainty and the costs of health-care services."

Patrick Kelly, chief executive officer of the West Virginia Health Care Association, said no verdict in any other nursing home case in the state comes close to the verdict in the Heartland of Charleston case.

From his perspective, large verdicts like this one adversely affect the health-care community by driving the costs of insurance higher for all nursing homes. He says those costs eventually trickle down to consumers.

"Nursing care for seniors is already very expensive," he said. "Big verdicts will only create greater access and affordability problems."

Kelly adds that ultimately, the Heartland of Charleston case isn't just a nursing home case.

"The dispute over ordinary negligence versus medical negligence impacts every West Virginia health-care provider covered under the MPLA," he said.

Jenkins said West Virginia always has experienced high numbers of lawsuits involving medical negligence. After legislators passed reforms in 2001 and 2003, the state saw a nearly 50 percent reduction in those lawsuits.

He said the legislature originally intended for the MPLA to cover nursing homes. But to remove any doubt, lawmakers last year passed Senate Bill 101, which reiterates that the act applies to nursing homes.

Jenkins contends that it could still be too late for the Heartland of Charleston case, since SB 101 isn't retroactive. If the verdict stands, it could reflect poorly on West Virginia and further discourage potential and current employers and investors.

"It can be a deterrent for a business that wants to grow and expand in our state, and tragically, even continue to do business in our state," he said.

In July 2012, Aon Risk Solutions and the American Health Care Association released a study that identified national and state-specific trends in the cost of general liability and professional liability claims for long-term care.

The study pointed out that state laws and the state judiciary largely influence liability costs.

"The state laws set limits on damages that can be awarded in torts," the study said. "They determine which health-care providers have limited liability and which do not. The state judiciary interprets the laws. A judiciary that is plaintiff-friendly can reduce the effectiveness of laws intended to reduce liability costs."

The study focused on West Virginia since it showed an increase in its annual loss rate - or liability costs relative to occupied long-term care beds - despite tort limits. West Virginia's projected loss rate for 2012 was the second highest of the states at $4,430 per occupied bed. Its projected claim severity, or claim size, was the highest at $326,000.

The study compared West Virginia and Kentucky, the state with the highest loss rate, to Texas, which enacted its own tort reform in 2003. However, the study said, as a result of Texas' efforts, its showed the lowest projected loss rate at $320 per bed for 2012. Its projected claim severity also dropped to $73,000.

"Malpractice costs and the tort environment are often major considerations in the decision to locate and invest in long-term care beds and services in a specific state," said Dom Colaizzo, chairman of Aon Risk Solutions' National Health Care Practice, at the time of the study's release. "This ultimately affects the supply of beds and cost to seniors and their families in a marketplace where demand is growing for senior care and constrained by reduced reimbursements."

In July, Manorcare announced it would sell Heartland of Charleston to Stonerise Healthcare, the owner of four other nursing and rehabilitation centers in West Virginia.

When asked if the recent verdict played a role in his client's move to sell, Bailey said he wasn't involved in that decision. But, he says, from his perspective, Heartland is a good brand, and its employees add value to the business and the community.

"The legislature enacted and Gov. (Earl Ray) Tomblin signed a law to make sure no future runaway cases like this happen, so I don't think this is anything more than a local business decision," he said.

Manorcare will argue Wednesday that the MPLA is the exclusive remedy for the Douglas estate's claims. It also will argue that flaws in the verdict form require a new trial and that the Kanawha County court was wrong in allowing a fiduciary duty claim based on the delivery of healthcare services.

It also will argue that the $80 million in punitive damages should be vacated or at least substantially reduced because the plaintiffs rely on a standard the Supreme Court has disavowed and does not apply in this case. Also, it says the Court should rule the punitive award as unconstitutionally excessive.