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Medical Malpractice

HON. DOUGLAS E. MCKEON*

ABSTRACT

To combat budgetary constraints, New York Governor Andrew

Cuomo and Chief Judge Jonathan Lippman, developed a working
partnership between the executive and judicial branches, formed with the
goal of reducing medical malpractice premiums and Medicaid costs while
promoting a culture of patient safety. To this end, New York is utilizing
two programs, more middle ground than tort reform, to address economic
realities of the medical malpractice debate, while adhering to the
fundamental right of fair compensation to victims. These programs are the
Judge Directed Negotiations Program and Medical Indemnity Fund.
A Judge Directed Negotiation Program has, at its core, a rather basic
philosophy: promoting discussion about a case, analyzing its legal and
medical pros and cons, and creating an environment in which lawyers
view the court as credible, fair, and willing to be involved in the settlement
process. Following this philosophy, cases settle. Judge Directed
Negotiations are a process where meritorious claims are promptly
identified and resolved and, just as importantly, where meritless claims
against physicians are promptly identified and dismissed.
The Medical Indemnity Fund was officially enacted October 1, 2011
after Governor Cuomo appointed a Medicaid Redesign Team to find ways
to save Medicaid money. The Medical Indemnity Fund saves Medicaid
money as it pays the cost of future medical expenses for infants injured by
medical malpractice who would otherwise receive Medicaid benefits.
These programs are new methods to deal with old problems, and more
importantly, they are innovative approaches that seem to be working.

* Justice, Supreme Court, Bronx County, NY; J.D., New York University School of Law,
B.A., City University of New York, Hunter College.

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INTRODUCTION

nder the leadership of New Yorks Governor Andrew Cuomo and

its Chief Judge Jonathan Lippman, an exceptional working
partnership developed between New Yorks executive and judicial
branches that provides real solutions and substantive results in reducing
medical malpractice premiums and Medicaid costs while promoting a
culture of patient safety.1 As a result of this union, two programs unique to
New York State (the State)the New York Medical Indemnity Fund
(MIF, the Statute, or the Fund)2 and Judge-Directed Negotiation
(JDN or JDN Program)are operating coactively in New York courts
to promote the expeditious handling of medical malpractice litigation.
These programs all but eliminate the use of Medicaid-funded devices, such
as Supplemental Needs Trusts (SNT),3 to resolve obstetrical malpractice
suits at a considerable savings to the Medicaid program. 4

See New York State Medical Liability Reform and Patient Safety Model: The NYS Model, N.Y.
UNIFIED CT. SYS. & N.Y. DEPARTMENT OF HEALTH (Oct. 17, 2011), www.health.ny.gov/
health_care/medicaid/redesign/docs/2011-10-17_nys_model_medical_liability.ppt. The NYS
Model is the project developed as a result of an Agency for Healthcare Research and Quality
(AHRQ) grant from the Obama Administration in June 2010. The New York State Unified
Court System, the New York State Department of Health, and five academic medical centers
in New York City are collaborating to achieve the following goals: (1) Develop a culture of
patient safety; (2) Enable *and+ promote complete adverse events reporting; (3) Create a
disclosure and early settlement program; (4) Expand a Judge-Directed Negotiation
Program; (5) Demonstrate the effectiveness of the model; (6) Disseminate reports and
lessons learned; and (7) Expand the NYS Model. Id.
2

See N.Y. PUB. HEALTH LAW 2999-g-j (McKinney Supp. 2012).

See LEE S. KREINDLER ET AL., 16 NEW YORK LAW PRACTICE SERIES 21:44 (2011) (When a
seriously injured person receives a large award or settlement, the proceeds may be placed in a
supplemental needs trust to ensure that the funds recovered are not considered an asset of the
plaintiff for purposes of eligibility for certain government benefit programs and are not
exhausted for payment of medical expenses that would be otherwise payable by
governmental entities under programs such as Medicaid.).
4 See Barbara Benson, Hospitals Get Half a Fix for Medical Malpractice Woes, CRAINS N.Y. BUS.
(Mar. 28, 2011, 3:33 PM), http://www.crainsnewyork.com/article/20110328/free/110329874. It is
estimated that by year eight, the Fund will reduce Medicaid payments by $37.5 million
annually. Id.; see also N.Y. STATE BAR ASSN, MEMORANDUM SUPPORTING GOV. CUOMOS
MEDICAL MALPRACTICE PROPOSALS 3 (n.d.), available at http://www.nysba.org/AM/Template.
cfm?Section=Home&ContentID=47619&Template=/CM/ContentDisplay.cfm (The result is a
system where at least half of successful infant plaintiffs, who have been awarded amounts for
future care, are enrolled in Medicaid and the Medicaid Program pays for the care.).
3

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Background

Nationally, medical malpractice reform proposals generally fall into

two categories: (1) use of damages caps or collateral-source offsets to place
monetary ceilings on categories of recoverable damages, usually pain and
suffering;5 or (2) fundamentally restructuring the recovery process by using
administrative tribunals: for example, using health courts in lieu of jury
trials as the avenue for injured patients or their loved ones to receive
compensation for damages caused by a healthcare providers negligent
medical care.6 Such propositions have never enjoyed meaningful support
in New Yorks legislature.7
Historically, legislative initiatives in New York concerning so-called
medical malpractice reform have sparked keen, often intense partisan
debate over issues that have become as much political as legal or medical.
The resulting statutory pronouncementsgenerally in response to some
looming crisis related to rising medical malpractice premiumshave
generally been disappointing: more political compromise than remedial
measure.8 This changed in 2011.
On January 1, 2011, the day of Governor Cuomo=s inauguration, five
New York hospitals or hospital systems were each paying in excess of
$100,000,000 per year in medical malpractice costs.9 Of the five, two were
paying in excess of $130,000,000, and two were paying in excess of
$120,000,000.10 One hospital was losing $8,000 each time it delivered a baby
whose medical expenses, inclusive the of mother=s, were paid by
Medicaid.11 Malpractice premiums for an obstetrician practicing in Suffolk
or Nassau Counties (New York City suburbs) averaged $186,772, while
premiums in Bronx County averaged $176,573 and Kings County averaged

5 Gil Siegal et al., Adjudicating Severe Birth Injury Claims in Florida and Virginia: The
Experience of a Landmark Experiment in Personal Injury Compensation, 34 AM. J.L. & MED. 493, 494
(2008).
6 Id. at 494-95.
7 See Michael Monaco, Note, New Yorks Medical Malpractice Insurance CrisisA New
Direction for Reform, 14 FORDHAM URB. L.J. 773, 774-75 (1985); Greg David, New York State of
Malpractice, CRAINS N.Y. BUS., June 21, 2010, at 11.
8

See Monaco, supra note 7, at 773-75; see also David, supra note 7.
MRT Adopts Four Work Groups Recommendations, GREATER N.Y. HOSP. ASSN,
http://www.gnyha.org/7785/Default.aspx?&print=yes (last visited Mar. 30, 2012) [hereinafter
GNYHA].
9

10

Id.
Mendez v. N.Y. & Presbyterian Hosp., 934 N.Y.S.2d 662, 665-66 (N.Y. Sup. Ct. 2011). This
figure comes from remarks made on December 1, 2009 by Lisa Kramer, President and CEO of
Hospitals Insurance Company, Inc. (HIC) before the New York State Senate Standing
Committee on Insurance, Health and Codes. Id.
11

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$171,430.12
To make matters worse, the State faced a record budget gap. 13
Medicaid costs had to be reduced, and a Medicaid Redesign Team (MRT)
was appointed by the Governor to make recommendations.14 In response to
escalating medical malpractice premiums and Medicaid costs in certain
regions of the State due to obstetrical malpractice litigation, one of the
recommendations was the creation of the MIF.15
Unlike Virginias and Floridas voluntary obstetrical funds, which
substitute an administrative-compensation program for a claimants right
to sue in court,16 New Yorks Fund is mandatory and only available to
those qualifying health providers who have resolved a lawsuit, either by
settlement or judgment, on or after April 1, 2011.17 In fact, New Yorks
Fund does not restrict a litigants right to sueit requires it.18
The Fund substitutes services for cash as the measure of damages for
the future medical expenses component of any court-obtained award, i.e.,
settlement or judgment. In other words, as will be explained in detail
below, the MIF eliminates the need for an insurer or healthcare provider to
pay cash up front for future medical expenses. Instead, services are paid by
the Fund on an accrual basis.19 The savings to insurers and healthcare
providers will presumably reduce malpractice costs and lower malpractice
premiums. Based on the template in Mendez v. New York and Presbyterian
Hospital,20 the first published opinion interpreting the Fund, and actual
savings achieved in post-April 1, 2011 Fund settlements, major hospitals in

12 EXCELLUS, THE FACTS ABOUT NEW YORK STATE MEDICAL MALPRACTICE COVERAGE
PREMIUMS 1 (2011), available at https://www.excellusbcbs.com/wps/wcm/connect/

5c0c0d80472181c9afa0ff7bd97e1c48/Medical+Malpractice+FS+2011-EX+FINAL.pdf?
MOD=AJPERES.
13 See Within Our Means, N.Y. TIMES, Jan. 31, 2011, at A16.
14 Redesigning New Yorks Medicaid Program, N.Y. STATE DEPARTMENT OF HEALTH,
http://www.health.ny.gov/health_care/medicaid/redesign/ (last visited Mar. 19, 2012).
15 See Benson, supra note 4.
16 See Siegal et al., supra note 5, at 499, 519 & n.130.
17 N.Y. STATE DEPT OF HEALTH, NYS MEDICAL INDEMNITY FUND 11 (2012), available at
http://www.health.ny.gov/regulations/emergency/docs/2012-03-13_medical_indemnity_fund.
pdf.
18 Daniel S. Ratner, New York States New Medical Indemnity Fund, MARTINDALE.COM (Aug.
11, 2011), http://www.martindale.com/medical-malpractice-law/article_heidell-pittonimurphy
-bach-llp_1328126.htm (stating plaintiffs must bring suit and prevail or settle to be eligible for
payment from the MIF).
19

GREATER N.Y. HOSP. ASSN, OVERVIEW OF THE NEW YORK STATE MEDICAL INDEMNITY
FUND FOR NEUROLOGICALLY IMPAIRED NEWBORNS 1 (2011), available at http://www.gnyha.org
/10711/File.aspx.
20

934 N.Y.S.2d 662 (N.Y. Sup. Ct. 2011).

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New York are projecting significant reductions (in the millions of dollars
range) in medical malpractice premium costs.21
JDN is a judicially created settlement tool and method of medicalmalpractice case management, originally implemented in the Supreme
Court, Bronx County, in collaboration with the New York City Health and
Hospitals Corporation (HHC).22 Since 2006, when HHC established its
own Law and Claims Departments, 23 there have been 695 HHC medicalmalpractice dispositions in the Supreme Court, Bronx County, only four of
which required jury selection.24 Of those four, only two resulted in a jury
verdict.25
The JDN concept is quite simple. One judge, well versed in medicine, is
assigned to a malpractice action from inception to jury selection. Cases are
analyzed early on as to whether they have the potential to settle. If the facts
warrant settlement (or the discontinuance against a blameless medical
provider) even before discovery commences, discussions among the parties
are initiated. Each case is closely monitored to reduce court appearances
and lower defense costs. This is significant since researchers estimate that
fifty-four percent of the dollars paid to plaintiffs in medical-malpractice
suits goes to the administration of the system.26
II. Judge-Directed Negotiation
New Yorks Chief Judge Jonathan Lippman and the two Chief
Administrative Judges who have served during his tenure, Honorable Ann
Pfau27 and Honorable Gail Prudenti, have been visionaries in creating

21 Interview with Donald Ashkanese, Vice President, Montefiore Med. Ctr.; Interview with
Brian Noonan, Esq., Vice President, New York and Presbyterian Hosp.
22 Alicia Gallegos, Medical Liability: Cutting Costs from the Bench, AMEDNEWS.COM (Oct. 31,
2011), http://www.ama-assn.org/amednews/m/2011/10/31/psa1031.htm. New York Citys
municipal healthcare system is the largest municipal system in America. Id.
23 See Joel Stashenko, New York Program to Target Medmal Cases for Early Settlements,
N.Y.L.J.,http://www.newyorklawjournal.com/PubArticleNY.jsp?id=120253653369&slreturn=1
(Dec. 27, 2011). Prior to 2006, lawsuits against the City of New York and related agencies,
including HHC, were defended by the New York City Corporation Counsel (Corporation
Counsel). Any settlement required the approval of the New York City Comptroller
(Comptroller). Today, HHC defends its own cases, but still requires the approval of the
Comptroller to settle them.
24

Id.
Id.
26 GNYHA, supra note 9.
27 Judge Pfau is currently the Statewide Coordinating Judge for Medical Malpractice
Matters. In announcing Judge Pfaus appointment, Chief Judge Lippman stated: The eyes of
the country are focused on our efforts to improve the administration of justice in medical
malpractice litigation . . . . State Courts in N.Y. Changing Leadership, INSURANCENEWSNET.COM,
25

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specialized courts and programs which marry administration of the law

with adequate response to societys needs. In furtherance of this
philosophy, they have created programs which promote early resolution of
medical malpractice claims withoutand this is criticaldiminishing the
judiciarys role as a neutral magistrate or depriving litigants of their right
to a trial by jury.
A good example is the highly successful JDN Program created in
conjunction with HHC, which originated in the Supreme Court, Bronx
County, to address municipal hospital malpractice claims. Because of its
success in the Bronx, the JDN Program was expanded to other counties in
New York City. On June 23, 2009, Crains Health Pulse reported that
HHCs malpractice indemnity costs had dropped from a high-water mark
of $190,000,000 in 2003 to $144,000,000 in 2008. 28
Impressed by the results of the JDN Program, the New York State
Department of Health (DOH) reached out to New Yorks Office of Court
Administration (OCA) to explore whether the JDN Program could be
expanded to private hospitals. As a result of that dialogue, a meeting of the
various stakeholders and interested parties was conducted by
Commissioner Richard Daines, M.D., on September 26, 2009. At this
meeting, Doctor Daines described the JDN Program and the parties gauged
whether there was interest in expanding it beyond the confines of New
York Citys municipal hospital system. The New York State Trial Lawyers
Association (NYSTLA), whose members include some of New Yorks
elite plaintiffs medical-malpractice trial lawyers, had long been supportive
of the JDN-HHC Program, viewed the model favorably, and did not
oppose its expansion, provided that litigants retained their fundamental
right to adjudicate malpractice claims in court and by a jury. 29
Efforts were ongoing to expand the JDN Program when, in the fall of
2009, President Obama announced the creation of a fund to provide grants
to applicants to encourage the development of innovative approaches to
reduce medical malpractice costs.30 Working cooperatively, DOH and OCA
submitted a joint proposal that contained a patient-safety component, an
early disclosure and apology pilot program, and an expansion of the JDN
Program to five private New York City hospitals, including the worldrenowned Columbia Presbyterian Center. On June 10, 2010, OCA was

http://insurancenewsnet.com/print.aspx?id=292284&type=topnews (last visited Feb. 23, 2012).

28

Barbara Benson & Gale Scott, Median Plan Cuts HHCs Med Mal Costs, CRAINS N.Y. (June
23, 2009), http://www.crainsnewyork.com/article/20090623/PULSE/906229963.
29 Interview with Jeff Korek, Esq., former President of N.Y. State Trial Lawyers Assn.
30 See Emily P. Walker, Medical Malpractice Reform by President Obama and the White House,
KEVINMD.COM, http://www.kevinmd.com/blog/2009/09/medical-malpractice-reformpresident-obama-white-house.html (last visited Mar. 30, 2012).

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awarded $2,999,787the largest AHRQ grantto implement this

program.31 Soon, other courts utilized the model.
For example, the Supreme Court of Westchester County developed a
JDN-type program in conjunction with the Westchester County Medical
Center, a municipal hospital. Based on its successful program with HHC,
the New York State Health Foundation awarded a grant to establish a JDN
Program in the Supreme Court, Erie County, to deal with medicalmalpractice claims involving three major private health systems. 32
The JDN model has, at its core, a rather basic philosophy: If you
promote discussion about a case; analyze its legal and medical pros and
cons; and create an environment where lawyers view the court as credible,
fair, and willing to become actively involved in the settlement process, you
will settle cases. JDNs aim is to establish a process where meritorious
claims are promptly identified and resolved and, just as importantly,
where meritless claims against physicians and health providers are just as
promptly identified and resolved.
Our experience with the Program supports the notion that suits which
settle sooner generally settle for less; moreover, there is the additional
benefit to all parties that litigation costs are significantly reduced. Under
the JDN method, once a suit is commenced, a single judge supervises the
case from inception to jury selection.33 This permits the judge to become
invested in the case and use every court appearance as an opportunity to
explore settlement. There are medical malpractice actions which, because
of their unique facts, are particularly amenable to early disposition without
the necessity and expense of protracted discovery.
Cases involving shoulder dystocia/brachial plexus are a good example
of the unique factual scenarios. Shoulder dystocia occurs when a babys
head is delivered through the vagina, but his shoulders get stuck inside the
mothers body.34 Erbs Palsy can occur after shoulder dystocia, causing
weakness in the arm or loss of use.35 Liability for brachial plexus injury is
31 Medical Liability Reform and Patient Safety: Demonstration Grants, AGENCY FOR
HEALTHCARE RES. & QUALITY (June 2010), http://www.ahrq.gov/qual/liability/

demogrants.htm.
32 Stashenko, supra note 23.
33 See, e.g., Michelle Andrews, N.Y. Court Program Aims to Ease Malpractice Bottlenecks,
WASH. POST, Nov. 22, 2011, at E4.
34
Pregnancy Complications: Shoulder Dystocia, MARCH OF DIMES (Dec. 2007),
http://www.marchofdimes.com/pregnancy/complications_shoulderdystocia.html [hereinafter
Pregnancy Complications].
35 Henry Lerner, Is All Brachial Plexus Injury Caused by Shoulder Dystocia?, SHOULDER
DYSTOCIA (2006), http://shoulderdystociainfo.com/allbrachialcaused.htm (citing Dominico
Pecorari, A Guest Editorial: Erb Palsy Without Apparent Shoulder Dystocia, 57 OBSTETRICAL &
GYNECOLOGICAL SURV. 547 (2002)).

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created by two means: (1) the doctors failure to appreciate the large size of
the baby or risk factors, for example, the mother is obese or diabetic,
making shoulder dystocia more likely to occur;36 or (2) the doctors use of
excessive lateral traction to free the impacted shoulder.37 Generally, these
issues are identifiable from the hospital record or by a physical exam of the
child. When combined with a full and frank discussion of the legal and
medical pros and cons of the suitthe hallmark of the JDN approachand
an opportunity to view the childs damages, defendants are often prepared
to make a settlement offer quite early in the process.
In the typical JDN/HHC settlement conference, the court benefits from
the presence of HHC and New York City Comptrollers Office
representatives, who have actual authority to settle cases. This is key. By
having people at the table with real authority, the plaintiffs bar views the
negotiations as a genuine opportunity to settle cases.
Replicating these periodic settlement sessions with private hospitals
has been challenging. Culturally, private-medical-malpractice insurers
have not, for the most part, come to court to discuss an inventory of cases
at one sitting. Refining that process is a work in progress. Unlike HHC
where all physicians are employees of the municipal entity, private
attending physicians often have their own coverage with the right to
withhold consent to settlement. Even so, the Federal Grant Program has
achieved more settlements early in the process than was previously the
case.38
III. Medical Indemnity Fund
On January 1, 2011, New York Governor Andrew Cuomo took office
confronting a record-budget deficit. Committed to ameliorating the states
worsening economic woes, the Governor appointed a Medicaid Redesign
Team to find ways to save Medicaid money for the 2011-2012 fiscal
year.39 Subsequently, on February 24, 2011, the Redesign Team approved a
package of recommendations, including Proposal 131proposed, inter alia,
caps on noneconomic damages for medical-malpractice awards and urged
the establishment of a Neurologically Impaired Infant Medical Indemnity
Fund, designed to reduce medical-malpractice costs, principally borne by

36

Pregnancy Complications, supra note 34.

JAMES A. OLEARY, SHOULDER DYSTOCIA AND BIRTH INJURY: PREVENTION AND
TREATMENT 204 (3d ed. 2009).
37

38

See Interview with Donald Ashkanese, supra note 21; Interview with Brian Noonan, Esq.,
supra note 21.
39 Press Release, Andrew M. Cuomo, Governor of N.Y., Governor Cuomo Issues Executive
Order Creating Medicaid Redesign Team (Jan. 5, 2011), available at http://governor.ny.gov/
press/01052011medicaid; see also EXCELLUS, supra note 12, at 3.

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hospitals, for obstetrical claims.40 Under the proposal, the Fund pays the
cost of future medical expenses for infants who would otherwise receive
Medicaid benefits.41
On December 1, 2009, Lisa Kramer, President and CEO of Hospitals
Insurance Company Inc. (HIC), proposed the establishment of an
obstetrical fund before the New York State Senate Standing Committees on
Insurance Health and Codes.42 Her testimony explained the rationale for
the Fund and its economic benefits to certain hospitals:
In the past five years, inflation in malpractice premiums far
exceeded inflation in consumer prices and, more important, the
reimbursement hospitals receive for the critical care they provide
to the public. By way of example, malpractice premiums for one
of our hospitals increased from $53 million in 2005 to $115
million in 2009.
The single biggest driver of hospitals= malpractice costs is
obstetricsthe delivery of babies. Over 40% of our payments are
made in cases involving neurologically impaired infants. Taking
into account the malpractice premiums attributable to obstetrics
cases, one of our hospitals has calculated that it loses over $8,000
per Medicaid-delivered newborn . . . .43

In the spring of 2011, New Yorks Assembly and Senate enacted the
MIF statute; however, caps limiting pain and suffering awards to $250,000
were never considered. Crains New York Business reported that about
50% of med-mal costs in New York were due to suits involving
neurologically impaired infants. 44 Medicaid is the insurer for an estimated
50% of New York state deliveries and pays the medical costs of a
significant number of children affected by neurological impairment,
including many who received a settlement or award in a medicalmalpractice action.45 In the Bronx and Brooklyn, Medicaid pays for about
70% of baby deliveries.46
The creation of an obstetrical fund achieves Governor Cuomos
multiple goals of reducing Medicaid costs and medical malpractice

40 MEDICAID REDESIGN TEAM, PROPOSAL TO REDESIGN MEDICAID: PROPOSAL NO. 13 (2011),

available at http://www.health.ny.gov/health_care/medicaid/redesign/docs/descriptions_

of_recommendations.pdf; Benson, supra note 4.

41 EXCELLUS, supra note 12, at 3 (explaining that the Medical Redesign Team advanced the
Fund as a way to reduce medical malpractice costs).
42 Mendez ex rel. Mendez v. N.Y. & Presbyterian Hosp., 934 N.Y.S.2d 662, 665 (N.Y. Sup.
Ct. 2011).
43
44
45
46

Id. at 665-66.
Benson, supra note 4.
Id.
Id.

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premiums. On a human level, the Fund provides a lifetime of guaranteed

care, geared to obstetrical mishap victims, and the comfort that comes to
parents by knowing that help will be available to their child if they are
gone.
The Fund provides other tangible benefits as a Medicaid cost-cutting
device. With considerable regularity, successful litigants in obstetrical
medical-malpractice actions establish Supplemental Needs Trusts
(SNT)statutorily created trusts that permit tort-recovery recipients to
receive settlement cash, while remaining eligible for Medicaid benefits.47
Based on this Courts experience, the SNT is used, when a child requires
significant future medical care, and settlement proceeds are inadequate,
usually because liability problems require a settlement at a reduced
amount. Under the MIF statute, the Fund pays for the same services as
Medicaid.48 However, unlike Medicaid, no lien is created from the receipt
of Fund services.49 Thus, the Fund permits a plaintiff to settle an action for
up-front cash, buy a home, and receive a lifetime of care without
encumbering the cash or the home, which is the legal consequence of an
SNT. As will be discussed below, because enrollment in the Fund is
mandatory for successful post-April 1, 2011 obstetrical plaintiffs, the Fund
pays the cost of future medical expenses for which Medicaid would have
been responsible prior to its enactment.
How does the Fund work? The MIF statute relieves defendants, in
certain specified obstetrical medical malpractice actions, from paying the
future medical expenses component (Fund damages) of any post-April 1,
2011 judgment or settlement. Instead the MIF statute requires qualified
plaintiffs be enrolled in the Fund, which pays for future medical expenses
as incurred.50 The statute contains a collateral source provision, which
mandates that qualified plaintiffs make use of any existing private
insurance before resorting to the Fund.51
Prior to the statutes enactment, medical malpractice insurers or selfinsured medical providers settled obstetric malpractice actions, including
claims for future medical expenses, with up-front lump-sum cash.
Prepaying for future medical expenses came with an obvious drawback: if
a successful infant plaintiff died sooner than expected or required a level of

47 See KREINDLER ET AL., supra note 3, 21.44; Joseph A. Rosenberg, Supplemental Needs
Trusts for People with Disabilities: The Development of a Private Trust in the Public Interest, 10 B.U.
PUB. INT. L.J. 91, 123-24 (2000).
48 See KREINDLER ET AL., supra note 3, 21.44.
49 N.Y. PUB. HEALTH LAW 2999-j(10) (McKinney 2012) (Payment from the fund shall not
give the fund any right of recovery against any qualified plaintiff . . . .).
50
51

Id. 2999-j(6).
Id. 2999-j(12).

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future care less than projected at the time of the settlement, unspent or
surplus funds went to the childs estate or nonmedical uses rather than
being returned to the insurer or medical provider. The Fund eliminates this
shortcoming by paying only for those services actually utilized, 52 a method
of compensation that has the potential to significantly reduce the cost of
future medical care to qualified infants.
Several years earlier, New Yorks Civil Practice Law and Rules was
amended by the addition of Article 50-A. In Mendez v. New York and
Presbyterian Hospital, the first published opinion addressing the Fund, the
court wrote:
The notion that the payment of future damages should have
some temporal relationship with the future, not exclusively with
the present, is consistent with CPLR Article 50-A, about which
the Advisory Committee on Civil Practice wrote: The legislative
history indicates that the provisions were intended to avoid
payment of unwarranted, windfall damages and to thereby
reduce the liability costs of the defendants found liable, but
without depriving victorious plaintiffs of fair compensation.53

Under the statute, the Fund pays for the following:

[F]uture medical, hospital, surgical, nursing, dental,
rehabilitation, custodial, durable medical equipment, home
modifications, assistive technology, vehicle modifications,
prescription and non-prescription medications, and other health
care costs actually incurred for services rendered to and supplies
utilized by qualified plaintiffs, which are necessary to meet their
health care needs as determined by their treating physicians,
physician assistants, or nurse practitioners . . . .54

For actions covered by the statute, payments of future medical expenses by

the Fund are obligatory and courts are required to amend settlement
agreements or judgments to comply with its terms.55 The Fund, which is
capitalized by deposits from the State and assessments on obstetrical
revenues of New York hospitals, became operational on October 1, 2011.
Rules and regulations have been promulgated to implement and amplify
the statute=s legislative purpose.

52 Stephen G. Schwarz, Implications of the New Medical Indemnity Fund in New York State,
LAWYERS.COM (Apr. 27, 2011), http://research.lawyers.com/blogs/archives/12849-Implicationsof-the-New-Medical-Indemnity-Fund-in-New-York-State.html.
53

Mendez ex rel. Mendez v. N.Y. & Presbyterian Hosp., 934 N.Y.S.2d 633, 634 (N.Y. Sup.
Ct. 2011) (quoting ADVISORY COMM. ON CIVIL PRACTICE, REPORT OF THE ADVISORY COMMITTEE
ON CIVIL PRACTICE 18 (2004), available at http://www.nycourts.gov/ip/judiciaryslegislative/
civilpractice_04.pdf).
54 PUB. HEALTH LAW 2999-h(3).
55 Id. 2999-j(6).

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The Fund is administered by the New York Department of Financial

Services (formerly the Department of Insurance). It defines a birth-related
neurological injury as follows:
[A]n injury to the brain or spinal cord of a live infant caused by
the deprivation of oxygen or mechanical injury occurring in the
course of labor, delivery or resuscitation or by other medical
services provided or not provided during delivery admission that
rendered the infant with a permanent and substantial motor
impairment or with a developmental disability [or both] . . . . This
definition shall apply to live births only.56

Under the statutory scheme, cases are settled, as it was prior to the
enactment of the Fund, for lump sums. Plaintiffs attorneys fee are
calculated pursuant to Judiciary Law section 474-a (sliding scale for
medical-malpractice actions), based upon this lump sum.57 Unlike other
medical-malpractice actions, the defendants in a Fund case pay a portion of
the attorney=s fee.58 Damages, other than future medical expenses (Fund
damages), are paid with lump-sum cash. The amount of non-Fund
damages (the damages to be paid in cash) is determined by an allocation of
the lump-sum settlement.59 The allocation also determines how much of
the attorneys fee is paid by defendant.60 Under the statute, the defendant
is responsible for paying the portion of the fee allocable to Fund damages
and the plaintiff is responsible for the remainder. 61 The statute is silent as to
the criteria to apply in allocating a settlement.
In Mendez, the court allocated a $5,500,000 settlement for a profoundly
brain-damaged child on a 50/50 basis50% for Fund damages and 50% for
non-Fund damages.62 There, the court reviewed appellate authorities in
which damaged infants required custodial care (usually the most costly
element of future medical expenses) and concluded that in a braindamaged-baby case, future medical expenses ranged from 53.7% to as high
as 89% of a damage award. 63
In allocating the settlement amount, as required by the MIF statute, the
Mendez court concluded that the Fund change[d] the dynamics of the
56

Id. 2999-h(1).
Id. 2999-j(14).
58 Id.
59 Id.
60 Mendez ex rel. Mendez v. N.Y. & Presbyterian Hosp., 934 N.Y.S.2d 662, 664 (N.Y. Sup.
Ct. 2011).
57

61

Id.
Id.
63 Id. at 668 (discussing future medical expense damage awards from Lovett v. Interfaith
Med. Ctr., 860 N.Y.S.2d 172, 173 (N.Y. App. Div. 2008) and Flaherty v. Fromberg, 849 N.Y.S.2d
278, 280 (N.Y. App. Div. 2007)).
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settlement process by reducing, often significantly, the amount of net

cash available to settle a case.64 Thus, the court adjusted the typical
allocation in an obstetrical action (weighted in favor of future medical
expenses) to maximize cash. Hence, the Mendez court suggested that in an
obstetrical action governed by the Fund, involving a profoundly damaged
child requiring custodial care, an appropriate allocation is 50/50.
Using the settlement amount in Mendez, the defendant pays one-half of
the $5,500,000 settlement, or $2,750,000, plus one-half of a $700,000, or
$350,000, for a total cost of $3,100,000 to settle a suit which pre-Fund would
cost $5,500,000a savings of $2,400,000. Clearly, the Fund does what it
was set up to achievecreate a significant savings to those hospitals
and/or insurers whose disproportionately high malpractice costs are due to
obstetrical malpractice claims.
Early reports on the efficacy of the Funds administrative structure are
quite good. Applicants receive prompt responses and each childs case is
assigned to a case manager. Moreover, the Funds administrators are
anxious to work closely with the trial courts, whose Infant Compromise
Orders, resolving obstetrical actions, determine eligibility for the Fund. 65

CONCLUSION
It is hard to imagine a conversation about the rising cost of healthcare
in America without some reference, justly or unjustly, to medical-liability
litigation. Ironically, it is routinely a discussion defined less by finances
(okay, there is some of that) than by partisanship and emotion. Partisans
who rigidly adhere to positions are resistant to change or any effort to
achieve consensus. Unfortunately, this results in the debate being shaped
more by terms such as caps, defensive medicine, and patient safety
than by dollars and cents.
Against that backdrop, New York State is utilizing two programs,
more middle ground than tort reform, to address economic realities while
adhering to the fundamental right of victims of medical malpractice to be
fairly compensated, preferably sooner rather than later. New York=s
Medical Indemnity Fund and Judge Directed Negotiation are new methods
to deal with old problems, and more importantly, innovative approaches
which seem to be working.

64

Id. at 669.
See id. at 663. Sedgwick Claims Management Services, Inc., a highly regarded national
claims management company, has been retained to serve as the Funds administrator. Medical
Indemnity Fund: General Information for Providers, N.Y. DEPARTMENT OF FIN. SERVICES,
http://www.dfs.ny.gov/insurance/mif/mif_gen_prov.htm (last visited Mar. 30, 2012).
65