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Physician/Patient Agreement Requiring Arbitration of Malpractice Claim Upheld for First Time

Published in Volusia County Medical Society Weekly Newsbrief

By Gregory D. Snell, Esq.

Florida appellate court has ruled for the first time that an agreement between a physician and a patient requiring the patient to arbitrate their medical malpractice claim rather than take it to trial is enforceable. Arbitration of malpractice claims has long been an option; what is significant about this decision is that a patient can be made to forfeit their right to trial and arbitrate any claim as a precondition to receiving medical treatment. No legislative malpractice reform measure ever went so far, and probably could not have, as there is a constitutional right to trial in Florida, which can be waived, but not denied. The potential implications for health care are significant.

The deciding court was the First District Court of Appeal, one of five which hear appeals from the trial courts and from which appeals can be made to the Supreme Court. The First District is the district for northern Florida and is based in Tallahassee. The parties to the case are Donna Franks as personal representative of Joseph James Franks and Gary John Bowers, M.D., Benjamin M. Piperno, M.D. and North Florida Surgeons, P.A. As sometimes occurs in appeals considered important, briefs were filed by two non-party organizations with an indirect interest in the outcome, the Florida Justice Association and the Florida Defense Lawyers Asso-ciation.

Chapter 766 of the Florida statutes, entitled “Medical Malpractice and Related Matters,” provides for voluntary and court ordered arbitration of malpractice claims but not mandatory binding arbitration. The voluntary arbitration has limitations on the recovery of non-economic damages but does not allow the health care provider to contest liability. Accordingly, it is not often used.

The agreement which was upheld not only required the patient to arbitrate their claim in lieu of trial but also required them to accept the Chapter 766 voluntary arbitration limitations on non-economic damages even if the physician contested liability. This is a far better version of arbitration for the physician than afforded by the statutes.

It was argued that the non-binding arbitration provisions of Chapter 766 should apply because other provisions of Chapter 766 were incorporated in the agreement. Also, the agreement was attacked as against public policy and unconscionable. Somewhat inter-estingly, the First District ruled in a 2007 case involving an owner of an assisted living facility, Alterra Healthcare Corp., that language in a mandatory arbitration agreement which limited damages was against public policy. The court distinguished its decision in that case, however, by stating that the legislative intent of the nursing home and assisted living facility statutes, and the related public policy objectives, differ from those of Chapter 766.

The Supreme Court is not obligated to accept an appeal of this case and didn’t accept the Alterra HealthCare Corp. case. If they do then whatever they decide will be the law. If they don’t then in the First District this ruling is the law. If a similar case comes before one of the other districts they might be persuaded by this opinion but they would not be bound to follow it. When two districts disagree the Supreme Court has jurisdiction to resolve the conflict.

Consequently, as it stands, health care providers are at liberty to enter mandatory arbitration agreements with their patients. There are reasons for and against. It is much less likely arbitrators, as opposed to jurors, will award excessive damages based on emotion or some other illogical impulse. However, jurors, all in all, have treated health care providers, particularly physicians, relatively well, with many a defense verdict. It is the infrequent eye catching verdict that creates a different, inaccurate, perception. It is not the aberrant jury verdicts that contribute most to the cost of medical malpractice insurance premiums; it is the cost of investigation and defense of claims.

If an agreement is made with a patient to arbitrate malpractice claims then every claim, regardless of severity or merit, would be eligible for arbitration. Arbitration, especially as proscribed by Chapter 766, is not an inexpensive proposition and agreeing to any other form of arbitration would, based on this ruling, seem to jeopardize enforcement. The economics of arbitrating them all would be hard to justify as the global cost could exceed the alternative cost of litigating them on an as needed basis. An agreement which gives the health care provider the discretion to choose which claims to arbitrate and which to litigate could be drafted but until such an agreement was interpreted by the courts its enforceability would be in doubt.

Only a small fraction of malpractice claims end up in trial. Claims are abandoned and lost on the merits by rulings of courts. With obligatory arbitration it is likely that fewer claims would be abandoned and there would be no mechanism for having them involuntarily disposed of prior to arbitration. The cost of taking a case to trial and other practical and procedural hurdles which must be overcome to get there can be daunting to would be claimants and their counsel. This serves as a deterrent much more than would an absolute entitlement to arbitrate claims.

Intellect and analytical skills which might enable an arbitrator to dispassionately and effectively sort through complex matters of alleged malpractice might also predispose them to find fault where an average juror would not. There are no guarantees that the success rate with arbitrators would be better than with jurors or even that the total awards would be less. There are incidental benefits of arbitration, including that it is private and therefore embarrassment and damage to reputation can be minimized and scheduling is more within the control of the parties than is typical in the court system.

Health care providers who wish to consider entering mandatory arbitration agreements with their patients should confer with legal counsel and their malpractice carrier for input. Those in specialty areas prone to catastrophic injury, and therefore more susceptible to large awards, may have more compelling reasons to do so. Care must be taken in drafting agreements or they could be fatally flawed and useless.

As for prospective negligence claim targets not subject to Chapter 766, unless there is a statutory scheme in place for the kind of claims which might be brought against them, which includes arbitration and which does not prohibit waiver of rights, this case does not give assurance, one way or the other, that they would be enforced.

Greg Snell is an attorney with the firm Snell Legal, The Business Lawyers, who provides representation in business litigation matters, including the representation of physicians and other health care providers in both litigation and non-litigation matters. Mr. Snell can be contacted to assist with preparing an arbitration agreement, to obtain a copy of the Franks case, or for any other reason at 386-677-3232 or gregsnell@snelllegal.com. For more information on Mr. Snell see http://www.snelllegal.com/.

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