A recent decision by the Texas Supreme Court provides significant clarification of the proper application of §74.503, CPRC, which requires, upon request of a defendant physician, health care provider, or claimant, the trial court to “order that medical, health care, or custodial services awarded in a health care liability claim be paid in whole or in part in periodic payments rather than by lump-sum payment.” The purpose of the statute—and the reason it is so important to Chapter 74 in its totality—is to prevent the potential windfall from unused future damages awards that are paid in a lump sum up front. Consistent with other provisions in Chapter 74, §74.503 aims to assure that claimants are made whole for their economic damages, while introducing much needed predictability into medical liability litigation. This predictability allows health care providers and liability insurers to measure their risk accordingly, lowering the cost of liability and thereby expanding access to health care.

In Columbia Valley Health Care System, L.P. d/b/a Valley Regional Medical Center v. A.M.A., A Minor, By and Through His Mother, Ana Ramirez, as Next Friend and Ana Ramirez, Individually (No. 20-0681), the Corpus Christi Court of Appeals affirmed a trial court judgment that thoroughly undermined and defeated the purpose of the statute. The facts are tragic, involving an infant born with the umbilical cord wrapped around its neck who developed cerebral palsy. The plaintiffs sued the hospital alleging negligence by the nursing staff, which the plaintiffs claim delayed calling the mother’s OB/GYN during the infant’s birth, resulting in hypoxia that caused the infant’s brain injury. The jury awarded damages in excess of $10.2 million, of which just over $9 million were for future damages before the minor turned 18, and about $1.2 million for future damages after the minor turned 18. The trial judge refused the hospital’s request for a jury charge on the minor’s life expectancy and annualized future medical expenses. When the jury came back with a verdict of 15-plus years of future medical expenses, the trial court limited periodic payments for the future damages to only five years ($604,000 per year) and 30% of the total verdict, leaving more than $7 million, which the trial court ordered to be paid immediately in cash to the plaintiffs and to the plaintiffs’ attorneys (despite the lack of evidence of a present or imminent need for that award). When the hospital moved for findings of fact and conclusions of law to support the judgment, the trial court refused.

The Corpus Christi Court of Appeals found no error in the jury charge, the trial court’s judgment, or the trial court’s refusal to make findings of fact and conclusions of law. The court’s holding turned largely on a construction of §74.503 that ignored the plain language of the statute. Specifically, the statute provides that “the court shall make a specific finding of the dollar amount of periodic payments that will compensate the claimant for the future damages.” §74.503(c). Further, the “court shall specify in its judgment ordering the payment of future damages by periodic payments the: (1) recipient of the payments; (2) dollar amount of the payments; (3) interval between payments; and (4) number of payments or the period of time over which payments must be made.” §74.503(d). Here the trial court plainly changed the verdict, ordering periodic payments of only about $3 million to “compensate the claimant for the future damages” (emphasis added). What about the other $7 million, which the jury designated as part of the future damages? The trial court thus manufactured the windfall the statute was specifically designed to prevent. (Moreover, making the hospital pay it to the plaintiffs’ attorneys, who are not parties to the lawsuit, seems improper on its face.)

SCOTX held that the trial court erred in three critical respects: (1) its award requiring only five years of periodic payments out of the 13 years of future damages the jury verdict contemplated contradicted the jury’s findings; (2) the lump-sum requirement, with the remainder to be paid to a special needs trust that reverted to the minor’s parents upon the death of the minor, violated the statutory mandate that “[p]eriodic payments, other than future loss of earnings, terminate on the death of the recipient” (§ 74.056(b), CPRC); and (3) the trial court cited no evidence from the record in support of its decision to divide the award between periodic payments and a lump sum. Consequently, SCOTX held that the trial court abused its discretion and remanded the case to the trial court for reconsideration of the structure of the award. In that proceeding, the parties will “have the opportunity to address whether the presentation of additional evidence that does not contravene the jury’s verdict would be necessary or helpful to the trial court in discharging its task of rendering a lawful judgment that complies with the periodic-payments statute.”

It is important to note that the Court rejected the hospitals’ contention that the trial court’s refusal to submit the minor’s life expectancy and annual medical expenses to the jury violated the Constitution and the periodic-payments statute. With respect to the constitutional claim, the Court found that the hospital received a jury trial on plaintiff’s claim of medical malpractice. The constitution does not go further and “require a jury to go further and allocate how or when its award will be paid.” Moreover, the periodic-payments statute does not “implement a constitutional guarantee,” but only enacts a legislative policy decision to require some part of future damages to be paid periodically. Regarding the hospital’s claim of a statutory violation, the Court noted that the statute itself does not require the trial court to “submit granular questions relating to the proper structuring of periodic payments to the jury,” though nothing in the statute would prohibit it either. The statute further does not require the jury to make findings of life expectancy or an annualized assessment of medical expenses, as the hospital sought. But the statute does require the trial court to base its decision to structure the award on the evidence. This is what the trial court failed to do here.

SCOTX’s opinion establishes that trial courts cannot arbitrarily divide an award of future damages to evade the purpose of the statute. It also gives courts of appeals a standard for determining when a trial court has abused its discretion in the application of the periodic-payments statute. We applaud the Court for once again interpreting this important statute to mean exactly what it says and preserving a centerpiece of the 2003 reforms.

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