PERIODIC PAYMENTS OF FUTURE DAMAGES

MICRA Primer: Making Sure the Money Is There When Needed

When California legislators were trying to solve a malpractice insurance crisis in 1975, they saw a way to help those injured through medical errors without increasing physicians’ costs for professional liability protection.

The solution was simple: In passing the Medical Injury Compensation Reform Act, the legislators included a provision that allows a health care defendant to pay a claimant’s future economic damages, if over $50,000, in installments.

The law, codified as Code of Civil Procedure Section 667.7, addressed the legislators’ concern that no matter how large an award a plaintiff won, the money might waste away before that person’s future needs actually arose.

Here is how the law works: Say an individual suffers an injury during knee surgery after a skiing accident. The patient loses six months of work and endures eight months of pain before his case against the physician goes to trial. The plaintiff alleges in trial that in addition to the pain and lost work he has already suffered, he will need two knee replacements over his lifetime.

The jury finds against the surgeon and awards the patient $75,000 in past economic damages (for the work already lost), $50,000 in past pain and suffering, and $100,000 to cover the costs (and resulting lost work) for the patient’s future knee surgeries.

Based on Section 667.7, the defense attorney seeks the court’s approval to satisfy the judgment by paying the plaintiff $125,000 now (for the past lost work and pain) and by paying the $100,000 future damages using periodic payments. In practice, this is done by purchasing an annuity that provides an income stream to the individual in agreed-upon installments, which can be monthly, yearly, or in identified years.

Without the installment payments, it is entirely possible that by the time the person needed his first and second knee surgeries, the $100,000 paid for those purposes will have been squandered.

MICRA is a set of laws that, like Section 667.7, protect patients and helps keep access to medical care open to Californians.