The law of unintended consequences

| 31/10/2010

Interfering with well tested and well established laws and procedures, without strong evidence of genuine problems that must be addressed for the greater public good, is usually ill-advised. The current proposals to cap certain non-economic, particularly medical malpractice (medmal), damages awards for personal injury and to shorten the time periods within which claims for such injuries can be brought, appear to assume that there are significant and urgent problems in Cayman and that they must be solved in this way. Both assumptions are open to question.

There is much to be gained by developing a viable medical tourism industry and also by ensuring that the Cayman Islands has a cadre of competent medical professionals who are properly compensated for their services and protected against unjustified and vexatious litigation and excessive damages awards. (I will leave for another day the issue of general insurance carriers and vehicle accident personal injury claims.) Few would dispute these points. But to then argue that we cannot enjoy these advantages unless we enact legislation to limit recourse against and compensation payable by those medical practitioners (or their insurance companies) found to be negligent seems a huge leap. It also begs the question as to who will pick up the cost of those who are so injured and not fully compensated and ignores the reputational risk for Cayman.

The Law Reform Commission has produced a very worthwhile report (LRC Report) on the issues. Its key conclusions are broadly valid and very compelling, i.e. the proposed changes are, in isolation, not well-founded and that alternatives should be pursued. The Government and the community should take very careful note of the conclusions.

The implicit assumptions behind the legislative proposals are that we have or may have an unfair and out of control legal and judicial system here that is customarily producing or will produce excessive awards for personal injuries and that produces inequity for defendants (medical practitioners and insurance companies) because claims are brought too long after the negligent event or omission occurred. The LRC Report properly concludes there is no evidence to support these assumptions as far as the Cayman Islands is concerned (indeed there is some suggestion that damages awards here are currently too conservative and do not fully compensate those injured).

There appear to be two specific concerns that have been identified and that drive the assumptions. First, certain categories of medical practitioners in Cayman have seen their insurance premiums increase dramatically over the past few years (although they are still much the same as in Bermuda and the Bahamas). The UK company that specialises in medical protection, the Medical Protection Society (a not-for-profit/mutual organisation), and provides the cover in Cayman states clearly that each country where it provides cover must be self financing. That means the performance of the medical practitioners it covers in Cayman is the basis of the calculation of the premiums (called “subscriptions”). This means that, if medical practitioners here produce high claims and awards (or the MPS thinks they will in the future), the premiums will increase to cover them or provide reserves to cover future claims. Likewise, if they produce low claims and awards (or the MPS thinks that the risks will go down), the premiums will reduce. This is broadly how insurance works the world over. It is a cost of professional practice, just as it is for lawyers, accountants and other professions. So the medical profession should review the way it practices in order to reduce the incidence and level of claims and explore other ways of obtaining (possibly less gold-plated) coverage for liability (as should the insurance industry), before lobbying Government for special legislative treatment that potentially prejudices injured persons.

Secondly, the agreement entered into by the Government to encourage medical tourism includes a provision that such legislation be introduced. Presumably on the basis that visitors (mainly from the US) using these medical facilities will bring with them increased vexatious litigation and excessive damages awards, i.e. effectively import US style malpractice litigation to our courts. That concern seems to fail to understand the fundamental and significant differences between the US and Cayman litigation systems. For starters, Cayman does not have contingency fees for lawyers or juries deciding damages awards. And the awards to-date by the courts are far from excessive and there is no reason to suppose that the approach of the courts here will change because of medical tourism (and history suggests that a US person who is injured by medical treatment here will find a way to bring the suit in the USA anyway).

The fact that these problems exist in other jurisdictions with completely different legal, social and judicial systems, and yet do not exist here, is no justification for importing the overseas solutions, the moreso when there is no hard evidence that these so called solutions have satisfactorily dealt with the actual problems elsewhere, or would actually deal with the problems adequately here if they did in fact exist!

So before rushing to limit legitimate compensatory awards for personal injuries due to medmal (or any other negligence such as in a car crash) and reducing the time periods for such claims, we should consider very carefully the public policy issues raised. And, in particular, how we as a society would provide for those (particularly in the less well off sector) who suffer such personal injuries and would be precluded from obtaining full and adequate compensation. There is currently (almost) no welfare safety net in Cayman. There is also no free lunch. So are those who ask for reduced liability prepared to pay taxes or levies to compensate those who suffer and lose out under the proposals? And have they asked themselves the critical question “Would my view of the proposals be the same if I or a family member was injured because of negligence”?


Related article: Law Reform Commission says don’t limit claims

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  1. Anonymous says:

    I rarely agree with Tim Ridley, but this he has made a good case and an excellent point.

    There should be no interference with "  well tested and well established laws and procedures, without strong evidence of genuine problems that must be addressed for the greater public good "

    We are heading for disaster if we continue to change our laws for investors.

    • Florence Goring-Nozza says:

      Don’t limit the Compensation caps and Don’t limit the people’s bank accounts and their ability to save money for the future and have CONTROL OVER THEIR OWN BANK ACCOUNT!

      There are ongoing arguments about nomination for awards.This is a UDP distraction from what they are really doing to you  right now as the clock is ticking.

      Caymaniansand x-pats alike should be very very concerned  about this recent passing of the Unclaimed Cash law that authorizes government to TAKE YOUR MONEY YOU HAVE WORKED HARD FOR AND TAKE YOUR LIFE SAVINGS!

      Changing the law from 6 to 7 is NOT AN AMENDMENT. You all should know that already.


      6 to 7 years old is CD rollover time. and taking it from you is outright ROBERY!   Our society is way to small with way too much fiscal irresponsibility to take people’s money with such a high risk attached.

      The promise by government to account holders that you can claim your money after they have squandered it by way of application is a truck load of horse manure landed in your living room! When will you people awake and take your country back from these bandits?

      Do any of you ever consider the factual truths surrounding this issue.

      Would you agree with me that it takes l5 to 20 years to SAVE FOR YOUR CHILDRENS COLLEGE FUNED?  The more kids you have the more you have to save. College fund does not mean tuition only, they have to pay rent and buy expensive books etc.including cost of living. Not all of them have part time jobs.  

      The UDP and the PPM  and independent member did an injustice to the people of the Cayman Islands including those with Key employee status.

      What I mean is, your child’s education money will NOW be in the hands of sharks who will squander it as they please traveling the world at their every whim. While the men in this country Caymanians and x-pats men alike suffer from a severe case of neutering! They can’t stand up for anything or for anyone, status grants and party politics means more to them than the future of their children. Shame on all of you.

      What happened to the guts of our men who should stand up for yourself and your children?


      Let Your legislatures know that this is unsatisfactory, not good enough and that they must go back to the table with this law and GET IT RIGHT.

  2. Anonymous says:

    Just don’t leave this decision up to the lawyers or any of their committees

  3. Rectus femoris says:

     What in the hell are you people talking about? 

    If I wanted to be bored to death, I would read the Compass. 

    Mr. Ridley, you are only interesting when you write to reassure us that there is nothing shady about our financial industry. Tell us again how we have nothing to do with tax evasion/avoidance and that people who hide their billions here do so only because they like our paperclips and stationary, or something like that. 

  4. Anonymous says:

    Contrary to Mr. Ridley’s assumptions, an observation that a status quo exists says little other than that it exists. It says nothing about whether a rational analysis might offer a different solution which offers greater benefits to the community. Similarly, questioning the status quo in relation to tort law or any other area of law need not require inferences of imminent disaster, despite the evidence that a large percentage of legislation is enacted in knee-jerk fashion by incompetent governments in response to disasters brought about by lack of timely rational analysis..

    In the same way that assumptions are used as substitutes for analysis and as filters for evidence in order to ordain conclusions, choices regarding how an individual chooses to make his or her voice heard determine whether or not that voice is heard and what it is heard to say. My recommendation would be that everyone interested in this issue, no matter what their views on tort reform, should make their views known directly to the appropriate government Minister. Do not allow your views to be filtered through, or out, by any person or any group, including the LRC. If you are inclined to write a letter or an email, send it to the Minister. Your views are just as valid as anyone else’s, and given what has been published to date, likely to be at least as well informed.

    Mr. Ridley may support the views set out in the LRC report. Others may not. I have taken the time to read the LRC report in full. I found it to be less helpful and insightful than might have been hoped. There are gaps. The content suggests that certain unarticulated assumptions were operative. The lack of critical analysis of the broader considerations in the debate is as troubling as the lack of lateral thinking. As a result, the conclusions reached are unconvincing.

    What does seem clear is that the analysis and conclusions submitted by the LRC should not carry any more weight on this particular subject than the views of any other person or group. Tort law ought to serve the community’s interests and tort law ought to be reformed when such reforms offer the greatest good to the greatest number while respecting the fundamental rights of all. The views of professional litigators on the one hand, and insurance premium paying medics on the other, must not be allowed to monopolise or even shape this debate. There is too much at stake.

    In fairness to the members of the LRC, the utility of their product may relate to the questions asked of them. Nonetheless, the responses to the critical questions which the community and the government must answer in the present context, (as noted by many of those posting comments on CNS), should not be determined by what is happening in Florida or Texas or Timbuktu for that matter. Neither should it be predetermined by a bias in favour of the status quo.

    Some questions may be critical in relation to specific time frames. In the current context these may include:

    Is tort reform relating to non-economic loss and limitation periods a "make it or break it" issue in determining either the continued availability of obstetric care or the viability of the medical tourism business model of the parties proposing to make large investments in the Cayman Islands?

    The answer to that question should inform any action taken in response to the answers to the following questions:

    Is there any evidence that, had the proposed changes been made 20 years ago, then as a consequence, a different outcome would have been produced in any relevant tort case in the Cayman Islands? (The LRC report suggests that the answer to this question is NO which in turn suggests that the proposed changes may be completely harmless or rendered harmless by some type of periodic inflation based adjustment in the maximum payments.)

    If the answer to this question is yes, then the questions arising might include;

    Would any negative consequence falling on any community members as a result of the changes in tort law be offset by benefits to the community as a whole?, and

    Could the government become an “insurer of last resort” (at an acceptable cost), in relation to the uninsured risk in those cases which might be affected by tort reform so as to secure the greater good without exposing individual community members to unacceptable risk?

    The above questions are used for illustration purposes. The debate need not be as narrow and as sterile as suggested by the LRC report. Innovative, low cost “win – win” outcomes are undoubtedly achievable and they are more likely to be achieved if neither the community nor the Minister are constrained by the views of the LRC in this instance.

    That leaves one final concept which was raised by Mr. Ridley. It is a concept that the LRC did not directly address in its report, but one which I recall having heard Mr. Ridley refer to in a talk regarding the financial services sector. That concept is “regulatory arbitrage”. In the context of the tort reform debate, the availability of such arbitrage allows people in Cayman to not only choose where to go to get the health care that they want, it also allows them, (within certain rules), to choose the most favourable location to sue if that health care goes wrong as a result of negligence..

    The availability of arbitrage is undoubtedly the most compelling argument advanced by Mr. Ridley in his Viewpoint, although Mr. Ridley chose not to focus upon how the availability of arbitrage counters his “lets keep things as they are” argument. Simply put, although the availability of arbitrage may argue against the commercial importance of tort reform for potential investors, it may be that tort reform in Cayman could proceed with little or no adverse impact because persons who might not get what they want in the Cayman Islands legal system in the event of tort reform, would in any event have the option to bypass any legal and economic restrictions in the Cayman Islands by suing in the US or elsewhere, with the potential added advantage of less economic risk.

    In the real world this type of arbitrage/ forum shopping is more likely to be attributable to the up front fees charged by Cayman attorneys, contrasted with the “no win, no fee” litigation available in the US and elsewhere. Nevertheless, if lower up-front cost and higher payout US litigation results are available to those injured by negligence in Cayman, then presumably there is no downside to the proposed tort amendments in Cayman. The availability of arbitrage would spring to the aid of those unable to sue in Cayman by virtue of limitation periods, and those disadvantaged in relation to “non-economic damages” limitations. Arbitrage might just become a preferred option even for those persons not facing obstacles as a result of the proposed tort reforms. Sadly, I suspect that if the general use of arbitrage arose then it may just be possible that some of those now vehemently opposed to changes in tort law would become those most vocal in demanding new changes to the sacred status quo in order to secure their own economic interests in the new environment.After all, that is how each iteration of the status quo is shaped.

    • Anonymous says:

      Good God, did you just swallow a tort reform text book?

      It’s perfectly fine to disagree with Tim, but do you have to make assertions like the following:

      "If you are inclined to write a letter or an email, send it to the Minister. Your views are just as valid as anyone else’s, and given what has been published to date, likely to be at least as well informed."

      Can’t you see that nearly all of of problems stem from the fact that we have a Premier who thinks that he is an all-knowing Finance Minister as well?

      Throw in the fact that we have a recent law school graduate who thinks its time to amend the laws to follow the UDP rather than having the UDP follow the laws, and you have a recipe for disaster.

    • Anonymous says:

      Wow, dude, lots of words there! What you fail to address in all those words is the essence of the law: justice and fairness.

      If we assume that the legal system is a fair and just one. (And if it is not then we have bigger fish to fry than claim caps!) Assuming that the legal system is a fair one then it follows that fair and just claim amounts would be rewarded and excessive claims would be an anomaly. Right? Thus the cap would be invoked in only rare cases. Correct? 

      While the cap might  not be reached in the vast majority of cases, this doesnot make a case for a cap. There will be some cases where the capped amount may be unfairly low. If we develop a sophisticated medical tourism industry, those instances will become more common.

      An acid test: If you, as a result of gross negligence on the part of your health care provider, were blinded, or rendered a quadriplegic, or you suffered chronic, intense, debilitating, lifelong perialgia would you really consider $500,000 to be just compensation for your pain and suffering? As one who once suffered a bout of debilitating chronic pain and as the parent of a child who nearly died as a result of the stupidity of a physician I can say this: If you would accept such a paltry amount, you are not only wordy, you’re pretty silly too.

      Keep in mind that the limit would be $500K. I would surmise that the maximum award would be granted in only those rare "worst cases".

      The correct practical acid test for most people is whether or not they are willing to accept the possibility of receiving an unfairly low claim for pain and suffering should they be the plaintiff in a serious medical negligence case.

      It is all fine and good to construct a debate based on theory, rational analysis and lateral thinking; however, the real world does not always work that way and reason often must give way to good ol’ common sense. Especially when it comes to the qualitative realms of court awards, and pain and suffering.

      You refer to "regulatory arbitrage". Such arbitrage usually refers to a strategy for financial transactions and I can see no correlation to medical malpractice or tort law reform. “Regulatory arbitrage” involves taking advantage of differing regulatory frameworks across borders to maximise financial returns. Are you sure you are not confusing "arbitrage" and "arbitration"? 

      In the USA "arbitration" is often an excellent alternative to expensive and protracted suits heard by a court of law. Often when it is reported that a suit was settled "out of court" it was settled by arbitration.

      I know of no existing legal framework for an extraterritorial malpractice suit across Cayman and US borders unless the provider or closely involved entity has some type of administrative offices or fiduciary affiliate in the country in which the suit is filed. I can see no precedent for the ability to sue in the USA for a tort arising solely in the Cayman Islands involving a local entity with no affiliate, subsidiary or parent in the USA. Perhaps you can provide details on how one might choose an alternate venue to bring suit in regard to a tort involving a medical provider which physically and legally operates and exists solely in the Caymans?

      • Kung Fu Iguana says:

        Oddly the only sensible point was the one about regulatory arbitrage.  Your rant against that phrase did tend to indicate you have no clue what you are talking about.

        And there is not really a concept of "gross negligence" under Cayman law.  Being negligence is a bit like being pregnant, you either are or you aren’t.

        • Just Wondering says:

          I was not ranting before but now the gloves are off: I did not rant against the phrase, merely commented that the concept is probably not sound relative to our health care industry. I allowed that the writer confused some terms since, strictly speaking, the term "Regulatory Arbitrage" is somewhat of a misnomer in the context used, but I can allow for it being used as an illustrative comparative for lack of a better term. Calling it "Opting for Cheap Health Care-lessness" is a more honest appellation than the dignified-sounding term "Regulatory Arbitrage". Don’t you agree?

          First let me say that comparing negligence to pregnancy is kinda silly, no?  Pregnancy is a scientifically quantifiable physical state and even that has "degrees" (single, twins, triples, sextuplets…); however, judgments involving wrongful injury/negligence are subjective (maybe that is why they the dude a "judge"? Duh!)  Your silly comparison further breaksdown in the context of the subject since a woman pregnant in one hospital or country is no more nor less pregnant in another, regardless of the customary metrics or applicable regulations or insurer. This does tend to indicate you have no clue what you are talking about when it comes to pregnancy, but hey, that’s just my opinion. A woman either is or is not pregnant; the finding of a court determines negligence and even then the finding can be reversed on appeal. From a legal standpoint a doctor is not guilty of being negligent the moment he commits the stupidity, he is found to be negligent by the court. A woman is preggers from the time of conception, regardless of if her physician detects the pregnancy or not. (I could say that your legal knowledge is direly suspect by your silly comparison, but I won’t.) Maybe the person responsible did not give you a clear enough spiel about "the birds and the bees.

          As I should see it "regulatory arbitrage" in regard to provision of medical care could take the form first widely exploited in Florida, later Houston and other areas. But this involves US patients or those protected by local laws, Florida/US doctors, and US insurer,  some insurers acting across state lines.

          While I can see advantages involving selection of and domicile of the actual care provider and/or similar "abritrage" potential involving insurers and their domicile – either desiring to capitalise on optimal profits, lower costs and lower risks associated with certain choices and provision of services in amenable jurisdictions with creative schemes, I am not convinced this will work on a global scale for us unless we severely compromise regulation protecting patients. The consumer can shop for the best deal and it is assumed that the provider or insurer already has. While this works well in financial transactions, corporate business models and insurance strategies – and works across provincial borders within a country, it is an unproven concept in the global health care market in relation to protection of the patient’s interest. That is where I think the concept breaks down. To make the concept viable involving cross-border medially-related transactions (and potentially resultant legal actions) risk and costs must be reduced without exposing medical tourism sellers or insurers to action in the home country of the patient, while still offering the patient a satisfactory degree of protection. Big order that is.

          Licensed professional and their services have much more stringent and conservative regulation than the average business corporate body or financial vehicle. In order not to unduly restrict global trade, laws were intentionally written to allow broad scope. Thus business arbitrage could flourish. Not so in the medical profession or medical insurance industry.

          It is an accepted fact that when regulatory arbitrage is encouraged, risk to the "consumer" is increased. When you allow a patient or a provider to select its provider or the regulatory structure based on cost and permissive regulation, it usually means choice of a structure that is more lax, with less stringent regulatory structures, and which may demand a lower degree of accountability and less protection. Not really something that makes me feel all fuzzy about my health care. But then you may care less about your health than I do mine. Allowing Cayman to make a retrograde step by capping compensation paid on claims against careless doctors is foolishness.

          I ask you: What model do you propose that would involve capitalising on "regulatory arbitrage" in regard to our health care system and how would our amending our insurance laws facilitate such a concept without increasing patient risk and their decreasing protection under the law?

          I stand to be convinced.

    • Anonymous says:

      could not agree with many of thecomments made in your reply to Mr. Ridley

      Some reform is necessary. Compensation should be paid to the suffering or family of the dieceased if due to negligence.

      In most cases, costs add up due to the prolonged lengthy exercise drawn up by the interested lawyers so that more income comes to their firms.

      Lastly, who knows. Contingency fees may become the norm, not only for medical negligence but for other types of accidents including road.

      Once contingency fees start, a lot of frivelous medical negligence cases will follow.

      Who pays ? I sure know– patients !