Fair Claims Act and Student Releases

1. Fair Claims Act and Student Releases Impact of Proposed Sovereign Immunity Legislation (HB 7123)

2. FERMA 2013 Summer Conference July 11, 2013

3. Bob L. Harris, Esq. Messer Caparello, P.A. 2618 Centennial Place Tallahassee, FL 32308 (850) 222-0720 bharris@lawfla.com www.lawfla.com

4. History of Sovereign Immunity 768.28 Waiver of sovereign immunity in tort actions; recovery limits; limitation on attorney fees; statute of limitations; exclusions; indemnification; risk management programs.—(1) In accordance with s. 13, Art. X of the State Constitution, the state, for itself and for its agencies or subdivisions, hereby waives sovereign immunity for liability for torts, but only to the extent specified in this act. Actions at law against the state or any of its agencies or subdivisions to recover damages in tort for money damages against the state or its agencies or subdivisions for injury or loss of property, personal injury, or death caused by the negligent or wrongful act or omission of any employee of the agency or subdivision while acting within the scope of the employee’s office or employment under circumstances in which the state or such agency or subdivision, if a private person, would be liable to the claimant, in accordance with the general laws of this state, may be prosecuted subject to the limitations specified in this act. Any such action may be brought in the county where the property in litigation is located or, if the affected agency or subdivision has an office in such county for the transaction of its customary business, where the cause of action accrued. However, any such action against a state university board of trustees shall be brought in the county in which that university’s main campus is located or in the county in which the cause of action accrued if the university maintains therein a substantial presence for the transaction of its customary business.

5. History of Sovereign Immunity (5) The state and its agencies and subdivisions shall be liable for tort claims in the same manner and to the same extent as a private individual under like circumstances, but liability shall not include punitive damages or interest for the period before judgment. Neither the state nor its agencies or subdivisions shall be liable to pay a claim or a judgment by any one person which exceeds the sum of $200,000 or any claim or judgment, or portions thereof, which, when totaled with all other claims or judgments paid by the state or its agencies or subdivisions arising out of the same incident or occurrence, exceeds the sum of $300,000. However, a judgment or judgments may be claimed and rendered in excess of these amounts and may be settled and paid pursuant to this act up to $200,000 or $300,000, as the case may be; and that portion of the judgment that exceeds these amounts may be reported to the Legislature, but may be paid in part or in whole only by further act of the Legislature. Notwithstanding the limited waiver of sovereign immunity provided herein, the state or an agency or subdivision thereof may agree, within the limits of insurance coverage provided, to settle a claim made or a judgment rendered against it without further action by the Legislature, but the state or agency or subdivision thereof shall not be deemed to have waived any defense of sovereign immunity or to have increased the limits of its liability as a result of its obtaining insurance coverage for tortious acts in excess of the $200,000 or $300,000 waiver provided above. The limitations of liability set forth in this subsection shall apply to the state and its agencies and subdivisions whether or not the state or its agencies or subdivisions possessed sovereign immunity before July 1, 1974.

6. History of Sovereign Immunity • Suits against government entities, including school districts and other state educational entities, are prohibited without their consent • England, “the King can do no wrong” • In 1969, immunity waived with no limits-sunsetted • In 1973, Florida passed statute providing a limited waiver of liability • Originally, the limits were $50,000 per person, and $100,000 per incident • 30 other states have similar caps on liability claims

7. History of Sovereign Immunity • The caps were increased in 1981 to $100,000 and $200,000 • Caps again increased in 2010 (Eff. Oct. 1, 2011) to $200,000 and $300,000 • Claimants can obtain judgments in excess of those caps, but cannot force state entities to pay more • Claimants have to present their excess claims to the Florida legislature and follow claims process rules • First claims bill passed by Florida legislature (as a territory) occurred in 1833

8. History of Claims Bill Process A “claims bill”, sometimes called a relief act, is a bill that compensates a particular individual or entity for injuries or losses occasioned by the negligence or error of a public officer or agency. It is a means by which an injured party may recover damages even though the public officer or agency involved may be immune from suit. Majority approval in both chambers of the legislature is required for passage.

9. History of Claims Bill Process In Florida, state and local governments have sovereign immunity in tort actions, subject to the Florida Fair Claims Act. Sovereign immunity is waived for liability for torts to the extent outlined in the act. Liability limits, when sovereign immunity is waived, are currently $200,000 per person/$300,000 per occurrence. Any damages in excess of these limits are subject to the “claims bill” process, which are submitted to the Legislature for payment in full.

10. History of Claims Bill Process • Claims bills were for many years based entirely on judgments rendered against government entities • That has changed, and claims are made without judgments from a court of law, including settlements • A claims bill is the sole way to compensate a tort claimant over the statutory caps • However, government entities are authorized to settle claims covered by insurance without Legislature • There is a Claims Bill Manual • Claims Bills are required to be filed by August 1st

11. History of Claims Bill Process • Special Masters are often used by House and Senate • Claims are paid from state funds, but local governments pay from their own budgets • Attorneys fees are capped at 25% • There is no restriction on fees a lobbyist can charge, and lobbyists can charge a contingency fee • Legislature has historically limited lobbying fees and included their fees within the attorneys fee limit • What has been the history of claims bills under the Florida Fair Claims Act

12. Claims Bills History • Since 1955, 2007 claims bills have been filed • Over $1.46 illion dollars claimed • Approximately $340 million awarded • A high of $140 million claimed in 2011 • A high of $45 million paid in 1996 (followed by$0 the next year) • Over $39 million paid in 2012 • Only 3 years that no claims bills were paid (1997, 2006, and 2013)

13. Annual Summary of All Claim Bill Activity in the Florida Legislature Since 1955

14. Claims Bill History • As you can see in next chart, most claims bills awarded are in the less than $500,000 category • A fewer amount are in the $1,000,000 to $3,000,000 range • Two more than $5,000,000 in 2012 (the first time in history) • Again, in 2012, approximately $39 million paid, exceeding the amount paid in total over prior 4 years, and most since 1996

15. Claims Bill History

16. Claims Bill History

17. Claims Bill History • As you can see in the next charts, since 1990, most claims bills are for motor vehicle crashes or medical malpractice at state or locally-owned hospitals • Since 1990, there have been 16 claims against school districts for school safety issues, and 11 claims for school bus accidents • No claims for school bus accidents prior to 2002, so a huge increase • Current claims bill against PB District (Abbott, SB 22) is only school claim

18. Claims Bill History

19. Claims Bill History

21. The Problem… There has been an increase in claims bills that the Legislature has to handle, and the amount of funds claimed and awarded… Lobbyists out of control… Legislature is asked to solve the problem… which is a problem in of itself……

22. The Problem…. So, what is the solution this offered? The creation of a Special Committee by the House on Claims Bills And, House Bill 7123

23. The Problem… Originally, the advocates for the Special Committee wanted to tackle: • Increasing number of awards • Lobbyist fees and disclosures • One legislator vs. another • A way to keep them away from the Legislature altogether

24. HB 7123 - Relating to Sovereign Immunity

25. The Problem… Section 6. (5) (d) Except as provided in paragraph (b), political subdivisions shall not be liable to pay a claim or a judgment by any one person which exceeds the sum of $1 million or any claim or judgment, or portions thereof, which, when totaled with all other claims or judgments paid by the political subdivision arising out of the same incident or occurrence, exceeds the sum of $1.5 million. However, a judgment or judgments may be claimed and rendered in excess of these amounts and may be settled and paid pursuant to this section up to $1 million or $1.5 million as the case may be;….

26. HB 7123 - Relating to Sovereign Immunity

27. The Problem… Section 6. (5) (b) 1. A political subdivision that purchases insurance or self-insures to cover liabilities under this section in an amount equal to or greater than three times the limits of liability set forth in paragraph (d) is afforded the protections of this paragraph for such liabilities that occur while such insurance or self-insurance is in effect.

28. Interesting to Note…. VS.

29. Interesting to Note….

30. Interesting to Note…. • Section 4. (3) 1. ….. such claim bill must be sponsored by a member of the local legislative delegation that is the principal location of such entity…. • Section 4. (3) 2. In any instance in which the local legislative delegation consists of only a single member of either the Senate or the House of Representatives, a claim bill meeting the requirements of subparagraph 1. may be sponsored by a member who represents a district adjoining the district of that single member.

31. The Problem…. Does this change help the problem, or make it worse for local government HB 7123 would only impact local governments and not the state, whose immunity limits would stay at $200,000 and $300,000

32. This Creates…

33. The Numbers…. In HB 7123’s staff analysis, staff claims “The bill does not appear to have a fiscal impact on the state, but will have an indeterminate fiscal impact on local governments.”

34. The Numbers…. The same staff analysis further states “The bill does not require the expenditure of funds by local governments, however, raising the caps on damages for negligence lawsuits will have an indeterminate fiscal impact on local governments. Certainly, more awards will have to be paid and settlements will likely end up being for higher amounts than under the limits in current law. Therefore, a local government that does not avail itself of the protections of insurance offered under the bill and commits acts of actionable negligence will experience increased costs under the bill. The impact should be less to local governments that participate in the insurance option under the bill and, therefore, receive the protection from claim bills offered under that option. If a local government purchases the required insurance, it will avoid judgments and claim bills for amounts over the policy limits. While this leads to certain expenses, it also results in avoiding unpredictable and substantial awards from lawsuits. The premiums for such insurance are unknown but it is anticipated that a market for such an insurance product will develop and the risks will be spread across a large segment of local government entities.”

35. Decreased Cost/ Decreased Risk? Similar questions have been documented regarding hospital professional liability in a publicly available article from a law office. The comments are cited from the web site of an attorney who did similar research. The questions and insights are as follows:

36. Decreased Cost/ Decreased Risk? 1) Will there be a reduction in my insurance cost? a. Argument that the insurer can be held liable for award in excess of its liability limits if the insurer should have settled for the policy limits before the excess award. b. Insurers are placed in the untenable position of having to settle non-meritorious cases for the full policy limits because an adverse award could exceed the policy limits and create a bad faith risk. c. The inability to vigorously defend cases has caused many healthcare professional liability insurers to simply refuse to provide lower limits of liability or to prohibitively price the same. d. Reduced policy limits of liability are likely to result in the insurer taking an aggressive posture for resolving rather than vigorously defending, claim given the increase exposure for bad faith or extra contractual liability.

37. Decreased Cost/ Decreased Risk? 2) Will lower limits of liability reduce my claims severity? a. The extent of the impact is unknown b. At lower limits, the cost to defend the claim may approach, or even exceed the policy limits. As a result, claims that may have resulted in defense verdicts, or may even have been dismissed, will result in indemnity payments.

38. Decreased Cost/ Decreased Risk? 3) Will reduced liability limits result in a reduction of my claims exposure? a. Real question is whether reduced limits of liability insurance make a defendant less of a litigation target once a claim is made. There is no scientific data available to provide a definitive answer to this question. b. Better plaintiff attorneys do not invest significant amounts of money in cases with limited returns. c. Personal injury plaintiffs’ attorneys generally do not have the desire or the legal acumen to satisfy an award against a defendant’s personal assets. d. Plaintiff’s attorneys will “cut their losses” and accept a healthcare provider’s policy limits in settlement, even when those limits of liability are significantly below the consensus value of the claim. e. Plaintiff’s attorneys will target another defendant in the case with more insurance. Hospitals are frequently targeted as “deep pocket” defendants . f. The truth of the “liability limits equal the claim value” hypothesis has again recently been confirmed in the aftermath of the insolvency of several healthcare liability insurers.

39. Decreased Cost/ Decreased Risk? 4) Will reduced limits of liability insurance result in fewer claims against me? a. It is incorrect to believe that reduced limits of liability insurance are a panacea for medical negligence litigation- Plaintiff’s attorneys rarely know a prospective defendant’s available insurance limits before a claim is made.

40. Student Releases (minors) • Kirton v. Fields - Florida Supreme Court • December 11, 2008 • Legislature addressed issue in 2009 and 2010 • SB 2440 passed in 2011 • Effective June 2010 • New language for releases for minors • Impacted huge number of businesses and school district activities • What is the impact on typical activities at schools?

41. Student Releases

42. Student Releases • Talk to your School Board attorney or risk management attorney • Check current practices for releases • Does release comply with s. 744.301, F.S. • Questions? THANK YOU!

43. Bob L. Harris, Esq. Messer Caparello, P.A. 2618 Centennial Place Tallahassee, FL 32308 (850) 222-0720 bharris@lawfla.com www.lawfla.com