Texas Supreme Court Ruling

The Texas Supreme Court recently ruled that healthcare providers can compel arbitration for medical malpractice lawsuits by electing arbitration with patients who sue them over negligent, careless, or abusive acts. The case, The Fredericksburg Care Company, L.P. v. Juanita Perez, Virginia Garcia, Paul Zapata, and Sylvia Sanchez on behalf of Elisa Zapata, overruled holdings by the lower courts that have found that the Texas Medical Liability Act (TMLA) regulates the business of insurance, making federal preemption inapplicable to medical malpractice suits in Texas.

After the family of Elisa Zapata sued the Fredericksburg Care Company for failing to protect the patient from neglect and wrongful death, the nursing home requested that a trial court grant it arbitration for medical malpractice, noting that there was an arbitration agreement in place, enforceable by the Federal Arbitration Act (FAA).

Both the trial court and San Antonio appellate court found that under the McCarran-Ferguson Act (MFA), the nursing home could not compel arbitration for medical malpractice. The MFA was passed around the time of tort reform and provides an exemption from preemption that applies to state statutes enacted for the purpose of regulating the business of insurance. Both lower courts and the Beneficiaries contended that Chapter 74, and specifically 74.451, relates to the business of insurance and is extended the protections of the MFA.

The Texas Supreme Court explained that although the aspiration of achieving lower insurance rates – thus reducing malpractice insurance costs for medical providers which would hopefully reduce costs to policyholders and their insurers – was the entire reason that Chapter 74 was enacted in the first place, the tenuous impact and connection with the business of insurance is inadequate to extend MFA protection to Chapter 74. Therefore, exemption from preemption does not apply to healthcare liability claims.

The opinion of the Court stated,

Section 74.451 of the Texas Civil Practice and Remedies Code was not a law enacted by the Texas Legislature for the purpose of regulating the business of insurance…Accordingly, the MFA does not exempt section 74.451 from preemption by the FAA…

This means that healthcare providers now have even more say as to the venue to resolve arbitration for medical malpractice agreements are now enforceable. If healthcare facilities and providers include arbitration agreements in their paperwork, intake documents, consent forms, or contracts, then patients may be compelled for arbitration.

Possible issues that patients may face include anything from the cost of arbitration, the language used in the arbitration agreements, finding arbitrators with knowledge and experience in personal injury and medical malpractice claims, procedural questions, lack of precedent, and the fact that this may further discourage filing healthcare liability claims. We may see an increase in the number of arbitration for medical malpractice claims, especially by nursing homes.

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