Apr 2007

Is "No-Fault" the Cure for the Medical Liability Crisis? Commentary 2

Laurie T. Cohen, JD and Jason M. LaFlam, JD
Virtual Mentor. 2007;9(4):317-321. doi: 10.1001/virtualmentor.2007.9.4.oped1-0704.


The present medical liability system, while not flawless, is efficient at adjudicating and paying those claims that have merit and at identifying and rejecting those that do not [1]. Even so, many pundits claim that the medical liability system in the United States is hopelessly broken and should be replaced by a no-fault system similar to that of Sweden or New Zealand. Central to these claims is the belief that the current system, unlike a no-fault system, dissuades physicians from being open and honest with patients and other professionals about medical errors, thereby hampering efforts to reduce errors and improve the quality of medical care. Adopting a no-fault system, however, would present many new challenges and may exacerbate some of the problems that advocates claim it would fix. Furthermore, enhancing the identification and disclosure of real or potential errors can be accomplished without replacing the current adjudicatory system.

The concept of a no-fault liability system, as opposed to the current negligence-based system, is not a new one. Workers' compensation systems have replaced the tort-based claims system for employer negligence in the workplace throughout the United States, and automobile insurance with no-fault clauses operates in several states. Moreover, Florida and Virginia have both instituted limited no-fault systems to address claims for birth-related neurological impairments in newborns. While such systems come with promises of simplification and cost containment, seldom has this been the overall result.

In New York, for example, the workers' compensation system, like the current medical liability system, is a source of continual debate about the cost of insurance premiums and the overall adequacy of the benefits paid to injured individuals. Nationally, workers' compensation payments by employers are estimated to have risen from $2 billion in 1960 to nearly $35 billion in 1985 and to $62 billion in 1992 [2]. At the urging of employers, benefits have been reduced and other actions have been taken to contain costs. As a result, the workers' compensation payments by employers nationally were estimated to be $63.9 billion in 2001 [3]. But this slower rate of increase has not lasted; high payments have employers once again clamoring for relief, and programs are once again re-examining worker benefits [4].

Additional Costs Under No-fault: the International Experience

Costs will probably rise under a no-fault medical liability system if the New Zealand and Sweden experiences are valid measures. Both countries are often cited as examples to emulate. Yet both have implemented a series of changes throughout the lifetime of their no-fault systems in the quest for cost containment [5]. The basis for the additional costs associated with these programs is the inherent increase in eligibility for benefits that occurs when the negligence system's requirement to prove fault is eliminated. Therefore, to contain costs, these countries have found themselves restricting eligibility and benefit levels [6]. Moreover, in a study applying a Swedish model to the states of Utah and Colorado, it was estimated that use of the Swedish approach would lead to higher direct costs than the negligence approach [7]. The total cost would be higher even though the study presumed that the program would be a secondary payer, meaning private insurance and government programs would first pick up the tab for medical care under the system.

In addition to the potential rise in costs associated with increased eligibility under a no-fault medical liability system, real limitations may be placed on a wronged individual's current rights. While a no-fault system expects to compensate more individuals, there is a real question as to whether such compensation would be commensurate with the injury actually suffered. As exemplified by current workers' compensation programs, government cost-containment goals frequently cause limitations on compensation levels. Furthermore, no-fault programs often place limitations on recoveries for noneconomic damages such as pain and suffering. Switching to a no-fault system, therefore, may risk providing compensation to individuals who are considered "injured" despite receiving an appropriate level of care, while those individuals severely injured through the negligent actions of their physicians are undercompensated.

The present medical liability system is meant not only to compensate individuals for the wrong committed against them, but to help deter future wrongful acts by the responsible party [8]. In contrast, a no-fault medical liability system is inherently centered on compensating eligible individuals and is not necessarily concerned with acting as a deterrent or with imposing a penalty on a responsible party. Failure to place fault on the responsible individuals may have implications for the quality of medical care. Many proponents of a no-fault system argue that the deterrence factor has been mitigated because payments are made by medical malpractice insurers and not by the negligent physicians themselves, but this arrangement does not eliminate the nonmonetary costs of medical malpractice litigation. "[A] malpractice suit challenges the professional performance, reputation, and identity of a doctor or nurse or other health care provider" [9], not to mention the tremendous impact on that professional's time. For these reasons, physicians are motivated by the current system to act with due care.

One of the best examples of the current system's ability to prompt change may be seen in the experience of the specialty of anesthesiology. As a result of the medical malpractice insurance crisis facing anesthesiologists in the United States during the 1980s, the profession adopted uniform practices and procedures that greatly diminished medical errors and subsequently reduced the insurance premiums anesthesiologists pay [10].

There are certainly actions which could be taken to improve the current system. One approach that has shown positive results involves efforts to encourage physicians to acknowledge their mistakes and apologize to patients and families. In Colorado, for example, certain statements made by a health professional to the patient or the patient's family or representative concerning medical errors are inadmissible as evidence of liability in civil actions or arbitration proceedings [11]. Anecdotal evidence from Colorado and several health systems have shown that the so-called "I'm sorry" approach results in fewer lawsuits and reduced costs when resolving claims.

The extent of the impact of these communication efforts will depend largely on the actions of medical professionals. If they choose to incorporate disclosure of medical errors into their routine practice, the overall health care delivery system, including their individual patients, may benefit immensely. It is often a professional's failure to be forthright about errors and medical outcomes that prompts a civil action [12]. While not precisely determinable, the decrease in civil actions attributable to a simple apology has been estimated to be in the range of 10 to 30 percent [13]. Forthright reporting of errors also increases the potential that corrective measures will be taken to rectify the cause of the error, thus decreasing the potential for repeat errors. Finally, to the extent that compensation is still required after apology, the process should be less adversarial, decreasing the administrative costs to the medical liability system.

In conclusion, while the present system is not flawless, a no-fault medical liability system is not the right answer. Such a system may promise cost containment and compensation to a larger group of individuals, but it inevitably fails to deliver those savings, or it does so at the expense of those suffering from the negligent conduct. Reforms to the existing system, such as fostering increased communication of errors, limiting the use of juries for determinations of fault but not for determination of damages or using neutral medical experts, may prove more advantageous to both patients and physicians.


  1. Studdert DM, Mello MM, Gawande AA, et al. Claims, errors, and compensation payments in medical malpractice litigation. N Engl J Med. 2006;354(19):2024-2033. See also Weiler PC. The case for no-fault medical liability. MD Law Rev. 1993;52(4):101-143.

  2. Miller NP. No-fault tort law as a "strategic assumption": Throwing out the baby with the bathwater. Univ Detroit Mercy Law Rev. 2004;82:47-58.

  3. Lin AC. Beyond tort: compensating victims of environmental toxic injury. South Calif Law Rev. 2005;78:1439-1528.

  4. Lin AC, 1506, 1507.

  5. Studdert DM, Thomas EJ, Zbar BIW, et al. Medical malpractice: external influences and controls: can the United States afford a "no-fault" system of compensation for medical injury. Law Contemp Prob.1997;60:1-34. Article compares the medical liability systems in New Zealand, Sweden and the United States and applies the Swedish system to Utah and Colorado.

  6. Studdert DM, Thomas EJ, Zbar BIW, et al, 10-15; see also Hitzhusen M, Crisis and reform: Is New Zealand's no-fault compensation system a reasonable alternative to the medical malpractice crisis in the United States? Ariz. J. Int Comp Law. 2005;22:657-661.

  7. Studdert DM, Thomas EJ, Zbar BIW, et al, 29.

  8. Kupeli MA, Tort Law—No fault compensation: an unrealistic elixer to the medical malpractice ailment. Suffolk Transnatl Law Rev.1996;19:561; See also Bovbjerg RR, Sloan FA. No-fault for medical injury: theory and evidence. Univ Cincinnati Law Rev. 1998;67:53-123.

  9. Weiler PC, 910

  10. Abraham KS, Weiler PC. Enterprise medical liability and the evolution of the American health care system. Harv Law Rev. 1994;108(2):381-436.
  11. Colo Rev Stat sec. 13-25-135 (2006).

  12. Cohen J. Toward candor after medical error: the first apology law. Harvard Health Policy Rev. 2004;5(1):22.


Virtual Mentor. 2007;9(4):317-321.



The viewpoints expressed in this article are those of the author(s) and do not necessarily reflect the views and policies of the AMA.