Diaz v. State, and Evidence of Settlements in Medical Malpractice Suits

The Washington State Supreme Court recently weighed in on an on-going issue that has been facing attorneys practicing in the area of medical malpractice. The question in issue is, in the context of a medical malpractice lawsuit, if a plaintiff settles with one or more defendants (and they consequently drop out of the suit), are the remaining defendants allowed to introduce evidence to the jury of that settlement?

Of course, to the layperson, this might seem like a question with an easy answer, but as is present all too often, in the eyes of the law, it is not. First, the rules of evidence govern what things a jury can and cannot see and hear during trial. Second, over time, medical malpractice cases have become subject to additional rules enacted by the state legislature due to the unique complications that often occur in medical malpractice suits.

The recent case that was decided is called Diaz v. State, 285 P.3d 873 (2012). In that case, the Supreme Court had to sort out three possible grounds for deciding whether evidence of a settlement could come into trial. The first basis concerns a Washington statute (RCW 7.70.080). That statute was enacted to supersede the collateral source rule in medical malpractice cases. You may be asking yourself, “What is the collateral source rule?” Here it is: The collateral source rule (from the common law) prevents any party from introducing evidence that a third party compensated a plaintiff for his or her injuries. The policy behind this rule is depriving the jury of the temptation to decrease the plaintiff’s verdict because the plaintiff received compensation from someone else.

In enacting RCW 7.70.080, the Washington legislature decided that the collateral source rule was not advantageous in medical malpractice cases, and that it was better for the jury to decide whether a plaintiff had been properly compensated by some third party (like a worker’s compensation policy, liability insurance, or something similar).

Later during the 1980s, the state legislature passed two more statutes that purported to govern evidence of settlements in medical malpractice cases. The first is RCW 4.22.060. Under that statute, if the plaintiff settles with one party, the plaintiff is then required to inform the judge, and the judge then deducts that amount from the ultimate verdict, or if the judge thinks the amount is unreasonable, the judge deducts whatever would be the reasonable amount.

The second statute is RCW 4.22.070. This statute did a more extensive overhaul of the way with which this issue is dealt. Under that statute, the jury was simply tasked with assigning overall fault to everyone responsible, whether or not they were still in the case or had been released via settlement. The jury would assign percentages. Then, each remaining defendant ultimately is responsible only for its proportion of the total verdict (total verdict discounted by their own percentage of fault). One additional catch was that if there was more than one defendant remaining in the case, each would be completely responsible for each other’s liability.

If we have already lost you, here is what we are hoping you take from this: the Supreme Court needed to step in because a trial judge cannot give effect to RCW 7.70.080 and either 4.22.060 or 4.22.070. The result would be a double reduction in damages. To make a long story short, the Supreme Court held that 7.70.080 does not apply, because it was enacted long ago, and because it is less specifically worded.

That leaves us (medical malpractice attorneys) with 4.22.060 and .070 to deal with this issue going forward. As between those rules, one applies when the defendants assign blame to each other, and the other applies when the defendants simply argue that they are not at fault but do not point the finger at anyone else.

In representing plaintiffs, we do not control to whom the defendants assign blame. Our job is to understand each statute, know when each applies to a particular case, and give principled advice as to whether a settlement is the right course of action at any particular time in litigation and under each specific set of circumstances.

(This post is intended to be educational and should not be construed as legal advice. If you have questions or believe these issues affect you or your case, please contact an attorney).