Hush Money for Malpractice Settlements?

In California, plaintiffs who win malpractice lawsuit settlements often must promise not to notify state authorities. But in cases of true wrongdoing, critics say such agreements amount to hush money.

"Arbitration agreements are a way of taking out of our court system, our government system, which is supposed to be open, and putting it into some private system, which is closed off and secret," said Tony Stuart of the Consumer Attorney's Association of Los Angeles (search).

Critics find secret settlements particularly disturbing in medical malpractice (search) cases, which can involve a patient's death.

Wendy Connor had routine cosmetic surgery that left her blind in one eye. She sued, settled and signed a gag clause, and now fears that her silence may allow more patients to be hurt.

"Every day I lived with the fear that he would kill somebody, and I got very depressed because there was absolutely nothing I could do to stop him," she said.

California courts and hospitals are already required to report legal action against doctors, but many don't. And although gag clauses are not prohibited, a California appellate court in 2000 struck them down, saying secret settlements have no legal merit.

Some California consumer advocates and lawmakers say they hope to resurrect a law banning gag clauses — a measure that was vetoed last year by Gov. Arnold Schwarzenegger (search).

"If a dangerous practice or product is revealed in a court case, in a government proceeding, the people have the right to know about that," Stuart said.

But opponents argue that such a measure would discourage settlements, which could clog the courts.

"The confidentiality agreement does not take away information from the licensing board. The boards have to go out there and find out about these lawsuits on their own," said attorney Enoch Brady.

If passed, the state law would get rid of gag clauses, but would not require full disclosure. In other words, lawsuits could be settled without all details being revealed.

Click in the video box above to watch a report by FOX News' Trace Gallagher.