Specifically, the law said people couldn't seek noneconomic damages -- those for pain or emotional distress, for example -- exceeding $500,000 in cases against doctors and more than $1 million in cases against hospitals.
The caps were adopted in 2005 and was seen as a way to lower medial insurance rates blamed for driving doctors out of the state. Several laws have similar legislation.
A Cook County judge ruled in 2007 the caps interfered with juries' power to award appropriate damage awards for medical errors. That sent the issue to the high court.
In a 4-2 opinion, the Illinois State Supreme Court ruled the caps violated the principle of separation of powers because the limits would infringe on the judicial branch's power.
In a partial dissent, Justice Lloyd Karmeier said it's the court that is violating separation of powers by second-guessing the Legislature's attempts to reduce health care costs.
Pleased with the high court's ruling were trial lawyers, who said the cap unfairly treated patients who have been harmed by medical errors.
"Our health care system is reeling and rather than trying to fix it, insurance companies across the country have tried to divert attention from the real reforms that would improve access and care," said Illinois Trial Lawyers Association President Peter Flowers. "With this decision, we can now focus on the real issue - providing meaningful insurance reform that will keep costs down for doctors and patients alike, and ensure access to quality care for every resident in the state."
But Maryjane Wurth, president of the Illinois Hospital Association, said the court's decision highlights the need for President Barack Obama and Congress to embrace meaningful medical liability reform as part of health care legislation.
Twice before in state history, Illinois lawmakers have adopted caps, and both times the Supreme Court eventually nixed them, the Chicago Tribune noted.
Read the opinion: Abigaile Lebron v. Gottlieb Memorial Hospital (.pdf)