Associated Press | CBS2 News

In a shocking report, more people die from medical mistakes each year than from highway accidents, breast cancer or AIDS. And in California, a little known law puts a price tag on what the state says your life is worth. Now, a Simi Valley family blames a local hospital's errors for robbing their daughter of her young and innocent life.

"She died in my arms," Jodi Gonzalez said. "The doc kept coming over and putting the stethoscope to her heart. 'Why do you keep doing that?' She said, 'The heart is still beating and we have to record the time of death.' See, she didn't want to die."

In the very same UCLA hospital Delaney Lucille Gonzalez was born in, just 16 months later, the toddler would die in.

"The next thing you are at the mortuary, you are picking out little coffins for your daughter... little coffins for your daughter," said Delaney's father Daniel Gonzalez.

Delaney was with Treacher Collins Syndrome, a rare disorder that causes physical abnormalities of the head and face.

The Gonzalez family never treated their bouncing baby girl, they lovingly nicknamed "Laney the ladybug," any different.

"Mentally she was all there, mental she was perfect," Daniel said.

"She was going to be beautiful and to me she was," Jodi said.

Always jovial and dressed in special head bands that her mother hand-made to keep her hearing aids in place.

When she was old enough, the Simi Valley family checked Delaney in to UCLA for a routine 90-minute surgery to repair the child's cleft palate.

"She couldn't say Da-Da cause you have to put your tongue on the roof of your mouth," Daniel said. "That is what we were looking forward to is she could say Da-Da for the first time."

Little Laney the ladybug would never get the chance to say Da-Da.

"I heard a code blue and I knew it was her, I knew it," Jodi said.

According to medical and autopsy reports, Delaney's breathing tube was misplaced, slowly suffocating the child as air pumped into her stomach rather than her lungs.

"I said, 'You need to save her,' and he said, 'I will,'" Jodi said.

Next, a series of critical errors.

California State Health inspectors report the radiology department waited hours before reviewing chest x-rays that would have shown the deadly mistake. Also, a staff member shut off oxygen sensors that Jodi believes could have saved her little Laney's life.

"Finally she shut it off," Jodi said. "She thought something was wrong with it. Well, it turned out it was telling her Laney wasn't getting enough oxygen."

The Gonzalezes prayed for a miracle, but doctors pronounced their precious girl brain dead...

"Clearly it says on her birth certificate she died from their mistake... I blame the whole hospital," Jodi said.

To ensure the hospital is held accountable and that this deadly mistake would never happen again, Laney's parents set out to sue. But they were shocked to find the state of California already put a price tag of $250,000 on their little girl's life.

"Basically you are telling me my beautiful 16-month-old daughter, who had her whole life ahead of her, who never danced with her daddy... Is worth $250,000. That is all her life is worth?" Jodi said.

There is a little known law in California called MICRA -- The Medical Injury Compensation Act.

"MICRA is a four letter word in disguise I think," said attorney Gerald Agnew.

Trial attorneys insist this law that was put on the books back in 1975 is insurance companies and doctors dirty little secret.

"I have to believe if the general public knew about MICRA, it wouldn't exist," said attorney and doctor Russell Kussman M.D.

The malpractice cap even overrides the decision of a jury.

"A jury can come back with a verdict, a fair and reasonable compensation... and the judge will reduce that to $250,000," Agnew said.

No amount of money will ever bring Laney back, but this family is dedicated in keeping her spirit alive.

"There's got to be a change to it," Daniel said.

"She's worth nothing... Nothing," Jodi said.

Economists surmise that cap of $250,000 would be worth about a $1 million today, yet the law remains unchanged.

In a statement from UCLA, they say the medical center is saddened by Delaney's death and are committed to patient safety and quality of care continues to be the hospitals number one priority.