January 19, 2009 by chad
TORT REFORM
GOOD OR BAD?
By Chuck Elsey
Most of us are aware of the McDonalds case where a 79 year old woman was awarded $200,000 in compensatory damages and $2.7 million in punitive damages because she spilled a cup of McDonald’s hot coffee in her own lap. I’m sure like most Texans you were immediately shocked by the size of the award. Cases such as this fostered cries for tort reform.
George Bush was and is a huge supporter of tort reform and began pushing the issue when he was Governor of Texas. Effective September 1, 2003 Texas adopted a medical malpractice bill that limited non-economic damages to a total of $250,000 from all doctors and other individuals, $250,000 from each hospital or other institution and a total of $500,000 from all institutions.
Tort reform is a controversial issue that divides the country mostly along party lines. If you like tort reform, get ready, because there’s a good chance more is on the way.
An important development that may well be the deciding factor in determining the extent of tort reform is the “new”, more conservative, Supreme Court’s apparent sympathy to business.
There seems to be a new willingness among the justices to become involved in business litigation which could have a substantial impact on tort reform. The U.S. Chamber of Commerce filed friend-of-the-court briefs in 15 cases on behalf of its corporate members, winning 13 of those cases, the highest winning percentage in its 30-year history. According to Akin, Gump, a law firm with an active Supreme Court practice, 40% of the cases heard by the court during the current term involved issues significant to business compared to about 30% during the previous two terms. Nearly 50% of cases for the next session involve business. Given recent decisions by the Court, there is a current push to have it go beyond its recent decisions and set out a formula to cap punitive damages.
America's current tort system has been under attack for being too costly and incapable of administering fair and timely awards. A recent actuarial study by Tillinghast-Towers Perrin indicates that tort costs rose 125% ($67 to $152 billion) from 1984 to 1994. The costs of litigation have burdened American families and businesses with higher insurance premiums, reduced incentives for auto safety features, and higher medical costs. In addition, it often costs plaintiffs 33 percent of their awardl (lawyer’s contingency fees) just to have access to the current American tort system.
Although primarily a Republican backed cause, Senator Joe Lieberman, a prominent Democrat, supports tort reform. A spokesman for Lieberman, Dan Gerstein, told the Wall Street Journal that the tort system “drives up costs, stifles innovation, limits products available to consumers and undercuts the competitive advantage our leading companies have.”
Conversely, Senator and former V. P. candidate John Edwards asks what happens when a child is blinded or paralyzed for life because of someone’s negligence? “He [Bush] proposes what they get for that is $250,000.” (Mike Allen and Amy Goldstein, Washington Post, xenical
02Jul25.html”>Jul. 26). This seems to be a sound argument but as Edwards knows, damages to cover future earnings, the costs of care, and other identifiable damages, would often amount to millions of dollars in actual damages in such a case and would be collectable even given proposed tort reform. Current tort reform is focused on only that portion of the awards which covered “non-economic” elements such as pain and suffering and punitive damages.
The fact that awards for punitive and pain-and-suffering damages are at this time calculated at two to three times actual medical costs sometimes lead to excessive use of physician and chiropractor services. Proposed legislation prevent the system's current payment of two dollars paid out for every dollar paid by an injured party for actual damages and out-of-pocket costs, and would radically reduce attorney’s estimated $15 to $20 billion annual take from auto cases.
The arguments against further tort reform are many. Most injured parties in a tort action cannot afford to pay to prosecute a lawsuit (which can range from several thousand dollars to millions in large complex litigation cases) and therefore they may have no access to the court system given the limitations of proposed tort reform. Accordingly, lawyers have often accept these type cases on a contingency fee bases where they can earn 33% up to 45% of the settlement or verdict. Lawyers take great risk in accepting cases on a contingency fee bases. If they lose they earn nothing for their efforts. Therefore they deserve to be rewarded for both their work and incentivized for their risk.
Also, minimization of pain and suffering and punitive damage awards eliminates much of the upside for lawyer’s who, heretofore, have been willing to take such risks. To realize the downside to you, the individual, of this type tort reform, one only need find a patient who has tried to find a lawyer to take a medical malpractice case since the law changed in 2003. With the upside incentive statutorily eliminated, many lawyers have reduced or abandoned their practice in this area of law. The same could be true if tort reform creeps in to other areas of litigation.
The question for each of us to answer as a voter is whether we are willing to have a tort system that many think has been unfair and resulted in unfathomable verdicts be overhauled, knowing that we are being asked to sacrifice our individual rights to make the world a better place for business and to lessen the drain on the economy?
Hopefully, sound minds prevail and the “new” tort reform system will be constructed to create equilibrium between the overall economic benefit to the country of such reform and the need for individuals to have adequate entrée into the court system to recover reasonable damages for pain and suffering and some modicum of punitive damages for the negligence of others.
This information is not intended to be legal advice and is intended to provide general information only. Do not assume that any information contained herein applies to your specific situation without consulting an experienced attorney. Sending e-mail or requesting an initial consultation does not create an attorney client relationship.
Chuck Elsey is the senior member of Elsey & Elsey, a general practice law firm located in Flower Mound, Texas (972-906-9695). In 2006 Elsey & Elsey was voted the “Best Law Firm in Denton County” by readers of The News Connection.
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