Tort Reform

When you are injured because of someone else’s negligent actions, in most cases, you are entitled to compensation for your injuries. Lay people often refer to this as personal injury law or negligence law.  However, lawyers know that the proper term is tort law. Like any other type of law, tort law can be changed.

Unfortunately, large corporations, medical societies and insurance companies look at tort law reform as a way to reduce their costs by limiting an injured person’s right to compensation and in some cases eliminate the right to a trial by jury which is guaranteed by the Seventh Amendment of the US Constitution.

The business groups and insurance companies often paint tort reform as a good thing – reducing the number of “frivolous lawsuits” or preventing “run-away juries” from making huge damage awards. Despite this window dressing, however, at its core, tort reform is about limiting risk of large businesses, doctors and insurance companies, at the expense of innocent people who were injured by their actions.

The following article gives the most common examples of tort reform, the reasoning behind them and why they may be a problem.

Damage Caps

The compensation that you receive in a personal injury or medical malpractice lawsuit, can be limited depending on the state in which your case is litigated. One type of limit to your potential compensation is known as “non-economic damage caps”. Specifically, this type of damage cap limits the recovery that a plaintiff can receive for injuries that do not involve financial or “economic” damages.

For example, if you were seriously injured by in a motor vehicle collision that was caused by another driver, you would be entitled to recover actual expenses such as your medical bills, lost wages and damage to your car.  However, a cap on noneconomic damages means that the court would have to limit the award attributable to pain and suffering, emotional distress or other “noneconomic” injuries such as loss of consortium or loss of quality of life. Given the horrific pain that many injured victims suffer as well as other long term injuries that can not easily be quantified in dollars, this type of damage cap often results in much lower jury awards and settlements.

Damage caps are often applied in medical malpractice lawsuits. In theory, the damage caps are intended to reduce medical malpractice premiums by reducing the number of lawsuits and the amounts that medical malpractice insurance carriers must pay for any given case. In theory, the medical malpractice insurance carriers will pass along the savings to doctors, hospitals and other medical providers, thus reducing their costs and incentivizing them to stay in the state and continue practicing. In theory, the doctors’ savings would again be passed on to the patients thus reducing healthcare costs.

Unfortunately, none of the alleged savings ever seems to trickle down to the patients. The patients who were harmed by medical providers are either prevented from pursuing their cases or receive less compensation than the jury would otherwise have awarded. Meanwhile, the medical malpractice insurance carriers pocket the savings….

One study found that medical malpractice premiums remain steady and are not significantly impacted by lawsuits. The study’s information was gathered from the National Practitioner Data Bank. While another study showed an increase in medical malpractice premiums over the years as a result of lawsuits, that study’s data was derived from the National Association of Insurance Commissioners. Most of the data indicates that medical malpractice litigation and expenses contribute a very small percentage to the overall cost of healthcare. At the end of the day, medical costs continue to rise and damage caps do not seem to make a difference.

Punitive Damages

Punitive damage awards are used as a type of punishment – to punish a wrongdoer for particularly egregious misconduct. In rare cases, large companies have been hit with large punitive damage awards. Punitive damages are involved in only two percent of all civil cases. However, the number of punitive damage payouts has increased within the last few decades.

Tort reform advocates argue that states need to limit punitive damages so defendants will not be unfairly punished for their negligence. The American Tort Reform Association (ATRA), for example, supports tort reform that will enforce proof of “actual malice” in order to qualify punitive damages. Some states have enacted damage caps that restrict the amount of punitive damages that can be awarded in a case, while other states simply do not allow punitive damages at all.

Opponents of tort reform, on the other hand, argue that by restricting punitive damages the U.S. Civil Court system will be unable to appropriately deter corporate misconduct. The Colorado Supreme Court has written ““If punitive damages are predictably certain, they become just another item in the cost of doing business, much like other production costs, and thereby induce a reluctance on the part of the manufacturer to sacrifice profit by removing a correctable defect.” Groups like the Center for Justice Democracy, argue that punitive damage caps can get in the way of determining an appropriate punitive damage award to punish a reckless defendant.

Punitive damages are determined by the jury using three contributing factors according to the Book of Approved Jury Instructions which is used in the State of California and several other states:

1. Reprehensibility of the conduct of the defendant.
   
2. The amount of punitive damages which will have a deterrent effect on the defendant in light of the defendant’s financial condition.
3. A reasonable relationship to the injury, harm or damage actually suffered by the plaintiff.

It is important to note that punitive damages aren’t meant to reward the plaintiff. The plaintiff only receives punitive damages “because there is no one else to receive it.” according to the Shepherd Components, Inc. v. Brice Petrides-Donohue & Assocs., Inc. case of 1991.