Tort reform

Lawyer jokes from 1900. Top-hatted lawyer to workman falling off scaffolding: "Take this card, my man, and if you're not killed call on me and I'll recover big damages for you."

Tort reform refers to proposed changes in the civil justice system that would reduce tort litigation or damages. Tort is a system for compensating wrongs and harm done by one party to another's person, property or other protected interests (e.g. reputation, under libel and slander laws). Tort reform advocates focus on personal injury in particular. Accident compensation procedures, compensation, and reform proposals vary greatly among jurisdictions, with a general upwards trend in compensation.

In the United States tort reform is a contentious political issue. US tort reform advocates propose, among other things, procedural limits on the ability to file claims, and capping the awards of damages. According to Forbes reporter Daniel Fisher, tort reform is "A catchall phrase for legislative measures designed to make it harder for individuals to sue businesses."

In Commonwealth countries there are proposals to replace tort compensation with a social security framework that serves victims without respect to cause. In 1972 New Zealand introduced the first universal no-fault insurance scheme for all accident victims, which provides benefit from the government run Accident Compensation Corporation without respect to negligence. Its goal is to achieve equality of compensation, while reducing costs of litigation. In the 1970s Australia and the United Kingdom drew up proposals for similar no-fault schemes, that were later abandoned.

The tort system

Main article: Tort

Tort requires those responsible (or "at fault") for harming others to compensate the victims, usually in money. The person injured can get a monetary payment to make up for their loss. This can include loss of income (while the person recovers), medical expenses and a payment for pain, suffering—even loss of a body part. Damages may also be awarded to compensate for the loss of future income. These components of the award can be adequately predicted in money terms, and (outside the United States) they most often constitute the largest element of the award.

The classical purpose of tort is to provide full compensation for proved harm. This is known under the Latin phrase restitutio in integrum (restoration to original state). In other words, the idea underpinning the law of tort is that if someone harms someone else, they should make up for it. Compensation should be, in the words of Lord Blackburn in Livingstone v Rawyards Coal Co,

"that sum of money which will put the party who has been injured in the same position as he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation."

Themes of reform

A number of recurrent issues can be identified in the debates about tort reform.

The primary criticism of the tort system is its purportedly high cost. This may either be the cost of compensation payments themselves, or that—granting that compensation is a worthy goal for the injured—litigation is an inefficient method of giving compensation. In Britain, for instance, it has been argued that 85p is spent on litigation for every £1 of compensation paid. In contrast, the social security system costs 8p or 12p for every £1 delivered.

Special medical malpractice courts

Tort reform advocate Common Good has proposed creating specialized medical courts (similar to distinct tax courts) where medically-trained judges would evaluate cases and subsequently render precedent-setting decisions. Proponents believe that giving up jury trials and scheduling noneconomic damages such as pain and suffering would lead to more people being compensated, and to their receiving their money sooner. This approach has been criticized for treating medical malpractice differently from other areas of tort law and for depriving Americans of their seventh amendment rights. . Still, a number of groups and individuals have supported this proposal.

Limits on noneconomic damages

Other tort reform proposals, some of which have been enacted in various states, include placing limits on noneconomic damages and collecting lawsuit claim data from malpractice insurance companies and courts in order to assess any connection between malpractice settlements and premium rates.

Reduction in the statute of limitations of action

A different reform is not to limit the amount of legitimate recovery, but to reduce the time to sue—the statute of limitations of actions. New York law now requires that:

An action for medical, dental or podiatric malpractice must be commenced within two years and six months of the act, omission or failure complained of or last treatment where there is continuous treatment for the same illness, injury or condition which gave rise to the said act, omission or failure; provided, however, that where the action is based upon the discovery of a foreign object in the body of the patient, the action may be commenced within one year of the date of such discovery or of the date of discovery of facts which would reasonably lead to such discovery, whichever is earlier....

— N.Y. Civil Practice Law and Rules (CPLR) § 214-a.

Arbitrary awards for pain and suffering

Tort compensation easily applies to property damage, where the replacement value is a market price (plus interest), but it is difficult to quantify the injuries to a person's body and mind. There is no market for severed legs or sanity of mind, and so there is no price which a court can readily apply in compensation for the wrong. Some courts have developed scales of damages awards, benchmarks for compensation, which relate to the severity of the injury. For instance, in the United Kingdom, the loss of a thumb is compensated at £18,000, for an arm £72,000, for two arms £150,000, and so on.

Even more difficult to reckon are damages for the pain and suffering of an injury. But while a scale may be consistent, the award itself is arbitrary. Patrick Atiyah has written that one could halve, or double, or triple all the awards and it would still make just as much sense as it does now.

Punitive awards and juries

See also: Punitive damages and Jury

A trial by jury is unusual in almost all countries for non-criminal cases

Another head of damages that can be awarded is called "punitive damages", or sometimes "exemplary damages". The word "punitive" means punishment and the word "exemplary" implies that damages should "make an example" of the wrongdoer. The purpose of such damages are twofold: to deter wrongful conduct by other actors, and to serve a normative function of expressing social shock or outrage at the defendant's actions.

In most jurisdictions, punitive damages are not available. They are considered contrary to public policy, because the civil justice system in many countries does not have the same procedural protections as the comparable criminal justice system. Therefore, allowing punitive damages would have the effect of punishing actors for wrongful conduct without allowing them the ordinary procedural protections that are present in a criminal trial. The fear is that punitive damages encourage a vindictive, revenge seeking state of mind in the claimant and society more generally. In the UK, Rookes v Barnard limited the situations in which punitive damages can be won in tort actions to where they are expressly authorised by a statute, where a defendant's action is calculated to make profit, or where an official of the state has acted arbitrarily, oppressively or unconstitutionally. In the United States, though rarely awarded in tort cases, punitive damages are available, and are sometimes quite staggering when awarded. For example, in 1999, a Los Angeles County jury awarded $ 4.8 billion in punitive damages against General Motors to a group of six burn victims whose 1979 Chevrolet Malibu was rear-ended by a drunk driver, causing it to catch fire. This was later reduced to 1.2 billion by the judge.

It is argued by some that extraordinary damage awards in the United States are a result of the jury system. In federal courts in the United States, the right to a jury trial in most civil cases is entrenched in the Seventh Amendment of the United States Constitution (drafted in 1789). Many state constitutions have similar counterparts that protect the right to a jury trial in state court proceedings. In many countries, particularly in continental Europe, juries are not used at all, even in criminal cases, because of the cost of protracted trials necessitated with a jury present and confidence in judicial impartiality. In the United Kingdom, juries are available in criminal cases, and for tort cases involving defamation, false imprisonment and malicious prosecution. Even in these three limited areas of tort there have been growing concerns about juries' role. In particular the disparity between awards in defamation cases (which invariably concern celebrities, politicians and the rich) and awards for personal injuries has been growing. Inevitably, the awards climb, in a way that a fixed system of damages under judicial scrutiny does not allow. Juries are unseasoned with a daily exposure to tragic accidents in tort litigation. When confronted with their first case they may be shocked and outraged, which inspires a willingness to teach the wrongdoer (through a big damages award) that "tort does not pay".

Compensation culture

Main article: Compensation culture

Some challenge the wisdom that courts are the appropriate forum for seeking redress for personal injuries. In the United Kingdom the phrase "compensation culture" is used to deride the tort system, which allegedly redistributes undeserved income. Although court costs are high, in fact, most personal injuries cases never reach court. They are settled between insurance companies. This is especially so for road accidents (where no-fault compensation schemes operate, and drivers mostly have third party insurance), and workplace injuries (where employers are usually required to have insurance, and will get compensation on the injured worker's behalf), the forum which account for the majority of personal injuries. Settlements are made "in the shadow of the law", so the amounts paid will usually approach or approximate what would be an expected award in court, if a credible threat from a claimant's solicitor is seen to exist.

Class action lawsuits in the United States

Class actions are lawsuits where a group of claimants band together to bring similar claims all at once. These do not exist in most countries, and what will usually happen is that one case will be funded as a "test case", and if judgment falls in the claimants' favour the tortfeasor will settle remaining claims. Class actions are justified on the basis that they ensure equal treatment of similarly situated victims, avoid the risk of conflicting judgments on similar issues, and allow an efficient resolution of a large number of claims. In the US, class actions have been used (and by some views abused) in order to overcome the differences applicable in different jurisdictions, including the perceived predispositions of judges, juries, and differences in substantive or procedural law. So if one claimant lives in State X, where courts and laws are unfavourable to their claim, but another claimant lives in the more favorable jurisdiction of State Y, they may bring a class action together in State Y. Strictly speaking, State Y must not adjudicate the claim unless it is found that the applicable law is similar or identical in both states, but as a practical matter this rule is often disregarded in favor of efficient resolution of claims. Another measure particular to the U.S. is the introduction of "proportionate liability", in place of joint and several liability.

Claimed inefficiency of legal system

According to economist Reed Neil Olsen, "...tort law generally and medical malpractice specifically serve two legitimate purposes. First, the law serves to compensate victims for their losses. Second, the threat of liability serves to deter future accidents." Tort reformers maintain that the present tort system is an expensive and inefficient way to compensate those injured.

According to a 2004 study of medical malpractice costs, "program administration—defense and underwriting costs—accounts for approximately 60 percent of total malpractice costs, and only 50 percent of total malpractice costs are returned to patients. These costs are high even when compared with other tort-based systems, such as automobile litigation or airplane crashes, that determine fault and compensate victims. Moreover, most patients that receive negligent care never receive any compensation. The Harvard Medical Practice Study found that only one malpractice claim was filed for every eight negligent medical injuries." Of the legal changes proposed by tort reformers, this study found that states capping payouts and restricting non-economic damages saw an average decrease of 17.1% in malpractice insurance premiums. Similarly, Klick/Stratman (2005) found that capping economic damages saw an increase in doctors per capita.

There is no guarantee, however, that any savings from tort reform would be efficiently distributed. Tort reform in Texas during the 1990s created $600 million in savings for insurance companies but liability policy rates stayed flat while the fraction of policy dollars needed to cover losses fell from 70.1 cents in losses in 1993 to 58.2 cents in 1998.

Opponents of these tort reform measures contend that reduced insurance premiums are not the only result when you cap malpractice payouts and bar non-economic damages. They may act against the other goal of liability law, deterring injurious behavior.

Economic effects

See also: Insurance, Medical malpractice, and Product liability

Three possible charges can be levelled at the tort system, for having distorting economic effects. First, the high costs of litigation and compensation payouts raise the cost of insurance. Because most tort claims will be paid from the pockets of insurance, and because the public generally pays into insurance schemes of all kinds, the public generally is footing the bill for tort claims. On the other hand, the insurance market can be argued to be flexible enough to adjust so that only high risk policy holders are footing the bill. Of course, taxpayer-funded insurance programs such as Medicaid and Medicare do not share this flexibility. If people are undertaking high risk activities (or are themselves high risk people) then it would seem fair that they share the appropriate social burden. Moreover the level of compensation in tort cases may not strictly correlate with insurance premiums. The market may keep costs to a minimum, provided that competition is effective. However, insurance regulations often limit the degree to which charges can be matched to risk levels at the policy-holder level. For instance, it would be illegal for an auto insurance company in the United States to charge African-American drivers more than Asian drivers, even though the claims rate of Asian drivers is substantially lower.

Secondly, and related to insurance in countries which do not have "socialised medicine" (i.e., national health care), the costs of the tort system, and in particular medical malpractice suits, may raise the costs of health care. The difficulty in this area is to distinguish between public and private health care providers. The experience in the UK, where there is a fully public system run by the National Health Service, is that tort claims have been restricted, for instance in disallowing loss of chance cases. The Medical Defence Union actively combats, and attempts to settle all cases where potential negligence claims are at stake. While successful, the costs of litigation to the health system are steadily growing, and stand at around £446m a year. In the United States, it is easier for victims of medical malpractice to seek compensation through the tort system. The American medical negligence record is the poorest in the developed world, with around 195,000 deaths per year, which itself leads to a higher number of claims. It is open to debate as to whether a change in the law of tort either way would lead to a change in practice. On the one hand, it may be said that resources transferred to fight tort cases detract from money that could be used to improve patient care. On the other hand, it could be said that increasing liability would deter medical staff from making mistakes. For instance, it is a direct result of well-publicized tort judgments that standard practice is for a nurse or surgeon to count the number of sponges that are present on a surgeon's table after the completion of surgery, in order to ensure that none are left behind within a body cavity. The motivation for this precaution was to avoid tort judgments for left-behind sponges, which had been a common cause of claim.

Thirdly, there is an argument that tort liability could stunt innovation. This argument usually comes in connection with product liability, which in every developed country is strict liability, subject to a "state of science" defence. If a product is faulty, and injures somebody who has come across it (whether they are the buyer or not) then the manufacturer will be responsible for compensating the victim regardless of whether it can be shown that the manufacturer was at fault. The standard is lower in other injury cases, so that a victim would have to prove that a tortfeasor had been negligent. It can be argued that strict liability deters innovation, because manufacturers could be reluctant to test out new products for fear that they could be subjecting themselves to massive tort claims. This argument is characteristic of the law and economics movement. It may be somewhat confused about the relevant law because it misses the state of science defence. This defence means that a manufacturer can always say "there was no warning or evidence in the scientific literature that this new product could be dangerous".

There is however also a case to say that people should not receive such full compensation for income losses, because it could be said entrench an existing and inequitable distribution of wealth in society.

Equality in treatment

See also: Distributive justice and Equality of outcome

Equality of treatment is the central issue for reforms in New Zealand and in the Commonwealth more generally. If someone has an accident then they have a statistical 8% chance of finding a tortfeasor responsible for their injury. If they are lucky enough to have been injured by someone else's fault, then they can get full compensation (if the tortfeaser is not judgment proof). For others—for those injured by natural accidents, by themselves, by disease or by bolts from the blue—no compensation is available, and the most that can be gained for their losses will be meagre state benefits for incapacity.

This was the basis for much of Professor Patrick Atiyah's scholarship as articulated in Accidents, Compensation and the Law (1970). Originally his proposal was the gradual abolition of tort actions, and its replacement with schemes like those for industrial injuries to cover for all illness, disability and disease, whether caused by people or nature. This has happened in New Zealand, except coverage of disease. Over the 1980s Atiyah's views shifted. He still argued that the tort system should be scrapped. But instead of relying on the state, he argued people should have to take out compulsory first party insurance, like that available for cars, and this model should be spread progressively.

Tort reform in the United States

In general, tort reform advocates contend that out of the over 15 million lawsuits filed in the United States every year, there are too many frivolous lawsuits.

The term has acquired a broader rhetorical definition in political debates about tort reform, where it is sometimes used by reform advocates to describe legally non-frivolous tort lawsuits that critics believe are without merit, or award high damage awards relative to actual damages.

Tort reform advocates argue that the present tort system is too expensive, that meritless lawsuits clog up the courts, that per capita tort costs vary significantly from state to state, and that trial attorneys customarily receive an unusually large percentage of the punitive damages awarded to plaintiffs in tort cases, as it is common for attorneys to obtain the statutory maximum one-third of the award when work is done on contingency. A Towers Perrin report indicates that U. S. tort costs were up slightly in 2007, are expected to significantly increase in 2008, and shows trends dating back as far as 1950. High-profile tort cases are often portrayed by the media as the legal system's version of a lottery, where trial lawyers actively seek the magic combination of plaintiff, defendant, judge, and jury. Advocates of tort reform complain of unconstitutional regulation caused by litigation. and that litigation is used to circumvent the legislative process by achieving regulation that Congress is unwilling or unable to pass.

Tort reform is also proposed as one solution to rapidly increasing health care costs in the United States. In a study published in 2005 in the Journal of the American Medical Association, 93% of physicians surveyed reported practicing defensive medicine, or "[altering] clinical behavior because of the threat of malpractice liability." Of physicians surveyed, 43% reported using digital imaging technology in clinically unnecessary circumstances, which includes costly MRIs and CAT scans. Forty-two percent of respondents reported that they had taken steps to restrict their practice in the previous 3 years, including eliminating procedures prone to complications, such as trauma surgery, and avoiding patients who had complex medical problems or were perceived as litigious. This practice restriction hits rural areas especially hard, as small towns find themselves without practitioners in high-risk areas such as obstetrics and emergency medicine, or practices without competition as physicians consolidate into single practices to distribute the high costs of malpractice insurance premiums.

A few of the changes frequently advocated include limits on punitive damages, limits on non-economic damages, limiting the collateral source doctrine, use of court-appointed expert witnesses, elimination of elections for judges, reducing appeal bond requirements for defendants faced with bankruptcy, "venue reform", which limits the jurisdictions within which one can file a lawsuit, limits on contingency fees, the adoption of the English Rule of "loser pays" (the defeated party must pay both the plaintiff's and the defendant's expenses), and requiring that class action lawsuits with nationwide plaintiffs be tried in federal courts, eliminating awards for pre-judgment interest. Many of these measures tend to benefit defendants; others, such as the English rule, sanctions for delay, and early-offer settlement requirements, could have benefits to plaintiffs in some cases.

Not all tort reform supporters support all proposed tort reforms. For example, there is a split over whether the collateral source doctrine should be abolished, and there is a healthy debate over whether it would be beneficial to further restrict the ability of attorneys to charge contingent fees.[4],[5]

Opposition to tort reform

Opponents of tort reform contend that supporters exaggerate the costs and ignore the benefits of the current tort system. For example, opponents of tort reform contend that lawsuits encourage corporations to produce safer products, discourage them from selling dangerous products such as some forms of asbestos, and encourage more safe and effective medical practices.

Beginning in the early 1980s, Professor Stephen Teret and other faculty at The Johns Hopkins Bloomberg School of Public Health argued that tort litigation was an important tool for the prevention of injuries. Teret identified several ways that litigation can enhance safety for everyone, including:

1) to avoid paying future damages, the creators of dangerous products or conditions may voluntarily make them safer;

2) where conduct is particularly egregious, courts may award punitive damages to deter that conduct in the future;

3) the process of gathering information prior to trial – called 'discovery' – can bring information to light that can be used by policy-makers to create new laws or regulations."

A 2006 study by Emory University professors Paul Rubin and Joanna Shepherd examined the effect of tort reforms on non-motor vehicle accidental death rates, and found that "caps on noneconomic damages, a higher evidence standard for punitive damages, product liability reform, and prejudgment interest reform lead to fewer accidental deaths, while reforms to the collateral source rule lead to increased deaths."

Disputed issues

Critics of tort reform contend that real purpose of the proposed changes is to shield businesses, especially large corporations, from having to pay just compensation to consumers, patients and clients for damages incurred from fraud, negligence, medical malpractice or other legitimate tort claims. They contend that limitations on punitive damages and other restrictions on plaintiff's traditional rights will reduce corporate accountability. Because corporations typically engage in a cost-benefit analysis before considering whether to stop a wrongful action (such as polluting or not enacting proper measures for safety), they contend that corporations will decide that the cost of changing a wrongful practice would be greater than the cost of continuing it, unless there is the chance that the cost of continuing will be made greater by a successful lawsuit. In this view, the prospect of paying a small damage award would have little or no effect in correcting the wrongdoing, and would essentially allow the corporation to continue an unsafe practice unless state or federal regulators interceded.

Tort reform supporters argue that this precisely describes the problem: lawsuits over socially beneficial practices increase the costs of those practices, and thus improperly deter innovation and other economically desirable activity. They further suggest that small businesses are hurt worse by the threat of litigation than large corporations are, because the legal expenses from a single lawsuit can bankrupt a small businessperson.

How would tort reform affect safety?

Opponents of tort reform contend that supporters exaggerate the costs and ignore the benefits of the current tort system.[6] For example, opponents of tort reform contend that lawsuits encourage corporations to produce safer products, discourage them from selling dangerous products such as asbestos, and encourage more safe and effective medical practices.[7] Beginning in the early 1980s, Professor Stephen Teret and other faculty at The Johns Hopkins University School of Public Health argued that tort litigation was an important tool for the prevention of injuries. [8] While Teret acknowledged that the primary purpose of tort lawsuits usually is to recover money damages for the injured persons, as compensation for their medical and other costs, he identified several ways that litigation can also enhance safety for everyone, including: "1) to avoid paying future damages, the creators of dangerous products or conditions may voluntarily make them safer; 2) where conduct is particularly egregious, courts may award punitive damages to deter that conduct in the future; 3) the process of gathering information prior to trial – called 'discovery' – can bring information to light that can be used by policy-makers to create new laws or regulations."

In contrast, a 2006 study by Emory University professors Paul Rubin and Joanna Shepherd argued that tort reform actually saved tens of thousands of lives because "lower expected liability costs result in lower prices, enabling consumers to buy more risk-reducing products such as medicines, safety equipment, and medical services, and as consumers take additional precautions to avoid accidents."[9]

Tort reform advocates cite a 1990 study of auto safety improvements by Harvard University professor John D. Graham for a conference at the Brookings Institution found that

"The case studies provide little evidence that expanded product liability risk was necessary to achieve the safety improvements that have been made. In the absence of liability risk, the combined effects of consumer demand, regulation, and professional responsibility would have been sufficient to achieve improved safety. In some cases, however, liability seemed to cause safety improvements to occur more quickly than they would have in the absence of liability."

Graham further notes that "there is no evidence that expanded liability for design choices has been a significant cause of the passenger safety improvements witnessed since World War II." Graham concludes by endorsing reform, noting that case studies of the current product liability system "suggest that manufacturers may be inclined to delay design improvements when they fear that improvements will be used against them [in court]."

Another presenter at the same Brooking Institution conference, Murray Mackay of the University of Birmingham, claimed safety (and other) innovations were inhibited by fear of lawsuits:

"[S]trict liability has had a negative influence on innovation. It has held back new designs, consumed resources that might otherwise have been directed at design improvement, and added on costs to the consumer. ... [I]n Western European countries ... liability risks are low and the marketplace pays a premium for innovative technology in safety as well as other areas. As a result, most safety-related advances in recent years have come from European manufacturers and, more recently, from the Japanese. ...

The effect of tort reform on medical outcomes has been studied with mixed results. A 2008 study found worse childbirth outcomes for mothers and infants in states with caps on non-economic damages. The Klick/Stratman paper cited above found several effects of specific tort reforms on infant mortality that lost statistical significance when looked at more closely—that is, correlation with other state-specific factors wiped out apparent increases in mortality from joint and several liability reform but also wiped out apparent decreases in mortality from capping economic damages and restrictions on contingency fees. The only tort reform effect that proved robust was a negative effect of collateral source reform on black infant mortality.

Proponents of tort reform counter by pointing to data from New Zealand, which has abolished its medical tort system but has medical error rates close to those in the United States.

Tort reform advocates, including Paul Offit, also argue that litigation has driven from the U.S. marketplace many useful and safe medical advances, including Bendectin (the withdrawal of which has led to a doubling of hospital admissions for morning sickness) and vaccines for Lyme disease and Group B Streptococcal disease, which kills 100 infants a year.[10]

Frivolous lawsuits

Under some interpretations of the law, a frivolous lawsuit is one that cannot reasonably be supported under existing legal precedent or under a good-faith argument for a change in the law. However, the term has a broader rhetorical definition; in political debates, "frivolous" is also used to describe tort lawsuits where there is only a remote link between the conduct of the defendant and the injuries alleged by the plaintiff or where the damages sought by the injured plaintiff are perceived to be too high for the injuries sustained. Tort reform advocates also complain about lawsuits that are brought based on purely hypothetical damages where the plaintiffs have suffered no tangible harm whatsoever, or where the harm caused could be traced to elements of excessive negligence or irresponsibility on the part of the claimant. Real or fictional frivolous lawsuits are a popular target of American humor. Claims by proponents of tort reform that frivolous lawsuits are common, costly, and based on the contingent-fee system of paying lawyers have been contradicted by others.

Regulation through litigation

Advocates of tort reform also complain of regulation through litigation, the idea that litigation is being used to achieve regulatory ends that advocates would not be able to achieve through the democratic process. For example, Rep. Rick Boucher (D-VA) argued in support of a 2005 federal tort reform that gave immunity to gun manufacturers in certain lawsuits because such lawsuits were "nothing more than thinly veiled attempts to circumvent the legislative process and achieve gun control through litigation"; reform supporters complained that (and the Pentagon supported the bill on the grounds that) the plaintiffs were trying to "sue [gun manufacturers] out of existence" by forcing them to incur $250 million in legal defense expenses, while gun control supporters argued that the legislation took "away the right of victims to be able to have their day in court," that the bill gave unprecedented immunity to a single industry, and that the law was unconstitutional.

Healthcare industry

Liability suits for medical malpractice issues have been of particular concern to many tort reform advocates, who advocate imposing caps on non-economic losses and punitive damages, as well as on "contingent fees", or fees set by the plaintiff's attorney as a percentage of damages awarded to the plaintiff. Tort reform advocates argue that such caps would benefit those plaintiffs with legitimate lawsuits by reducing the number of "nuisance" suits and thereby improving the overall efficiency of the system. This area of tort reform reflects a broader ideological claim of the tort reform movement; that unrestricted litigation - particularly in the realms of personal liability and class-action suits - has a widespread and damaging effect on important social institutions and services beyond the scope of individual claims.

As an argument against the current system, tort reformers link the rising costs of premiums for physicians' medical malpractice insurance to the rising cost of personal and group policy health insurance coverage.

Others deny that medical malpractice suits play a significant role in the cost of health care. Including legal fees, insurance costs, and payouts, the cost of all US malpractice suits comes to less than one-half of 1 percent of health-care spending. Other recent research suggests that malpractice pressure makes hospitals more efficient, not less so: "The recent focus by the American Medical Association and physicians about the dramatic increases in medical malpractice insurance premiums, and their suggestion of a cap on non-economic damages, deserves a closer look. According to Baicker and Chandra (2004), increases in premiums are not affected by past or present malpractice payments, but may increase due to other unrelated factors. Chandra, Nundy, and Seabury (2005) find that the rising cost of medical services may explain the bulk of the growth of “compensatory awards”. They also find that the greatest ten percent of the malpractice payments have grown at a smaller pace than the average payment for the years 1991 and 2003. This means that the “medical malpractice crisis” is not necessarily fueled by the growth in malpractice payments. Furthermore, malpractice pressure actually forces our hospitals to be technically more efficient. This implies that existence of the medical malpractice system is beneficial, and its strength should not be diluted by either putting caps on non-economic damages or by decreasing the statute of limitations."

Controversy over the impact on business

Some supporters of tort reform posit that reforms can significantly reduce the costs of doing business, thus benefiting consumers and the public in the long run. Harvard Business School professor Michael E. Porter stated: "product liability is so extreme and uncertain as to retard innovation. The legal and regulatory climate places firms in constant jeopardy of costly and … lengthy product suits. The existing approach goes beyond any reasonable need to protect consumers, as other nations have demonstrated through more pragmatic approaches." A commission by the American Insurance Association and co-authored by Nobel Prize winner Joseph Stiglitz to look at the effects of bankruptcies from asbestos litigation on workers in the asbestos industry; the study estimated that 52,000 jobs were lost.

Critics of the tort reform movement dispute the claim that the current tort system has a significant impact on national or global economies. The Economic Policy Institute wrote that the effect on the economy of job loss resulting from lawsuits is negligible:

In an April 2002 paper, the CEA (President Bush's Council of Economic Advisors) examined the economic impacts of the tort system in somewhat greater depth. But that paper, too, failed to demonstrate any employment effects of the tort system and made no prediction about the impact of tort law change. Even if we assume that asbestos liability legislation could somehow have prevented the loss of 2,500 jobs per year resulting from asbestos-related bankruptcies (by, for example, limiting compensation for non-economic damages to the victims or their survivors, or by denying awards of punitive damages), the effect on overall employment and the national unemployment rate in an economy with more than 130 million payroll jobs would have been imperceptible (a change of less than two-thousandths of 1%).

Critics of tort reform also contend that the real purpose of the proposed changes is to shield businesses, especially large corporations, from having to pay just compensation to consumers, patients and clients for the harm incurred from fraud, negligence, medical malpractice, product liability or other legitimate tort claims.

Specific industry protections

In response to lawsuits filed against gun manufacturers by several municipalities, a bill was proposed by the U.S. Congress in 2005 that would provide immunity to gun manufacturers for most negligence and product liability actions (and prohibit the Bureau of Alcohol, Tobacco, Firearms, and Explosives from revoking a dealer's license, even in cases where a dealer has been identified as selling a relatively high number of guns subsequently used in violent crimes).

Organizations such as the United States Conference of Mayors oppose gun manufacturer immunity legislation. Others have argued that the legislation took "away the right of victims to be able to have their day in court," that the bill gave unprecedented immunity to a single industry, and that the law was unconstitutional to the extent that it conflicted with the Separation of powers.

Dispute over "litigation explosion" claims

The American Tort Reform Association (ATRA) claims that "The cost of the U.S. tort system for 2003 was $246 billion, or $845 per citizen or $3,380 for a family of four" and "The Growth of U.S. tort costs have exceeded the Gross Domestic Product (GDP) by 2-3 percentage points in the past 50 years." [11] This claim is based on a 2002 study by Tillinghast-Towers Perrin.[12]

Opponents of tort reform deny that there has been a "litigation explosion" or "liability crisis", and contend that the changes proposed by tort reform advocates are unjustified. Records maintained by the National Center for State Courts show that population-adjusted tort filings declined from 1992 to 2001. The average change in tort filings was a 15% decrease. The Bureau of Justice Statistics, a division of the Department of Justice (DOJ), found that the number of civil trials dropped by 47% between 1992 and 2001. The DOJ also found that the median inflation-adjusted award in all tort cases dropped 56.3% between 1992 and 2001 to $28,000.

Tort reform advocates allege that these numbers are misleading. They claim that most liability costs come from pre-trial settlements, so the number of trials is irrelevant. Supporters further note that the number of "filings" is a misleading statistic, because modern filings are much more likely to be class actions with many more joined claims than the cases of decades ago. They also note that the choice of the 1992 start date is misleading, because the largest increase in the number of tort cases occurred between 1970 and 1992. They also argue that the use of the median, rather than the mean, is a misleading statistic for measuring the magnitude of the litigation problem.

Supporters frequently base their claims of an "explosion" in the costs of tort litigation based on annual studies by Tillinghast/Towers Perrin, a major consultant to the insurance industry. In 2008, Towers Perrin reported that the cost of liability litigation has outpaced the growth of the GDP growth of 9% in estimated annual tort costs between 1951 and 2007 as opposed to a 7% average annual growth in GDP—representing 2.2% of GDP in 2004 vs. just 0.6% in 1950 and 1.3% in 1970. (It should be noted that Tillinghast/Towers Perrin is an interested party in the politics of tort reform with its operations as a major consultant to the insurance industry and as an insurance company itself with its reinsurance business.) The Tillinghast/Towers Perrin study has been criticized as unverifiable (since TTP will not release its data or methodology) by the Economic Policy Institute, a progressive think tank: "Although TTP's estimate is widely cited by journalists, politicians, and business lobbyists, it is impossible to know what the company is actually measuring in its calculation of tort costs, and impossible to verify its figures, because TTP will not share its data or its methodology, which it claims are 'proprietary.'" Tort reform supporters claim that the Towers Perrin numbers are underestimates in many ways.

Corporate lawsuit abuse

Tort reform opponents argue that corporations and insurance companies are the worst abusers of the litigation system. In particular, they contend, corporations often use their enormous resources to unfairly delay trial, pursue frivolous appeals, and contest claims in which liability is clear. In response, a number of tort reform supporters argue that that criticism is not a reason to oppose tort reform; such abuse would be deterred by proposed tort reforms such as "loser pays," which would prevent large corporations from using litigation as a cudgel against individuals and small businesses who cannot afford to defend themselves in court by providing an incentive for law firms to provide contingent defense. Opponents of tort reform contend that most private citizens would be afraid to sue wealthy corporations or insurers if they could be bankrupted by an award of the defendant's legal fees if they lost. This would limit legitimate claims, and effectively deny many citizens a forum to redress the harm caused them.

Debates over individual reforms in the United States

A number of proposals have been made by advocates of tort reform, although these proposals are not agreed on by all 'tort reformers' and are considered by many opponents a roll-back of the reforms of the twentieth century. The collateral source rule, for example, dates back to 1854.

Non-economic damages caps

Main article: Non-economic damages caps

Non-economic damages caps place limits on a jury's ability to award damages to victims for pain and suffering and loss of enjoyment of life as well as punitive damages. The purpose of these reforms is to allow for fair compensation for victims while preventing excessive, emotionally-driven jury awards from bankrupting entire organizations and leading to job losses and cost increases for consumers.

Proposals to cap non-economic damages are one of the most frequently-proposed tort reforms, and have generated controversy over their fairness, efficacy, and constitutionality. Critics complain that limitations on punitive damages and other restrictions on plaintiff's traditional rights will reduce corporate accountability. Because corporations engage in a cost-benefit analysis before considering whether to stop a wrongful action (such as polluting or not enacting proper measures for safety), caps on damages may well encourage corporate malfeasance. They contend that the prospect of paying a small damage award provides too little incentive to correct the wrongdoing, and would allow the corporation to profitably continue an unsafe practice.

For example, tort reform critics point to the story surrounding the Ford Pinto, where accountants determined that the expected payout in wrongful death suits would be less than making a design change to prevent the gas tanks from blowing up on minimum impact. The value of human life was not factored into the equation.

Joint and several liability

Main article: Joint and several liability

Tort reformers have had the most legislative success in limiting the common law rule of joint and several liability, often replacing it with a rule of proportionate liability. Of the forty-six states that had a joint and several liability rule, thirty-three states have abolished or limited the rule.[13] Opponents of tort reform contend that the elimination of the rule would under-compensate people who had the misfortune to be hurt by more than one person, if at least one of the defendants does not have the financial means to pay his or her share of proportionate liability.

Loser pays

Nearly every Western democracy follows the "English rule," which requires the loser of a civil suit to compensate the winner for his or her attorney's fees.[14] For example, after authors Michael Baigent and Richard Leigh lost their the plagiarism litigation over The Da Vinci Code in a British court, they were ordered to pay the defendants' $1.75 million in attorneys' fees.

The "American rule" differs; in most cases, each party bears its own expense of litigation. Supporters of tort reform argue that loser-pays rules are fairer, would compensate winners of lawsuits against the costs of litigation, would deter marginal lawsuits and tactical litigation, and would create proper incentives for litigation, and argue for reforms that would require compensation of winning defendants some or all the time.[15] In federal courts, debate has focused on the scope of Federal Rule of Civil Procedure Rule 11, which sanctions attorneys in some situations for making frivolous filings.

Opponents argue that such rules would have had a chilling effect on civil rights litigation. Proposals to limit frivolous lawsuits have been criticized on the grounds that the restrictions could be used to impede individuals attempting to enforce civil rights laws, according to The Federal Judicial Center's Study of Rule 11. Robert L. Carter, United States District Court Judge for the Southern District of New York, and Rep. Sheila Jackson Lee have both argued that Brown v. Board of Education would have been called frivolous. In response, reform supporters note that victorious civil rights litigation could hardly be deemed "frivolous"; that desegregation was accomplished through legislative, rather than judicial action; and that reform opponents overstate the importance of litigation in the civil rights movement.

Tort reform in US politics

Tort reform is controversial. George W. Bush made tort reform a centerpiece of his successful run for Texas governor and of his second-term domestic policy agenda. In the 2004 presidential election, Democratic vice presidential nominee John Edwards, a successful trial attorney, was criticized by tort reform advocates for lawsuits that he brought against obstetricians on behalf of children who suffered severe birth injuries; reformers criticized the suits as relying on junk science, while Edwards denied the allegation.[16]

Republican lobbyist Grover Norquist points out possible political motivations for tort reform, writing in American Spectator that "Modest tort reform, much of which has been actively considered by committees in both houses, would defund the trial lawyers, now second only to the unions, and this is debatable, as the funding source of the Left in America." But the debate over tort reform is not always a partisan affair. As a senator, Barack Obama voted for the Class Action Fairness Act of 2005 and for the FISA Amendments Act, which granted civil immunity to telecommunications companies that cooperated with NSA warrantless wiretapping operations. In the 2000 presidential election, the Democrats' vice presidential nominee, Senator Joe Lieberman, was a leading supporter of tort reform; former New Republic and Slate editor Michael Kinsley has often criticized products liability law. And the conservative pro-life group Center for a Just Society opposes many tort reform measures, arguing that litigation can be used to keep RU-486 off the market.

The United States Supreme Court sometimes weighs in on tort reform debates, but here too, the justices do not always vote according to their predicted ideological stereotypes. In the seminal case of BMW v. Gore, the court ruled that the Constitution placed limits on punitive damages, with liberal justices Stephen Breyer and John Paul Stevens in the majority and Justices Antonin Scalia and Ruth Bader Ginsburg dissenting. Under Chief Justice John Roberts, some expect the court to be more likely to take cases that could resolve tort reform debates.

Tort reform in commonwealth countries

New Zealand

Main article: Accident Compensation Corporation

United Kingdom

See also: Patrick Atiyah, Woolf Reforms, Claims management company, and Compensation Act 2006

• Pearson Commission (Royal Commission on Civil Liability and Compensation for Personal Injuries) 1979
• Sir Liam Donaldson, Making Amends (2003) Crown Copyright
• Proposed NHS Redress (Wales) Measure 2007

See also

• Australian tort law
• English tort law
• United States tort law
• Health Courts
  • Accident Compensation Corporation
  • Asbestos and the law
  • American Tort Reform Association
  • Class Action Fairness Act of 2005
  • Compensation culture
  • Junk science
  • Liebeck v. McDonald's Restaurants (the McDonald's coffee case)
  • Medical malpractice
  • Pearson v. Chung (concerning $67m for a judge's trousers)
  • Private Securities Litigation Reform Act
  • Product liability
  • Punitive damages
• Software patent debate and Patent troll (concerning reform of patent law, which pits similar interests against one another)

References

• Peter Cane, Atiyah's Accidents, Compensation and the Law (2006)
• PS Atiyah, The Damages Lottery (1997)
• Peter W. Huber and Robert E. Litan, eds., The Liability Maze: The Impact of Liability Law on Safety and Innovation. Washington, D.C.: Brookings Institution, ISBN 0-8157-3760-2

Further reading

• Congressional Budget Office, "The Economics of U.S. Tort Liability: A Primer"
• Walter Olson, Point of Law, "Procedure"
• Walter Olson, Point of Law, "Regulation Through Litigation"
• Richard Epstein, Wall Street Journal, 2005 22 August, "Rule of Law: Ambush In Angleton"
• David C. Johnson, The Attack on Trial Lawyers and Tort Law, a Commonweal Institute report. October, 2003. This report looks at the origins, strategy and tactics of the tort reform movement and its ties to core conservative-movement funders and organizations.
• Jeff Milchen, 2004 27 October, "Beware of 'Junk Lawsuits' Hype" (discusses corporate abuses of the American legal system)
• Public Citizen, 2004 Oct., "Corporate Hypocrisy in Accessing the Courts" (study asserting that corporations are the most frequent initiators of litigation in the U.S.A.)
• Rachel Weiss, Tort Laws on Trial: Lawsuit Liability Measures, 2004
• CorpReform.com, 2003 30 October, "What Is Tort Reform - and Why Is It Bad for the Public?"
• Washington Post, "Advocacy Groups Blur Media Lines" (article discussing U.S. Chamber of Commerce's use of newspaper to promote tort reform)
• Manhattan Institute Center for Legal Policy, "Trial Lawyers Inc." (multiple reports on the economic and political power of the plaintiffs' bar)
• Carl Geiger, testimony about Small Business Liability Reform Act before House Judiciary Committee
• Paul H. Rubin, Wall Street Journal, 2005 8 October, "Tort Reform Saves Lives"
• Economic Policy Institute response to response of Tillinghast/Towers Perrin
• Tillinghast/Towers Perrin response to Economic Policy Institute
• Warren Redlich, Personal Injury reform - Gross Negligence Standard
• Donald Harris, Tort Law Reform in the United States [1991] OJLS 407-415
• The Reagan Administration's Report of the Tort Policy Working Group on the Causes, Extent and Policy Implications of the Current Crisis in Insurance Availablity and Affordability (1986)
• Zeiler et al. Physicians' Insurance Limits and Malpractice Payments: Evidence from Texas Closed Claims, 1990-2003, Journal of Legal Studies 36:S2 (June 2007)
• Black et al. Do Defendants Pay What Juries Award? Post-Verdict Haircuts in Texas Medical Malpractice Cases, 1988-2003, Journal of Empirical Legal Studies 4:3 (March 2007).

External links

• New Zealand's Accident Compensation Commission homepage

In the United States

• Data regarding United States tort costs and civil trials from Data360

Pro-reform

• The American Tort Reform Association, a leading proponent of tort reform, http://www.atra.org.
  • American Tort Reform Association, "Facts on Tort Reform"
• The AEI Liability Project, which researches the scope and consequences of the liability crisis, http://web.archive.org/web/20050530000920/www.aei.org/research/liability/projectID.23/default.asp.
• The Manhattan Institute Center for Legal Policy, http://www.manhattan-institute.org/html/clp.htm.
  • Walter Olson, "The Lawsuit Lobby" (discusses funding of tort reform opposition)
• The American Justice Partnership, an umbrella tort reform organization, http://www.americanjusticepartnership.org.
• Illinois Civil Justice League, Restoring Fairness To Illinois' Civil Justice System, http://www.icjl.org.
• Texans for Lawsuit Reform, http://www.tortreform.com, is led by longtime tort reform advocate Dick Weekley http://www.dickweekley.com

Anti-reform

• Drum Major Institute for Public Policy http://www.drummajorinstitute.org/
• Commonweal Institute, "The Attack on Trial Lawyers and Tort Law" (examines use of front groups and funding sources for tort reform)
  • Tort Reform Organizations and the Far Right, http://www.commonwealinstitute.org/reports/tort/Section1.html
• Independent Justice, How Our Civil Justice System Protects Consumers and Patients in Ways the Regulatory System Does Not, http://www.allianceforjustice.org/independentjustice.pdf
• False Alarm, Washington Monthly, http://www.washingtonmonthly.com/features/2004/0410.mencimer.html
• Association of Trial Lawyers of America, http://www.atla.org.
• Center for Justice and Democracy, a leading opponent of tort reform, http://www.centerjd.org.
  • Carl Deal and Joanne Doroshow, Center for Justice and Democracy, "The CALA Files" (discusses funding of CALA)
• Tort Reform, Corporate Style, http://www.washingtonmonthly.com/archives/individual/2006_02/008175.php
• LawReader, http://www.lawreader.com/index.php/browse/node/2586.html
• Tort Deform, http://multinationalmonitor.org/hyper/issues/1995/03/mm0395_09.html