Saturday, December 13, 2003

Tort Deform


One of the pet issues of certain faux-conservatives is "tort reform". They announce that there is a big problem with "frivolous lawsuits", and then typically tell us that the remedies we should impose are:
  1. Damages caps;
  2. Shorter limitations periods; and
  3. More statutes of repose.

The problem is, none of those "remedies" are aimed at "frivolous" litigation - in fact, those particular "reforms" are directed at meritorious litigation. They're the equivalent of the "technical defenses" some people like to complain about in the field of criminal law - where a guilty criminal "gets away with it" because of an evil "loophole" in the law. Statutes of limitation and repose prevent the litigation of meritorious cases based on the passage of time. Often, the lobbying is for limitations periods which are shorter than the time in which the negligence which might give rise to litigation could reasonably be discovered. Damages caps have no effect on "frivolous" litigation, but can have catastrophic effects on people who suffer serious personal injury and are unable to recover reasonable compensation from those who caused them harm.

Yesterday, Bruce Bartlett of the National Center for Policy Analysis published "The cost of the legal system", which is perhaps typical of the mushy-headed nonsense put forth by advocates of "tort reform". He complains that a new report from the National Association of Manufacturers and the Manufacturers Alliance indicates that U.S. manufacturing costs are the highest in the world, due to "corporate taxes, employee benefits, pollution abatement expenses and tort liability costs." This will, of course, come as a surprise to those who recognize that other nations have higher corporate taxes, offer greater employee benefits, and are intolerant of pollution - and even have similar tort laws. But let's leave that aside for a moment and assume that this industry report paints a fair and balanced picture. Bruce focuses his editorial on the following contention:
Our tort liability system is 3.2 percent more expensive. No country has a system more expensive than ours.

Actually, I'm a bit surprised that our tort liability system is only 3.2 percent more expensive on average. A principal reason that our tort liability system is so costly is that, in our system, the cost of future medical care is paid by the defendant whose negligence injured the plaintiff, whereas in other nations those costs are either non-compensible (note that Bruce includes China in this calculus - a nation not known for offering due process) or are covered by national health plans. Remove future medical costs from personal injury tort verdicts, and many will plummet in size.

Bruce next presents a classic misrepresentation of "tort reform" advocates:
This last point is reinforced by a recent study from Tillinghast-Towers Perrin, a consulting group. Last week, it estimated that U.S. tort costs climbed to $233 billion in 2002, or 2.23 percent of the gross domestic product. This is like an $809 per year tax on every American, paid in the form of higher prices for goods and services, higher insurance costs and a deterioration in living standards.

Stuff and nonsense. The tort system shifts responsibility for damages from those who suffer injury to those who caused the injury. Eliminating the tort system does not mean the elimination of a "$809 per year tax" - it means that every American will, on average, absorb $809 in damages caused by somebody else, while the person responsible for their injuries pays absolutely no price. That is, absent the tort system, there would be an additional subsidy of $809 per American per year, payable to those whose negligence or deliberate wrongful conduct injures other Americans. (The fact that "tort reform" advocates pretend otherwise serves to highlight who they actually are - business and insurance company lobbyists.)

I am reminded of Walmart's decision from a number of years back that it was more "cost-effective" to stock its high shelves in a manner that posed a risk to customers, paying off lawsuit settlements to customers who were injured or killed by falling boxes, than to improve the manner in which it secured merchandise on high shelves. Upon being presented with a memorandum documenting that this was an official company policy, an angry jury punished Walmart with a large verdict for an injured plaintiff. And, at least to some degree, Walmart improved its policy. No doubt, Bruce would find much more fault in the jury's "excessive" verdict than in the fact that Walmart was choosing to put its customers at unnecessary risk.

What's worse, even at $809 per person, the tort system grossly undercompensates injury victims. According to the Tillinghast-Towers Perrin report Bruce cites (but obviously hasn't read), the tort system returns less than 50 cents on the dollar to people it is designed to help and returning only 22 cents on the dollar to compensate for actual economic loss. Those are real costs, and are borne by tort victims. In other words, the public continues to provide a huge de facto subsidy to tort feasors.

Bruce continues,
Of course, legitimate personal injuries deserve compensation. But, less and less of each dollar awarded in tort suits actually compensates for injury. According to the Tillighast study, only 22 cents on the dollar compensate for actual economic loss. The rest went to lawyers or involved punitive damages or those for "pain and suffering" that went far beyond compensating actual loss.

So in Bruce's mind, "pain and suffering" is not a "legitimate" injury. That is, if I cut off your leg or poke out your child's eye, I should pay for the doctor bill and a prosthesis, but as you don't suffer any "legitimate" damages beyond your out-of-pocket expenses, that's where my liability should end. Am I wrong in asserting that no thinking person would agree with Bruce on that point - and that if Bruce himself were thinking, he wouldn't have presented such an absurd argument?

And I love this part - according to Bruce, we know that "tort reform" is necessary because industry-sponsored public opinion polls, driven in no small-part by nonsense such as Bruce's editorial, suggests that people "believe" it is necessary:
A poll earlier this year for the American Tort Reform Association found that 76 percent of Americans believe that their health costs are higher because of excessive medical liability lawsuits. By a two-to-one margin, people believe that lawsuits are hurting the economy and discouraging the creation of jobs.

(Bruce likes to present thoughts instead of facts - "For example, it is thought that $50 billion to $100 billion is wasted each year on unnecessary medical tests that doctors order just to protect themselves from a lawsuit". No citation, no statistics, just a "thought". When it comes to Bruce, the old saying "A penny for your thoughts" seems like a bad deal....)

Bruce, of course, makes no mention of the 1999 Institute of Medicine report which, after examining available data, estimated that between 44,000 and 98,000 people die each year from medical errors in hospitals alone, making medical errors the eighth leading cause of death in the United States. The direct and indirect cost of preventablemedical error was estimated at $17 billion per year. The Tillinghast-Towers Perrin report states that medical malpractice verdicts in 2001 totaled $24.6 billion - which seems to be a significantly lower "administrative markup" over the actual cost than that the U.S. pays for gas in Iraq.

This is not an argument that there is no room for reform or improvement in the tort system. There are reforms which could be made to make the system more efficient and more affordable, as well as to improve the odds of just and reasonable verdicts. But, unfortunately, it is the rare "tort reform" advocate who has any interest in those goals, as opposed to placing additional hurdles in front of genuinely injured plaintiffs, and limiting the compensation available to those most severely injured by their patrons' wrongful conduct. And the arguments presented by "tort reform" advocates are frequently at significant odds with the facts.

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