The Politics of Tort Reform
by Stephen Cooper
Taken from remarks made at the Intermediaries & Reinsurance Underwriters Association’s 2003 Claims Workshop, May 5, 2003.
Conventional political wisdom tells us
that Democrats favor the status quo because they are in the pockets of the trial
lawyers and Republicans favor reform because they are in the pockets of big business. But life is never so simple. This
year and next, tort reform will be tied to
election politics and the unique logic of
elections. The first maxim of politics warns
us that politicians measure success by getting re-elected, not by enacting legislation.
The corollary – enacting legislation does
not get votes; blame gets more votes than
success.
Elections are very complex affairs.
They change daily, and in election politics,
30 days can be a lifetime. Small, almost
immeasurable changes in public opinion
have large influences. In 1987, James
Gleick wrote a book entitled Chaos: Making a New Science. Several years later
Michael Crichton took Gleick’s ideas and
wrote a novel entitled Jurassic Park. In
the book Jurassic Park – and in the movie,
the hero chanted, “ a butterfly flips its wings
in Beijing, and a month later it rains in NY.
Every political campaigner can tell you stories about small seemingly harmless incidents or photos that destroy election campaigns. We all remember the 1998 Presidential campaign and the photograph of the
Democratic Presidential candidate Michael
Dukakis sitting in a tank wearing a tanker’s
cap. Unfortunately for Dukakis, the
earflaps of his cap were sticking out making him look like Snoopy. That was the end
of his campaign.
That is all very interesting you are saying to yourself — but what does this have
to do with politics and tort reform. I will
answer “a great deal.” Politics – legislative politics and election politics, are very
complex systems and small events do have
large consequences.
The term tort reform means different
things to different people. To consumer
advocates and union leaders it means letting business push shoddy and dangerous
products on to an unsuspecting public. It
means spraying workers with toxic waste
just because you can get away with it. It
means Doctors that routinely forget why
they are in operating room — performing
open-heart surgery on orthopedic patients.
Doctors amputating the wrong leg.
For business it means no more class
actions, no more $95 million judgements
for a cup of coffee that may have been too
hot and no more extortion by trial lawyers.
In truth it is none of the above. Every
day we read a story about an outlandish
jury verdict. These stories don’t make it
to the news media by accident. Since the
1980’s, business has spent tens of millions
of dollars on media campaigns, public relations firms and lobbyists highlighting the
cost of litigation. During the debate about
the patients bill of rights, the Health Benefits Coalition, a coalition of business and
business associations, and health insurers,
my clients, retained Porter and Novelli, a
prominent public affairs firm. Every day,
without exception, including Thanksgiving
and Christmas, Porter and Novelli sent media advisories and canned stories to both
the print and electronic media.
For better or worse, the public believes
that most lawsuits are frivolous. However, and there is always a however, while
the average person believes everyone else’s
litigation is frivolous, they say to themselves, this is America and by jeepers, (except if they are from NY, and then it begins with a four letter word) I have a right
to sue. Most Americans believe that the
right to sue for unlimited damages is in the
bill of rights along with free speech.
This perceived right makes most politicians wary of board-based tort reform —
but tinkering with the elements of tort law
is OK.
Black’s law dictionary defines ‘TORT’
as a civil wrong for which a remedy may
be obtained – usually in the form of damages.
But the devil is always in the details
and Federal tort reform, is no exception.
If the real lawyers in the audience will forgive me, I will review some of the elements
of tort law.
1. First, venue - where can a plaintiff
seek a remedy – state or federal court?
The ability of plaintiff’s attorneys to venue
shop has driven many national and international companies to advocate for either
national standards, national limits or the
federalization of tort law.
Urban legend is replete with stories
about juries awarding tens of millions of
dollars for mis-painted BMWs and the famous hot cup of coffee. Advocates of tort
reform have also pushed for binding arbitration – outside of the judicial system –
with little ability to appeal the arbitrator’s
decision. Over the last year, the Supreme
Court has upheld binding arbitration.
2. Who can seek damages — a class
or an individual? Every large corporation
fears the threat of class actions. In some
instances, Congress has limited the ability
of wronged parties to join together as a
class - requiring either direct action or an
action by the lead plaintiff – the plaintiff
with greatest economic damages.
3. What are the remedies – economic
damages, non-economic damages (pain
and suffering) or punitive damages and
are there dollar limits on remedies? In
some instances, federal law prohibits noneconomic damages or punitive damages
and places dollar limits on all three forms
of remedies. Many states already have lim-
its on non-economic damages and punitive
damages. For example, the state of Virginia has an across the board $250,000
limit on punitive damages.
4. When does an injury occur? Does
an injury occur at the time of the incident
or when it becomes manifest – oftentimes
many years later. Many states have statutes of limitations – establishing a time
limit for suing in a civil case. However
the harm from asbestos exposure or other
toxic substances may not become apparent for many years. Faced with state statutes of limitations, many attorneys file premature claims prior to the manifestation of
injury. The compromise asbestos litigation
reform bill now under discussion will probably propose a liberalization or extension
of the statute of limitations for asbestos
cases.
5. How do you define wrong or as a
colleague of mine would say, how wrong
was wrong? Black’s Law dictionary lists
literally dozens of different types of negligence - from simple negligence, negligence
in which the individual is unaware of the
risk he or she created, to gross negligence
— a conscious disregard of the consequences to another individual. I am not
sure that all of these definitions help define degrees of negligence — is reckless
negligence worse than gross negligence, is
it worse than wanton negligence? During
last year’s debate about the Patients Bill
of Right, the Democrats and Republicans
argued about the standard allowing a subscriber to bring an action against a health
plan.
The Democrats wanted ordinary negligence – something more than simple negligence but less than gross negligence. The
Republicans advocated gross negligence.
6. What are the rules of evidence? During the debate over the Patient Bill of
Rights, advocates for insurers and business
argued that plaintiffs should not be able to
submit any evidence in a judicial proceeding that they didn’t present during an administrative review. Advocates for Tort
Reform would like to limit the “fishing expeditions” the discovery process afforded
plaintiff’s attorneys. In asbestos litigation,
in some instances before that individual is
eligible to participate in an class action, an
independent reviewer must certify that a
claimant has suffered injury from exposure
to asbestos. However, the independent
reviewer’s findings may not be presented
as evidence.
7. Who is liable? We have all heard the
term, joint and several liability. This rule
allows any defendant in a case to be held
liable for the entire amount of the claim
regardless of fault. Advocates of tort reform argue for proportional liability.
8. How are damages awarded? In many
instances, courts award damages as a lump
sum. Advocates of tort reform have advocated for structured settlements – consisting of periodic payments over time.
9. Attorney’s fees and the contingency
fees. Most attorneys charge clients on a
contingency basis – that is a fixed percentage of the damages award – generally ranging from 33% to 50%. Advocates of tort
reform would like to limit attorney’s fees
to either a fixed dollar amount or to a
smaller percentage – from 15% to 25%.
To avoid confusion, I will define tort
reform as a measure addressing any or all
of the nine elements listed above. Will federal tort reform pass this year? Broad based
federal tort reform will not pass this year.
However, every year, and this year is no
exception, Congress enacts and the President signs legislation addressing one or
more of the nine elements.
On April 30, last Wednesday, President Bush signed a bill, HR 1770, providing compensation to health care workers
and other workers injured as a result of receiving a small pox vaccination. Under
this bill permanently disabled individuals
can receive as much as $50,000 a year for
life in lost wages and spouses of individuals killed by the vaccine can receive a lump
sum settlement of $262,100. Those dissatisfied with their compensation can file
suit under the Federal Torts Claims Act.
Why is this tort reform…..it addresses
venue, who can seek damages, types of
damages, places economic limits on damages, defines injury, who is liable or this
case not liable, defines wrong doing,
method of payment and attorney’s fees.
In general, Congress is more likely to
enact tort reform when there is a national
priority, a clear national interest or a crisis. The former Counsel to the US Senate,
Bill Diefenderfer, would say “the Congress
passes legislation when faced with crisis
or Christmas. I would argue that the urge
to leave Washington for the Christmas holiday is generally a more powerful motive
than crisis, but nonetheless crisis is ample
motivation.
For example, in 1957 Congress passed
the Price Anderson Act limiting the liability of the nuclear industry in the event of a
nuclear accident. We were in the middle
of the cold war, the unsettled mid-eastern
political environment threatened oil shipments and Congress believed that the development of a nuclear power industry was
critical to the safety and economic well
being of the country.
Companies were adamant that without some legal protections they would not
engage in this business. Before a Congressional Committee Charles Weaver, a vice
president of Westinghouse, stated: “we cannot risk the financial stability of our company for a relatively small project no matter how important it is to the country’s reactor development effort, if it could result
in a major liability in relation to our assets.”
Without trying to sound too cynical,
since the 1950’s, every special interest has
argued that tort reform for them is of national importance. Forget broad based tort
reform, they say, help us. Tax lobbyist have
the saying – “don’t tax me, don’t tax thee,
tax the fellow behind the tree.” We can
easily change that to – “don’t sue me, don’t
sue thee, sue the fellow behind the tree.”
While there has been a great deal of
discussion about broad-based tort reform,
in truth, no one believes it will happen any
time soon. Like tax lobbying, it has become every group for itself.
This year, physicians have made malpractice reform their top priority. Physicians have held demonstrations in state
capitols, threatened to quit medicine and
have turned on their powerful media machine telling us we face a national crisis.
While a bill did pass the House, HR
5, it is unlikely to pass through the Senate.
First, it is not clear that this is a national issue. Health care is local; most patients do not cross state lines to see a physician. Second, states have the ability to
limit malpractice claims and many have.
And a number of Republicans have expressed concerns about setting federal limits on state courts.
Third, the evidence is not so clear.
Some studies have shown that malpractice
insurance premiums in states having enacted tort reforms are no less than premiums in states without limits. In addition,
many of the malpractice carriers have said
that new federal limits will not result in
lower premiums. Fourth, while physicians
have done a good job rallying public support, the House bill extends these limits to
drug companies, medical device manufacturers and health plans. Senate Democrats
and a number of Senate Republicans are
not sure they want to go that far.
Fifth, and most important, it is not
clear that the Republicans really want to
pass malpractice reform. Under the rules
of the Senate, 60 Senators must agree to
allow a bill to come to the floor for a vote.
The Republicans do not have 60 votes and,
in all likelihood, this bill will not come up
for a vote. There is this growing suspicion that the Republicans would be just as
happy not bringing this bill up for a vote –
and blaming the Democrats for blocking
physician malpractice reform. Remember,
in politics, blame is a more powerful force
than accomplishment.
The Senate is now working towards
class action reform – S 274, S 274 would
move more class actions to federal courts
– limiting venue shopping and making it
more difficult for some class members to
receive disproportionate benefits. Again
it is unclear that the more ideological
House will accept a moderate Senate bill.
And again, Republicans will have to make
a judgment if no bill is better for
fundraising and election politics than a
compromise bill.
This year, Congress may be able to enact asbestos litigation reform. Spanning
30 years, asbestos litigation is probably the
longest running mass tort in US history.
Over the last two years, there have been
over 200,000 new asbestos lawsuits.
ERISA. ERISA was suppose to pre-empt
state law, prohibit class actions, limit claims
to no more than the value of the benefit
and limit claims to federal court.
Why now? The current system of lawsuits doesn’t help anyone. It doesn’t protect workers exposed to asbestos and it
doesn’t protect business. Facing large asbestos claims over 70 companies have already filed for bankruptcy. Under the current system, many of those sick or dying
from asbestos exposure will receive little
or nothing if they filed a claim against a
company already in bankruptcy. Workers
exposed to asbestos but not ill may be
forced to file a claim prematurely. And if
the claim is made against a financially solvent company they may receive compensation. And business faced with a growing number of cases, would like to see a
settlement. AND most important there is
no political gain in blocking asbestos litigation reform. Why compromise now —
everyone wins something.
The courts have routinely allowed the
states, health care providers and subscribers seek remedies in state courts, bring class
actions and seek both non-economic and
punitive damages.
The proposed Senate compromise involves the creation of a trust fund. The
unanswered questions are –how large a
trust fund, will there be any public money
in the trust funds, how much would insurers and business each pay into the trust fund
and could some businesses opt-out of the
participating in the fund?
Which leads us back to Jurassic Park
and dinosaurs. In Jurassic Park, the dinosaurs escape and the hero tells us that the
dinosaurs will always escape. Well tort reform is like Jurassic Park. The dinosaurs
will always escape. The compromise Asbestos bill will probably allow some companies to opt-out of the trust funds. Companies opting out will those companies or
industries believing judicial settlements
will be less costly than paying in to a new
trust fund. Every insurance company
knows that pools of this sort only work
when you can spread the risk. If individuals or companies with less risk can opt out,
an insurance company or public trust fund
will soon find itself in the classic insurance
death spiral.
In the past and I suspect in the future
the Courts will let the some of the dinosaurs escape. We only have to look at
After Congress enacts tort reform,
physician malpractice reform or asbestos
litigation reforms, very smart lawyers from
around the country will find exceptions,
and soon these exceptions will become the
rule.
Why is tort reform a national issue?
The quick answer is John Edwards, Senator from North Carolina, a Presidential
hopeful and a trial lawyer. The White
House needs a bogeyman. They have
painted John Edwards and the democrats
as tools of the trial bar - destroying health
care for America. If John Edwards drops
out of the race, which could easily happen,
tort reform may no longer be the darling
of the Republicans.
I am suppose to make predictions
about the 2004 Presidential race, which
party will control the Senate and the House
in 2005 and who will win the world series.
I am not going to. Politics is about change.
James Gleick said that we have all these
fancy high-powered computers to predict
the weather but a butterfly flaps her wings
in Beijing and a month later it rains in NY.
Small almost immeasurable changes have
large influences.
Stephen Cooper is a Government Affairs Counselor at the law and lobbying firm Preston Gates
Ellis & Rouvelas Meeds LLP in Washington DC.
Mr. Cooper focuses his practice on federal
policy, health care, health information & health
technology. For more information, visit
www.pgerm.com.