An index on such practices ranks Colorado second in the U.S. for reining in costs and implementing reforms.

Colorado ranks second in the nation when it comes to tort liability practices, which bodes well for business, according to a report from Pacific Research Institute, a San Francisco-based free-market think tank.

Lawrence J. McQuillan, co-author of the U.S. Tort Liability Index, was in Denver on Thursday to discuss findings of the report, first published in May.

"It's a snapshot of what states have done today in actual costs and done to rein in costs for the future," said McQuillan, speaking at a panel discussion at The Denver Press Club in Denver.

The event was sponsored by the Independence Institute, the Golden-based free-market think tank.

Reforms in tort law adopted by the Colorado between 2000 and 2005 put the state in the No. 2 spot, ranking behind Texas. States in the Rocky Mountain region rated high overall, with Utah coming in sixth and Wyoming 13th.

"If not for the reforms, today Colorado would rank 34th," McQuillan said. "I think (Colorado) has positioned (itself) well for the future."

Tort reform is not only good for the civil justice system, but good for business, McQuillan said. States with high monetary damage limits and few reforms are at a competitive disadvantage to states such as Colorado with low monetary caps and several reforms.

"Competition is forcing changes and putting pressure on civil reform," he said.

Tort law refers to damages awarded as a result of wrongdoing to a person or group. In Colorado, that limit is $366,250 for nonpunitive damages.

In 2003, the state switched from a no-fault auto insurance - where injuries in car accidents were paid regardless of fault - to a tort liability system, where at-fault drivers are responsible for all the damages.

While the switch meant that drivers no longer had to carry medical insurance under their car insurance plans, there's debate over whether the switch has resulted in lower premiums.

Premiums haven't dropped due to reforms, said Ross Buchanan, a trial lawyer for the Denver firm of Buchanan, Jurdem & Cederberg, P.C., and a member of the panel. "Tort reform has never been shown to reduce premiums," he said. "Our tort system is reasonably effective, reasonably inexpensive and reliable."

The liability index ranks states based on 39 variables in 2004 and 2005, such as the number of civil cases filed, and whether the state provides civil-liability exemptions for junk-food or obesity lawsuits. Medical malpractice, workers' compensation and product liability were also variables factored into each state's ranking.

McQuillan said the institute's next tort liability index will be out in 2008.