The ascendancy of Barack Obama has emboldened the Association of Trial Lawyers of America, now repackaged as the American Association for Justice.
Recently, the trial lawyers sent the Obama team their 2009 legislative “wish list” as part of a broader strategy to expand litigation and deny that lawsuit reform cuts costs.
“Tort reform does not work,” claims Jon Haber, CEO of the trial lawyers group.
He is in denial of the facts. Lawsuit reform does work.
In the new study, “Tort Law Tally,” my coauthors and I found that 18 common tort reforms cumulatively can cut tort payouts by a full 47 percent and reduce annual tort insurance premiums by 16 percent.
For consumers, that translates into a typical yearly savings of $128 per person.
The statistical analysis of the most recent cost and reform data, 2004 and 2006, shows that several lawsuit reforms stand out. Strong attorney-retention sunshine laws are particularly effective, cutting tort payouts by 12 percent — the largest reduction from a single reform.
Consider tort lawsuits brought by state governments against large corporations. State officials sometimes turn to private lawyers for assistance in these cases. These public-private partnerships can be extremely useful, but they can also allow officials to reward their lawyer friends with ginned-up lawsuits.
North Dakota’s sunshine laws, to cite one example, require that an emergency commission approve an attorney general’s selection of a private, outside lawyer.
Caps on appeal bonds are another highly effective reform. Defendants pay appeal bonds to appeal verdicts they’ve lost.
The right to an appeal is a hallmark of our justice system, but sometimes bonds are set unreasonably high. For example, in 2003 Philip Morris was ordered to post a $12 billion appeal bond. This is too high a price for due process.
To avoid this short-circuiting of a defendant’s rights, several states — like Georgia and Mississippi — cap appeal bonds. Such caps produce an aggregate reduction in total tort losses of 4 percent.
Caps on non-economic damages and on awards in medical-malpractice lawsuits are also extremely effective brands of reform. These three caps can cut state tort losses by 7 percent.
Unfortunately, Alabama does not have any of these caps. As a result, the state’s tort losses are $160 million higher than they would otherwise be.
In the absence of caps on malpractice damages, states are left with a physician shortage. Alabamans have experienced this unfortunate result first hand. Only 10 of the state’s 67 counties have adequate medical access.
Implementing malpractice damage caps could help Alabama reverse this sad state of affairs. A report conducted for the U.S. Department of Health and Human Services found that states with such caps had 12 percent more physicians per capita than states without such caps.
Facts are stubborn things. And the facts are that lawsuit reform cuts insurance premiums significantly, which lowers consumer prices and allows hospitals, drug companies and manufacturers to better serve patients and customers and create jobs.
Ordinary consumers stand to save a great deal from commonsense, meaningful lawsuit reforms.
All Americans are looking to save money, and every state is struggling to jump-start its economy. In both efforts, lawsuit reform delivers welcome results.
Lawrence J. McQuillan, Ph.D., is director of business and economic studies at the California-based Pacific Research Institute, and coauthor of PRI’s “Tort Law Tally.” His e-mail address is LMcQuillan@pacificresearch.org.