From the July 2011 issue of American Agent & Broker •Subscribe!

Civil Justice Reforms

2011 a great year in Wisconsin, Texas, Oklahoma, Tennessee and Alabama

Television pundits have spent an inordinate amount of time this year discussing the meaning of the 2010 elections in terms of the 2012 elections. Civil justice reform proponents, on the other hand, have quietly seized the initiative to enact common sense liability legislation. As a result, 2011 will go down as one of the great years for balancing civil litigation in the states.

The good news began in January and has continued through early June. No fewer than five states have enacted significant liability reforms. Most of the changes involved subjects that appealed to common sense and were easy for voters, as well as legislators, to understand.

Wisconsin

Wisconsin was the first state to act on civil justice issues with the passage of omnibus reform Act 2 on January 27. Although this victory was overshadowed by the national headlines involving Wisconsin’s battle over the powers of public sector unions, passage of Act 2 was the big news story for business in general and insurers in particular.

Related: Read Golden's article "Payday Loans For Lawsuits".

Requested by Gov. Scott Walker, Act 2 provides partial protection against market share litigation to manufacturers of ubiquitous products, such as lead paint and asbestos, including a 25-year statute of repose for discontinued products. The bill places limits on use of strict liability theory against manufacturers. It provides innocent seller protection and adds a 15-year statute of repose for most manufactured products. It also includes modified comparative liability at a 51 percent threshold.

Act 2 brings long-term care facilities under the noneconomic damage limits that currently apply to medical malpractice. The bill limits punitive damages to generally the greater of twice the compensatory damages or $200,000. It enacts damages for pursuing frivolous litigation. Finally, the bill adds a scientific evidence standard to expert witness testimony, following Rule 702 of Federal Rules of Evidence.

Texas

Texas has gained much economic success since enacting comprehensive civil justice reforms in 2003. The Texas Legislature followed up with more reforms this year and Governor Rick Perry signed into law HB 274 on May 31.

This year’s omnibus bill directs the Texas Supreme Court to promulgate an early dismissal of actions rule for cases that have no basis in law or fact. It also requires the Texas Supreme Court to promulgate rules of civil procedure to "promote the prompt, efficient, and cost-effective resolution of civil actions" in which the amount in dispute is less than $100,000. The new law removes a requirement that a trial judge obtain permission from all parties before he or she can certify a question for appellate review, and clarifies the procedure for taking such an appeal. HB 274 modifies the early offer of settlement statute to make the statute more balanced between plaintiff and defendant. Finally, it protects potentially responsible third parties from being named to an existing lawsuit after the statute of limitations has run out.

Oklahoma

Oklahoma’s legislature enacted several bills that add to the civil justice reform momentum from 2010. Gov. Mary Fallin signed seven new civil justice reform bills into law. The new laws place a $350,000 cap on non-economic damages in most bodily injury cases, allow the court to impose periodic payments for future damages, eliminate joint and several liability, inform a jury that any award in a personal injury lawsuit is not taxable, treat medical bills at the amount actually paid rather than the amount billed, and require a class action lawsuit to contain factual allegations sufficient to demonstrate a plausible claim for relief.

Related: Read the article "U.K. Civil Court Reform Credit-Positive For Insurers" by Chad Hemenway.

Tennessee

Tennessee joined the list of states improving their business and job climates through lawsuit reform in late May. The Tennessee Civil Justice Act of 2011 is an omnibus reform bill that has been one of Gov. Bill Haslam’s top legislative priorities this year. In a significant victory against lawsuit abuse, consumer protection act class actions and private right of enforcement are prohibited. Enforcement is the responsibility of attorney general and reporter for deceptive acts or practices.

Other highlights of the bill include capping noneconomic damages at $750,000 in most personal injury lawsuits and health care liability actions. Listed catastrophic injuries or listed actions by the defendant are subject to a $1 million limit on noneconomic damages. Punitive damages are limited to the greater of two times total compensatory damages or $500,000. There are exceptions for listed actions by the defendant, similar to those for noneconomic damages. Punitive damages in product liability cases are further limited with innocent seller protection. Food and Drug Administration compliance protection is added for drugs and medical devices. The Act removes private right of action in securities cases alleging unfair or deceptive trade practices, charging the attorney general and reporter with enforcement.

Another reform that will encourage business growth in Tennessee by discouraging forum shopping is venue reform for business defendants. This change means that a lawsuit must be brought in either the county where all or a substantial part of the events giving rise to the claim occurred, the county where the defendant’s principal office in the state is located or the county where the defendant’s agent for service of process is located, if the defendant does not maintain an office in Tennessee.

Related: Read the article "NC Considers Liability Lawsuit Bill" by Emery P. Dalesio.

The Tennessee Legislature did not stop with just the enactment of the omnibus bill. On the last day of the 2011 session, it passed two summary judgment bills that will make the civil justice system more efficient for all parties involved in litigation. HB 1358 overturns the Tennessee Supreme Court’s holding in Hannan v. Alltel Publishing Co., 270 S.W.3d 1 (Tenn. 2008). The bill brings Tennessee summary judgment standard back into line with that in federal courts, requiring the plaintiff to show that he or she has some minimum amount of evidence to warrant a trial. SB 940 similarly addresses summary judgment in employment lawsuits. It reinstates the federal burden-shifting standard that was rejected by the Tennessee Supreme Court after Hannan, in cases involving employment discrimination and retaliation. Together, these two bills restore a defendant’s right to stop a case that has no basis in fact early in the process.

Alabama

Alabama’s legislature also passed four civil justice reform bills in late May. SB 207 reduces the interest rate charged to a defendant that appeals a lawsuit verdict from 12 percent to 7.5 percent. SB 212 addresses forum shopping in wrongful death cases by requiring that a lawsuit can be brought only in a county where the deceased could have filed suit when they were living. This will prevent the current practice of finding someone to act as a personal representative for the deceased in a plaintiff-favorable county solely for the purpose of obtaining venue there.

SB 187 provides expert evidence reform. It adopts Daubert standard and a later US Supreme Court decision, Joiner. Together these cases established a framework for admitting scientific expert testimony in order to preclude introduction of "junk science" into courtrooms. Finally, SB 184, known as the Alabama Small Business Protection Act, provides innocent retailer protection against product liability suits. The suits are typically aimed at the manufacturer, but often include Alabama retailers, wholesalers and distributors as defendants. The Act protects retailers, wholesalers and distributors as long as they did not participate in the manufacture, design or modification of the product. In addition to protecting those in the distribution chain, the Act will likely serve to reduce forum shopping, since inclusion of retailers and wholesalers has been used as a means of keeping cases in state courts preferred by plaintiff attorneys.

As this article is written, all four bills have been presented to the governor and await his approval.

While the news is not this good in all states, these results demonstrate what can be accomplished by a united business community when presented with a realistic opportunity to achieve reform. Indeed, the business community is taking legislative action to combat the possibility of greatly expanded liability exposures from trespassers onto private property—a problem that many people do not yet know exists.

For the most part, property owners have not been responsible for injuries to someone trespassing on private property. They are, after all, committing crimes against property owners. There have been a few exceptions, like attractive nuisance regarding children and a duty not to set booby traps. That could change if courts adopt the duty of care to trespassers proposed in the American Law Institute’s Restatement (Third) of Tort: Liability for Physical and Emotional Harm that was published in April 2010.

Rather than restating (as its authors have traditionally done) what courts around the country have held to be the law, the new Restatement advises courts to hold that property owners owe the same legal duty of care to people illegally on their land as they do to invitees. This would be a significant shift in tort law, as it does not appear to have been included in either case law or statute in any state to date. In fact, Trial, the magazine of the American Assn.for Justice (formerly the American Trial Lawyers’ Assn.) listed this expanded duty of care to trespassers as one of "The New Restatement’s Top Ten Tort Tools" for trial attorneys.

For insurers, such an expansion of premises liability exposure would likely affect homeowners insurance risk as much as commercial liability. Due to owning vast amounts of land, agriculture could face as much new liability exposure as urban manufacturing or retailing entities.

It is common sense that a property owner should not owe the same duty of care to a trespasser as it does an invitee. Trespassing is a crime, after all. Fortunately, the business community, including the insurance industry is advocating for legislation that codifies what is already standard in case law around the country, effectively precluding the adoption of the expanded duty of care to trespassers proposed in Restatement (Third). As this article is written, bills have been introduced in at lease nine states to preclude its adoption and four states (North Dakota, Oklahoma, South Dakota and Texas) have already enacted statutes. It would be good news if many more states enacted statutes to prevent the overreaching position advocated in Restatement (Third), along with other common-sense civil justice reforms.

 

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