Tort Reform Caps Should Be Flexible

Tort Reform Caps Should Be Flexible It isn't often that insurance issues enter the pop culture. On those few occasions when they do, insurers are rarely on the “right” side.

Thus, it was interesting to see a strong case made for tort reform in the newest best seller by John Grisham, “The King Of Torts.” The book served as a cartoon primer on how big-time trial lawyers–and their targets–operate in the class-action arena.

The lead character, the so-called “King of Torts,” is a former public defender seduced by the pot of gold at the end of the class-action rainbow. He and his fellow sharks are portrayed as ambulance chaserspiratesa gang of thieves. In one case, a cement company that practically employs an entire town is driven into bankruptcy after the “King” rejects a settlement offer because the attorney fees would be too low.

Throughout the book, class members are given the bum's rush–recruited by the thousands with scary TV ads, then left with the short end of the stick while their lawyers get rich quick off the sheer volume of claims.

To be fair, the defendants don't come off much better. None of them are innocent of wrongdoing. However, the tort lawyers are clearly the villains. Indeed, the book's premise seems to be that plaintiffs in class-actions are victimized twice–first by the company or individual harming them; then again by their own lawyers, who sell them out for far less than they deserve and take an obscene chunk off the top.

Ultimately, the “King of Torts” is unceremoniously dethroned by one of his own kind–a malpractice attorney. Former clients are gathered in a class to sue their quick-draw tort lawyer for negligence. He is accused of accepting a relatively paltry settlement of $62,000 per person ($43,000 after subtracting attorney fees, which top $100 million for the class) in a suit over a drug that turns out to be not merely harmful, but deadly. Thus, the hotshot trial attorney is sued into bankruptcy, receiving a dose of his own medicine. Poetic justice, indeed!

To add injury to insult, the “King” is beaten up by thugs laid off by the cement company he drove into bankruptcy.

The book is clich?d and superficial, but it does raise many issues at the crux of the tort reform battle.

Is the tort system out of control?

Are greedy trial lawyers manipulating the courts for their own gain–often at the expense of their clients?

Are unfettered class-action suits undermining the economy and various high-risk professions, ultimately leaving society holding the bag?

Tort reform advocates say the solution is simple. All we have to do is limit non-economic damage awards to $250,000 and cap plaintiff attorney fees. However, I fear this knee-jerk reaction is a simplistic response to a very complex problem.

If you want an alternative pop culture take on the tort system, rent “Erin Brockovich.” In that fact-based flick, a company pollutes the local drinking water, resulting in serious illnesses among the surrounding residents. Damage control by the offending firm neglects to reveal the full extent of the medical threat. When a trial lawyer's nosy, persistent aide digs into documents and soil samples, the truth is revealed. A class is assembled, and justice of a sort prevails.

The film, while dramatized and clich?d in its own right, raised an entirely different set of questions about the relative merits of tort reform, such as:

Exactly who is being “protected” by such reforms–those harmed, or those causing the harm?
If awards for pain and suffering are limited, are we trading deterrence for predictability? Knowing the maximum probable loss up front might help underwriters set stable rates, but is $250,000 a big enough hammer to keep wayward companies and individuals in line? Will corporate officers and individual practitioners feel less concerned about cutting corners on safety since the legal downside would not be as catastrophic?
If contingency fees and damage awards are strictly limited, will injured parties be able to find high-caliber attorneys to take their case against powerful corporate and professional defendants? In addition, is it fair to cap plaintiff attorney fees when there are no caps on the amount of money defendants can spend to combat class-action suits?
Is there any justice in setting an arbitrary damage standard? Are all maximum $250,000 damage claims alike? Shouldn't the worst offenders–those guilty of gross negligence or outright criminal behavior–be subjected to a far higher penalty?

Is there abuse of the system? Perhaps. In selected cases, litigation may be little more than a legal form of extortion, with publicity-shy companies desperate to protect their brand reputation and stock price rushing to settle even frivolous suits just to make the problem go away.

In addition, we can't ignore the fact that the tort system does impact the overall economy and society. It is remarkable to see doctors making like union-types by walking off the job, demanding tort reforms to stop medical malpractice premiums from soaring.

However, the fact is that class actions are not all baseless–there is plenty of bad corporate and individual behavior out there–and that means there has to be some flexibility in any tort reform law to deter and punish the worst offenders.

If tort limits are approved, there should be an “escape clause” to give judges the option to toss the cap aside if asked to do so by a jury. The judge can then determine if the defendant's conduct was so outrageous that a larger award is in order, based on precedents in similar cases. That way, the vast majority of suits might be subject to a reasonable limit, but the hammer would discourage people from flaunting basic safety standards, and punishing those who do.

A hard cap would be a one-dimensional, quick fix that could end up doing more harm than good. If the tort system must be tweaked, the worst offenders should not be let off the hook.

Sam Friedman is NU's publisher and editor-in-chief. Responses to this column should be sent to sfriedman@nuco.com.

Reproduced from National Underwriter Edition, March 17, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.