How the Tort System Really Works

August 27, 2008

I thought that I’d briefly discuss a case that shows how the legal system really works with tort claims. As the November elections approach we are no doubt going to hear quite a bit about run away jury awards and the poor, long suffering businesses and insurance companies.

In truth only about 4% of the cases filed ever make it to trial (according to King County records), as plaintiffs are subjected to withering pretrial procedures that drag out their cases for years.

Rivas v. Overlake Medical Center has been pending for nine years and Susan Rivas, the plaintiff, has yet to get her day in court. She went to Overlake Hospital for a procedure after which she was placed in intensive care for four days, then told that she would lose her kidney. With all hope of saving the kidney was lost she filed suit three years and two days after the operation. Overlake and Dr. Muraki, her doctor, replied saying the suit was too late. The three year statute of limitations passed two days before the suit was commenced.

Nine years later her case got to the State Supreme Court, which held on August 7 that the stature of limitations had been tolled for the four day period in which she was in intensive care. This gave her four extra days, so she is not barred by the statute of limitations from suing. She can now have a trial. (Justices Fairhurst and Alexander dissented saying that the statute of limitations should be strictly enforced.)

Most plaintiffs by this point would have given up and it remains to be seen whether Susan Rivas will have the resources (spiritual, mental and financial) to actually have a trial.

If say she has a trial in the next year or two and wins, then the defendants’ insurance companies can appeal the decision. So it is quite possible that even if she wins at every stage from here on out, it could be five or more years before she recovers any money whatsoever, assuming her health holds out.

Washington has no punitive damages that are available to her, so she will be entitled to receive only the damages that she can prove that she suffered directly due to her injury. You can see that insurance companies benefit by delaying payment 15 or more years.

Tort reform would further reduce Susan’s recovery by imposing an arbitrary limit on the amount she could receive. The effect of such a law would not only be to deprive people like Susan Rivas from receiving full compensation, but even more important to the insurance companies it would discourage people from filing suit and no doubt reduce the 4% of cases that survive pretrial procedures to say 3% or 2%.


Washington’s Attorney General Takes Both Sides of Tort Reform Issues (Part 1)

June 26, 2008

Washington State’s Attorney General Rob McKenna recently campaigned for tort reform, claiming that the legislature needed to step in and reduce the awards that were being entered against the state. He indicated that the courts were out of control and the legislaure needed to do something about it:

“But the courts have moved so far away from what the Legislature intended back in the early 1960s that the law removing sovereign immunity is no longer recognizable, and at the same time the Legislature has failed to act at a policy level where the limits ought to be.”

Mr. McKenna got into office advocating tort reform for everyone, saying that judgments were getting too big.

That sounds to me like just expedient court bashing. He says lawsuits are preventing the state from taking corrective action? That sounds like baloney.

Well, what did he do when the Exxon Valdez case got to the Supreme Court and the Court was asked to review the biggest punitive damages award in American history, $5 billion? This award was being attacked on two grounds. First, Exxon said that it was excessive. The plaintiffs were awarded all their proven damages, plus $5 billion. Second the spill was a violation of the federal Clean Water Act which does not award punitive damages at all. This omission from the law was fought for by Republicans, who generally are beyond cautious with respect to environmental laws. The $5 billion punitive damages award was granted under court created doctrine that the trial judge held applied in spite of the Clean Water Act.

The arguments of Exxon are exactly the same positions that Mr. McKenna campaigned on and which he has been advocating recently.

Mr. McKenna participated in this case by helping prepare a brief on behalf of Washington and 33 other states which argued that the punitive damages award should not be reduced and that the court created doctrine that allows punitive damages ought to be respected in spite of contrary language in the Clean Water Act. This is exactly the opposite of what he is saying in public.

Lawyers are sometimes required to advance positions they do not believe in but this does not appear to be the case in this instance. Mr. McKenna is crowing about the result and how he helped preserve punitive damages under court created doctrine!

The statement he issued on June 25 says this:

“We are pleased the court upheld an award of punitive damages, since Exxon had argued that no punitive damages can be awarded in a maritime case under federal law, no matter how egregious the circumstances,” McKenna said. “We are disappointed, however, that the Court did not award the full punitive damages authorized by the Court of Appeals. The reduced award is brutally disappointing for the Washington and Alaska fishermen and their families who were counting on this money to help make them whole.”

Don’t get me wrong; I don’t disagree with this sentiment. It is just that because I agree with him, I cannot in good conscience claim to support tort reform, particularly the two points championed by Exxon and Mr. McKenna in public statements.

I have puzzled over this for some time trying to render Mr. McKenna’s divergent positions rational. The only thing I can come up with is that Mr. McKenna thinks that punitive damages are fine for injured people in other states but not for people in Washington, except for fishermen. That still does not make sense to me.


Ladenburg’s Statistics Counter Tort Reform Argument

June 20, 2008

I attended a seminar at which John Ladenburg, the Pierce County Executive and candidate for Washington Attorney General, spoke and gleaned some statistics that I thought I’d share. We often hear about the crippling burden of litigation and the extravagant liability that businesses and government are exposed to.

Most governmental entities insure against litigation expenses and awards but Pierce County decided to cancel its policy and self-insure. In the course of doing this Pierce county kept careful track of its litigation and related expenses. The results are surprising.

From 2001 through 2007 Pierce County was involved in a total of seven trials and binding arbitrations. One each year on average. The County won all the trials and lost two of the three arbtrations. That’s two adverse results in seven years.

To sue the government a person must first file a claim. These claims are investigated and the County reports its decision on the claim to the claimant. About half of the claims are paid because they are meritorious, although usually payment is for less than the amount asked.

The half which are not paid, after receiving the explanation from the County, usually drop their claims. Only about roughly three to six percent of the claims result in lawsuits in Pierce County. Once filed, the vast majority the lawsuits against Pierce County are dismissed or settled.

This procedure in which the people’s claims are treated respectfully and a fair settlement is sought from the beginning has resulted in cutting amounts paid in the settlement of claims almost in half over the seven year period. This approach has saved the County a great deal of money.

Mr. Ladenburg’s impression is that high jury awards and huge litigation expenses are not the result of frivolous claims by litigation-crazed citizens, but a result of the aggressively adversarial treatment of people with claims. By refusing reasonable claims and settlement offers, governmental (and other) entities add to the burden on the courts and increase their own risks.

If you have ever been in a lawsuit with a big corporation or governmental entity, chances are that you perceived a refusal to entertain a settlement offer you thought was reasonable and a strategy that drove up the cost of the litigation. The strategy of some “deep pocket defendants” and their insurance companies is to make the litigation prohibitively burdensome and expensive, so people cannot see it to conclusion.

Mr. Ladenburg’s statistics suggest that plaintiffs are generally reasonable and those who are not reasonable meet with an appropriate fate in court. Corporations (governmental and private) that are aggressively litigious must bear a significant share of the responsibility for the caseload imposed on our courts.


Rob McKenna Thinks We Are Idiots.

March 22, 2008

Washington State’s Attorney General Rob McKenna really should be in the Bush administration. He demonstrates a presidential grasp of what he is doing. His opinions are not rational, at least that is the conclusion you must reach if his arguments are in fact the basis of his opinions.

Generally speaking tort law has two purposes: to compensate victims and to enforce rules of conduct that are accepted as societal standards. Its purpose is in part to help mold society into behavior patterns that are predictable and reasonable. A debate about tort reform should address the realization of those goals, then perhaps weigh the cost to society against the benefit of particular laws. You would expect a reasoned argument to discuss alternatives to the law in question and their relative merit.

Unfortunately it is never done that way. Often proponents of tort reform merely attempt to excite the general prejudice against trial lawyers. This is politically expedient but does nothing to advance our interest in living in a rational society. The other common argument is to throw out a figure and say that is how much money has been awarded for something. The argument proceeds by saying this figure is way too high and concludes with: ergo we should abolish that law. This is exactly how insurance companies look at things but this approach seems to have traction with the general public. In truth this is not an argument at all and again is little more than an appeal to prejudice or sometimes sympathy for the perpetrators of tortious conduct.

Mr. McKenna believes that sovereign immunity should be re-instituted in Washington after having been abandoned in the 1960’s. His argument goes like this: The State of Washington has paid over $500 million in the last 25 years. If the State could not be sued, it would not have to pay anything and there would be no problem. End of argument. He spices this up a little by adding that the trial lawyers are always expanding the State’s liability. With that he has pretty much covered everything.

Why didn’t we think of this with drunken driving?  That costs a lot too.  This would be a good approach to cutting down crime.  Make homicides legal.  Washington has already pursued this approach with construction defects and disasters.  Why not expand the approach.  It’s working isn’t it?


Immunity to the Department of Corrections

February 14, 2008

I have talked about how the legislature grants immunity to special interests, so that they cannot be reached by consumers. When is was discovered that defective materials were commonly employed in the construction of condominiums, the legislature’s response was to pass a law saying that condominium owners had no recourse against anyone in the construction industry if the damage did not appear within four years of the time the condominium got its final permit, thereby eliminating numerous claims for massive repair bills. The major beneficiary of this was the insurance industry which would have had to pay, as the insurer of the builders and suppliers, but which does not have to pay as the insurer of the condominium owners because condominium policies have an exclusion that gets them out.

State Senator Mike Carrell has introduced a bill to grant virtual immunity to the Department of Correstions because of the Department’s liability for negligently releasing felons into the community. This is rather ironic given the publicity given to legislative efforts to provide financial assistance to victims of crimes. The bill is SB6401.


Tort Reform

January 19, 2008

The insurance industry and Chamber of Commerce have been resolute in the steady drum beat for tort reform. The “free-market think tank” Pacific Research Institute last March published a “report” assessing the annual cost of the American tort system at $865 billion per year. That’s a couple billion per day! (A number that wildly exceeds the sum of all tort judgments and is mostly attributable to “secondary effects.”) A month ago a Washington D.C. “nonprofit organization” the American Tort Reform Foundation, produced another “report” called Judicial Hellholes. This paper condemns judges and courts that have permitted high damage awards or are otherwise “unfriendly” to business interests. (Washington should be ashamed that it did not even register mention.)

These tort reform arguments are remarkably similar in that they do not make any serious effort to weigh competing interests or examine the nature of the the American people’s interest in inhibiting the action complained of in the lawsuits. It is presupposed that any harm done to business interests is a wrong to be avoided. This is propaganda not reasoning. This is one of those areas where the proponents take such an extreme position that discussion and dialogue cannot be pursued.

PRI’s “research” is a good example of how silly things have gotten. This report takes into account the amount of business lost as a result of lawsuits without considering what sort of business was lost, how the curbed business activities might have harmed society or how the absense of the business practices might have benefited people in general. The tobacco industry of course has lost a lot of money because of lawsuits but not everyone would call that wrong. This drop in profit by tobacco companies is offset by reduced health care costs and longer life spans, both of which are generally viewed favorably. Tort lawsuits have have resulted in a marked, measurable improvement in the environment, something that is favored in most circles. The tort of outrage has been used in Washington to abate racial slurs at work, a laudatory achievement in the eyes of many. Lawsuits substantially increased the safety of automobiles and reduced traffic deaths. Lawsuits are the means by which renegade corporations and corporate officers have been made responsible for criminal and fraudulent activity. They have been the means of recouping losses by stockholders and pension plan members.  There are countless other examples.

I hope some day these issues will be resolved by sane discussion of policy issues in which business interests will be seriously weighed against the interests of society.