Tort Reform, Bush and the Insurance Industry

Now that Bush has been re-elected, the insurance industry and investors in insurance companies are salivating. Why? It increases pressure to adopt tort reform.

What does tort reform really mean?

There currently are three major proposals being considered by Congress:

1. Class Action Reform. The main thrust of this is to force class action lawsuits above a certain dollar threshold ($5 Million) and class actions involving people from multiple states into Federal Court instead of state courts. The goal is to prevent plaintiff attorneys from filing class actions in state courts that are presumably more plaintiff friendly. My guess: There is a good chance that this will happen.

2. Medical Malpractice Damage Caps. This is something that 27 states have already enacted. Essentially, it limits the amount a medical malpractice victim can be awarded for pain and suffering. One problem with this is that it actually prevents many people from pursuing their legal rights. On the other side, it will not significantly reduce malpractice insurance premiums - and more important, it will have almost no effect on rising health care costs. A classic example of a malpractice victim who this hurts was described in the press a few months ago: An elderly woman in a nursing home in Texas was raped by an individual who had a history of similar incidents. Even though the rape was witnessed by another worker and should have been an open and shut case, the victim's daughter was rejected by ten law firms before finally finding one who would help her. Why such a hard time finding a lawyer. Well, the Texas malpractice caps apply to nursing homes because of a broad definition under the law. Because the victim had no economic damages - no potential to earn an income, the maximum award was $250,000. Since a plaintiff attorney typically has to spend $100,000 or more (covering experts, costs, etc.) just to get to trial, there are few lawyers who are willing to take that big a risk for a relatively small payout. Even if successful, the victim's potential take, after expenses and attorneys' fees was probably no more than $50,000. This is far from the windfall that the advocates of tort reform claim to be trying to prevent. Certainly, this was no frivolous lawsuit.

3. Asbestos Lawsuits. Why is this important - asbestos lawsuits are hurting many big companies. Well, I would argue that asbestos is hurting many hard working Americans who trusted those same companies that asbestos wouldn't hurt them. By the way, the companies knew decades ago that asbestos would cause severe lung damage, yet they continued to use it. Many of these hard working Americans are now in hospitals with a horrific disease called Mesothelioma. Should we prevent these honest people from being compensated for the wrongs done to them by big business?

Who is watching out for the people?