The NewStandard ceased publishing on April 27, 2007.

Opponents Say Anti-Lawsuit Movement Favors Industry, Distorts Facts

by Michelle Chen

Contrary to the widely accepted notion that rising insurance premiums are a result of a civil court system run amok to the detriment of corporations and “legitimate victims,” studies suggest the finger of blame is misdirected.

June 6, 2005 – When Mark and Michelle Geyer found out that their 7-year-old daughter Jessie had died from a preventable infection, a sense of disbelief bled into their grief. Just a few days earlier, Jessie had been sent home to recover from "the flu" after two doctors had failed to properly diagnose and treat her, as Jessie’s mother recalled before members of Congress earlier this year.

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Believing their daughter would have lived if the hospital had performed the appropriate tests, Jessie’s parents were determined to seek recourse.

But a California state law imposing limits on medical malpractice suits, combined with harsh market realities, erected a barrier between the family and the courts.

"I couldn't get an attorney," said Michelle Geyer, recounting a string of rejections by lawyers who cited financial concerns about the case before she successfully "begged" a lawyer to represent them in court. Due to a statewide cap on damages for pain and suffering in malpractice cases, she said: "They turned me down because she is only worth $250,000. They told me it was a bad business decision for them to take it."

The experience of the Geyers, according to rights advocates, is just one case of a rash of legal misfortunes accumulating in the wake of California’s 30-year-old malpractice lawsuit reform law.

Other states have enacted similarly controversial restrictions on civil, or "tort," lawsuits, looking to limit the liability of corporations, hospitals and other entities. Such changes are ostensibly pursued in order to control rising insurance prices and combat what critics of the current system consider "frivolous" claims.

Economic analysts and progressive groups counter that the industry is fueling anti-lawsuit hysteria in an attempt to wipe out anything interfering with its profits, including the judiciary.

The US Congress may soon follow suit, facing pressure to overhaul the tort system from the Bush administration and pro-business lobby groups.

The "tort reform" proposals introduced in this session of Congress range from medical liability award caps like California’s, to unprecedented restrictions on class action lawsuits.

Public interest organizations and lawyers’ associations are rallying in defense of the public’s longstanding right to hold corporations and institutions accountable for wrongdoing, while conservative factions push for a restructuring of the civil litigation process on the grounds that the current judicial system is rife with abuse.

Class Action Law Drives Wedge Between Corporations, Accusers

So far, the Bush administration has scored one major victory with the passage of the Class Action Fairness Act, signed into law in February.

Aligning with the tort reform movement, the backers of the Act say it prevents profit-minded lawyers and undeserving claimants from "gaming a broken system," as Senator David Vitter (R-Louisiana) put it in a Senate floor speech last winter.

The new law provides defendants greater flexibility to move cases out of state courts and into federal jurisdiction, which has historically been more favorable to big business in civil suits.

Data from several states reveals malpractice insurance premiums have continued to rise sharply even after the enactment of tort reforms, undermining the theory that capping damage awards could directly control insurance costs.

In addition, public interest groups fear the Act will prevent people in different states from uniting to bring large suits – such as product liability claims – against corporations.

Jillian Aldebron, counsel with the Congress Watch project of the watchdog group Public Citizen, predicted that that the law will weaken the civil court system as a mode of defense for communities against corporations that sell unsafe products or harm the environment and public health. "Air, water -- it doesn’t necessarily follow state boundaries," she said.

"Clearly, this effort to restrict liability is very broad," said Joanne Doroshow, a public interest lawyer and executive director of the Center for Justice and Democracy, a civil law advocacy group. "And the kind of laws that you’re going to start seeing in Congress and [that] we’ve already been seeing at the state level, would limit liability for anybody who’s sued, whether it’s a toxic polluter or an HMO or a… manufacturer of defective cribs."

Activists Call Industry the Real Culprit

The civil court system has historically served as the public’s primary line of direct defense against bad medical practices and public health and safety threats. But since the 1980s, the perception of a litigation "crisis," marked by rising insurance costs, has catalyzed a movement for a shakedown of the litigation system.

In well-funded public relations campaigns, the insurance industry has heaped the blame for rising premiums on civil lawsuits, warning Americans that "tort excess" is wreaking havoc on the economy. A report issued in April by the Insurance Information Institute, an industry association, and the US Chamber of Commerce stated that the "litigation crisis" was translating into "higher prices, lower wages and fewer jobs" for taxpayers and workers.

As the insurance industry cries out for enhanced liability protections, it continues to rake in record profits and resist regulation.

But economic analysts and progressive groups counter that the industry is fueling anti-lawsuit hysteria in an attempt to wipe out anything interfering with its profits, including the judiciary.

"There is a huge amount of public relations efforts going on to turn the American public’s mind against the legal system and the people who use it," said Doroshow.

Meanwhile, professional organizations like the American Medical Association (AMA) contend that fear of malpractice suits is driving doctors to limit their services or to administer unnecessary, and often costly, medical procedures -- a practice known as "defensive medicine" -- in order to ward off potential lawsuits.

The AMA reported last December that in twenty so-called "crisis" states, doctors were shutting down their practices or moving out of state at alarming rates because of the threat of lawsuits or the states’ unaffordable insurance premiums. From 2001 to 2002, according to government data cited by the organization, premiums rose at a greater rate in states without malpractice damage caps than in those with caps.

But advocates point to data from several states revealing that malpractice insurance premiums have continued to rise sharply even after the enactment of tort reforms, undermining the theory that capping damage awards could directly control insurance costs.

In Nevada, for instance, according to the consumer advocacy coalition Americans for Insurance Reform, shortly after the passage of laws limiting malpractice claims in 2002, insurers filed for rate hikes ranging from 17 to 93 percent. Similarly, the passage of California’s flagship malpractice liability reform bill in 1975 was followed by continued spikes in doctors’ premiums over the next 13 years, which tapered only after the government imposed stricter regulations on insurance companies.

A 2003 analysis by the Congressional Budget Office, a government agency that estimates the costs of proposed and enacted legislation, found scant evidence of tort litigation leading directly to a crisis in access to services or to a rise in health care costs. Moreover, the Center for Justice and Democracy reported that since the early 1980s, both malpractice insurance premiums and lawsuit payouts have consistently amounted to less than one percent of the country’s total healthcare costs.

In May, the Kaiser Family Foundation, a mainstream health policy research organization, issued a report that tempers public perceptions of a litigation system running rampant. Using data collected from the federally administered National Practitioner Data Bank, researchers found that from 1991 to 2003, while the total dollar amount paid for malpractice suits grew from $2.1 billion to $4.5 billion nationwide, adjustment for inflation translates this into an annual rise of only 1.7 percent.

The Foundation noted that the increase in payouts mainly mirrors growth in the average amount paid per claim; the frequency of lawsuits resulting in payment grew "modestly" by an estimated 12 percent between 1991 and 2003. In the same period, the number of paid malpractice claims per 1,000 non-federal physicians actually dipped by 6 percent.

For tort cases in general, government data indicate that both the number of lawsuits and payout costs have stabilized and even declined in recent years. According to a US Department of Justice survey of state civil courts in the 75 largest counties, the number of tort cases filed between 1992 and 2001 declined by 32 percent.

Critics of tort reform acknowledge that rising insurance costs burden the healthcare system, but they say the blame lies not with the courts but with the multi-billion-dollar insurance industry.

Advocates contend that as the industry cries out for enhanced liability protections for its clients, it continues to rake in record profits and resist both state and federal government regulation. Public interest groups like Americans for Insurance Reform are calling on the government to curb insurance industry practices like price-fixing and unreasonable rate hikes.

Challenging the insurance lobby’s stance, critics question any attempt to calculate the real economic costs of the tort system. The progressive think tank Economic Policy Institute (EPI) recently reported that the oft-cited actuarial firm Tillinghast Towers-Perrin inflated its tort cost calculations by counting payouts by insurers as "expenses" born by the economy as a whole. In fact, EPI pointed out, these payments simply reflect an internal shift of funds "from wrongdoers to victims."

Critics argue further that tort law’s value as a social institution does not lend itself to conventional accounting methods. In a recent policy report, Americans for Insurance Reform stressed that industry statistics do not take into account the social benefits of the tort system, including greater adherence by corporations to regulatory protections, the prevention of injuries and deaths due to "safer products and practices," as well as "wages not lost, health care expenses not incurred, and so on."

Following the Money to the Courthouse Door

The tort reform movement has ridden into state and federal legislative chambers with a strong financial and political push from industry and conservative think tanks. At the fore in the debate on Capitol Hill is the American Tort Reform Association (ATRA), which bills itself as a "broad based, bipartisan coalition of more than 300 businesses, corporations, municipalities, associations and professional firms."

ATRA says its main focus is ridding the civil legal system of frivolous lawsuits by advocating greater restrictions on claims at both the state and federal levels. These include rules to discourage "junk" claims and to prevent "forum shopping" by plaintiffs -- the selection of a certain trial jurisdiction because the judge or jury might be more sympathetic.

ATRA spokesperson Gretchen Schaefer told The NewStandard that in ATRA’s view, the real victims of the tort system include not only "mom and pop" businesses, targeted by mercenary plaintiffs; but also the truly injured, who are in danger of being crowded out of courts by frivolous claimants. Schaefer also claimed that ATRA has "seen no evidence" that tort reform could potentially limit victims’ rights, and that the group aims to protect businesses from victimization by unfair lawsuits.

Highlighting the plight of the corporations ATRA represents, she remarked, "These people are getting sued because they have deep pockets," regardless of whether they have actually committed any harm. "That’s not justice," she said. "That’s greed."

"Greed" is also the operative word for ATRA’s opponents, who point out that the tort reform organizations have in recent years received millions in contributions from the tobacco, insurance, pharmaceutical and energy industries. ATRA’s website lists among its key supporters the Pharmaceutical Research and Manufacturers of America, State Farm Insurance and Kraft Foods.

The passage of the Class Action Fairness Act was a strategic benchmark for the tort reform lobby in its push for federal liability protections. Backed by the National Association of Manufacturers and the National Restaurant Association, ATRA is now promoting the Lawsuit Abuse Reduction Act of 2005, which would restrict a plaintiff’s right to choose the forum of the trial and mandate stiffer penalties for plaintiffs who make claims later found to be "frivolous." The bill recently passed the House Judiciary Committee.

Although it is unclear whether any of the pending reform bills will muster enough votes to pass Congress, according to activists tracking the tort reform movement, what they view as an effort to limit access to the legal system is gaining momentum among legislators and the public, while the opposition lags behind.

The Commonweal Institute, a liberal policy think tank, has cautioned opponents of tort reform that their movement is hindered by the lobbyists leading it, who are mostly involved with trial lawyers’ organizations and not grassroots groups.

In order to garner support on the community level, said Commonweal President Leonard Salle, "independent groups" must persuade "the broader public" that preserving the tort system is in society’s best interest. Without effective outreach to counterbalance tort reform campaigns, he said, "the messages that are being put out… they’re good messages, and they’re saying some of the right stuff. But they’re not being heard."

Malpractice Reform May Be a Costly Trade-off

Medical malpractice liability has become ground zero in the tort reform debate, embodying the emotional and political tensions on either side of the issue. Proposals to limit compensation for malpractice victims have ignited friction between those who say reform would strengthen the health care system, and opponents who argue that it would rob patients of their right to seek redress against providers who have harmed them.

The key liability reform under consideration in Congress is a blanket cap on awards for "non-economic damages," which include the pain and suffering of victims and other long-term costs beyond those directly associated with the injury.

Other legislative proposals would grant liability protections to drug companies, impose strict limitations on punitive damage awards levied against violating corporations, and limit the proportion of awards that can go towards attorneys’ fees. In some cases, these laws would preempt state medical liability laws.

Opponents say the measure would restrict a vital aspect of fair compensation: restitution for long-term pain and suffering. Critics argue that children, along with the elderly and low-income people, are financially dependent on awards for lost quality of life because compensation based on the direct costs of lost wages would be small or nonexistent.

The Center for Justice and Democracy contends that a cap would disproportionately impact women, who generally have lower incomes than men or are more likely to be stay-at-home parents, and minorities, who are more likely to receive substandard healthcare.

The case of Jessie Geyer, whose family was turned down repeatedly in their search for a lawyer, may illustrate how malpractice lawsuit restrictions could undermine victims’ rights long before a verdict is issued. The Geyers believe California’s cap on non-economic damages, by guaranteeing a less lucrative case for lawyers, made it a struggle just to reach the courthouse door.

Carmen Balber, a consumer advocate with the California-based public interest group Foundation for Taxpayer and Consumer Rights, explained to TNS that any cap on awards in malpractice cases -- the majority of which are lost by plaintiffs and may cost tens of thousands of dollars just to litigate -- would essentially limit "the amount of money that attorneys can theoretically make." Victims and their families would subsequently be more vulnerable to a legal system in which access to representation hinges on the potential for a profitable verdict.

To illustrate, Balber described a scenario of an avoidable mishap leading to a lost finger: "If you’re low-income, your case is simply not worth as much… as the case of a technology [executive] who lost a finger."

The medical and insurance industries have jointly pressed liability reforms to thwart what they define as wild insurance rate hikes. Yet some tort reform critics suspect that with this lobbying partnership, the medical community is either overlooking or strategically ignoring, the possibility that fluctuations in premiums stem more from manipulative insurance industry practices than from excessive claims.

Doroshow believes the insurance issue is actually a smokescreen for a deeper agenda. "When you look at the motives of doctors and hospitals and HMOs that get their liability capped," she said, "it has much less to do with insurance rates than it has to do with the fact that they simply don’t want to be sued. They don’t want anyone looking over their shoulder… even if people die as a result."

But other advocates say that doctors, like the public, have been roped into the tort reform movement by the deceptive claims of big business.

"The medical industry basically has been conned by the insurance industry," said Carlton Carl, a spokesperson for the American Trial Lawyers Association, one of the leading professional organizations lobbying against tort reform. Instead of targeting malpractice victims, he argued, physicians should hold insurers responsible for the high premiums stoking fear among doctors across the country.

Some advocates in the medical community are pushing for liability reform that goes further than shielding doctors from lawsuits, such as insurance discounts to reward high quality-of-care standards, or conditioning liability reductions on stronger safety mandates for physicians.

One alternative reform initiative that has attracted both public interest groups and doctors is a program known as "Sorry Works!" which encourages doctors to admit mistakes to patients, apologize and openly negotiate a settlement. A pilot project in the University of Michigan Health System has seen a drop in malpractice suits as well as litigation costs under this model, suggesting that honesty could be a surprisingly effective antidote to litigiousness.

But to the disappointment of victims’ advocates , the momentum among federal and state lawmakers for dealing with liability issues has generally not ventured beyond the courtroom, but rather centered on legislating a tighter sieve for lawsuits.

Although opponents of tort reform acknowledge the uncertainties and inefficiencies of the civil litigation system, they argue that the proposed "remedies" could not curtail "tort excess" without also restricting the power of the courts as an inviolable, if imperfect, instrument of justice.

Adam Scales, a professor of law at Washington and Lee University, sees no sound alternative to existing legal process. "The tort system stinks," he said. "It’s slow. It’s uneven. It’s often random. But ‘tort reform’ does not involve an effort to actually think about how to redesign the system. It simply involves playing around with the numbers."

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The NewStandard ceased publishing on April 27, 2007.


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Michelle Chen is a staff journalist.

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