The Tortellini

Insurance Industry Now Thinks Texas Needs More Litigation

In 2003, Texas voters approved a constitutional amendment that allowed state legislators to cap pain and suffering awards in medical malpractice lawsuits at extremely low levels. The insurance industry lobbied heavily for the measure, helping to promote a false vision of Texas as a "judicial hellhole," where doctors were fleeing the state over an "epidemic" of frivolous lawsuits. Since then, malpractice lawsuits have plummeted.

Now, though, the insurance industry is wondering if its campaign worked too well—not because malpractice victims can't get justice (which they can't) but because tort reform is cutting into insurance company profits. Defense lawyer Gary Schumann told a group of insurance execs recently that tort reform had worked so well in Texas that judges were trying cases that might otherwise go to mediation just to stay busy. Not only that, but Texas nursing homes (among the worst in the nation) have become so unconcerned about getting sued that many have stopped buying private liability insurance.

Schumann said he was worried about the industry's future. "We want a little bit of litigation out there, don't we? We want a little bit of risk. We need risk or we're all out of business. … We'll see what happens but tort reform has worked. I just hope for all of our sakes it hasn't worked too well."

Why don't the doctors get mad?

Another state reporting that surprise, tort reform didn't have any impact on doctor's medical malpractice insurance premiums. After passing a $350,000 cap on noneconomic damages and other restrictions on med mal lawsuits, Georgia is now about to undertake more legislation--this time, at least, targeted at the actual problem, the insurance companies--to bring some relief to the docs, after discovering that six of the the state's top med mal insurers had jacked up premiums even further after the law passed in 2003, some by as much as a third.

Every time I read one of these stories, I wonder why the doctors lobby doesn't march on the state capitals about insurance reform, rather than targeting injured patients who occasionally sue. Probably I can answer my own question. Aside from the fact that a lot of the med mal insurers are owned by doctors, I suspect that even if the doctors didn't have to pay for any med mal insurance at all, they'd still hate lawyers and the injured patients they represent. Tort reform for them isn't just about money. Still, the doctors do look kinda dumb for lobbying for all this tort reform and then having only the insurance companies benefit from it--just as they have at least two or three times in the past. Why don't they ever learn?

Anderson Cooper on the Insurance Industry

I don't have cable, so missed this interesting segment Wednesday from the CNN show Anderson Cooper 360. It details the ways State Farm and Allstate, on advice from the consulting firm McKinsey & Company (the same outfit that produced the study for New York Mayor Michael Bloomberg calling for more restrictions on shareholder's suits) are using scorched-earth litigation tactics against people who were injured in relatively minor auto accidents to avoid paying relatively small claims. The transcript isn't online but you can read a shorter version on Anderson's blog here...

Why Insurance Companies Love Tort Reform, part 437.

The insurance industry has spent the better part of the last 50 years scaring Americans into believing that lawsuits are driving doctors out of business, shutting down Little League, and generally making life miserable for any decent business. One of the many results of this campaign is that Americans now buy lots of insurance to protect themselves against all these looming lawsuits--probably in most cases, far more insurance than they really need, thanks to caps on damages won by those very same insurance companies.

Consider this case: Not long ago, a county government in Nebraska spent $300,000 on a $5 million liability insurance policy. In Nebraska, it's impossible to win more than $1 million in a lawsuit thanks to a hard cap on damages, but apparently the insurance company didn't see fit to remind county officials of this.

The policy recently came to light after a speeding deputy sheriff slammed into a man taking his fiancee out to breakfast. The accident killed the woman and left Manuel Salazar a paraplegic. Salazar's medical bills alone before the lawsuit went to trial were $1.2 million. Even though the county had a $5 million insurance policy, the Nebraska Supreme Court in July 2005* said that none of it above $1 million could be used to pay Salazar's claim. Salazar is now reliant on public benefits, and the taxpayers of Nebraska are safe in the knowledge that their county has contributed its share to the insurance industry's windfall profits over the past few years by buying a policy that the county can't even use to compensate someone who was wrongly injured by one of its employees...

*I originally misstated the date of this decision and have corrected it. Read more here...

From tort reform to jury nullification?

Someone once told me that one of the most visible results of the tort reform movement on American culture was that it had given people permission to be mean. A perfect example of this seems to have come from an insurance company lawyer in Las Vegas recently. Earlier this month, the Nevada Supreme Court voted to discipline a defense lawyer who regularly represented Allstate for disparaging plaintiffs and the legal system during closing arguments, arguing that the lawyer was aiming for jury nullification.

Lawyer Philip Emerson used almost identical closing arguments in four different cases. Here are some excerpts:

"People must take responsibility for their lives and not blame others for challenges and setbacks. People must stop wasting taxpayers' money and jurors' valuable time on cases like this."

And this:

This is a case where the plaintiffs are trying get something for nothing ... it's cases like this that make people skeptical and distrustful of lawyers and their clients who bring these types of lawsuits. It's a big factor as to why our profession is not as honorable in the eyes of the public as it once was. But the only way that people and their chiropractors will stop bringing these cases is if juries start saying no, enough is enough. Our legal process is meant to justly compensate and make one whole, not to make them rich.

In another case, Emerson asked jurors to imagine their own child getting injured, then said, "[i]s that an opportunity, does that mean you just go out and sue-negligence? It's an accident." The Nevada court ordered Emerson to pay all the attorney's costs in four cases in which he engaged in "attorney misconduct" and ordered new trials in two of the cases.

I'm not so surprised by the sorts of things Emerson was saying in court (though it is pretty funny to see how often he recycled his identical closing arguments. How much do you supposed he billed Allstate for that?). What I find sad about it is that he clearly thought that his arguments would resonate well with the jury. But I guess he knows juries a lot better than I do, as he won three out of the four cases at issue. 

 

How insurance companies create tort reformers

While I was researching my book, I tracked down a story that had been circulating during debates over products liability legislation in Congress in the mid-90s, involving a guy who sued an American flag company in Texas for injuries he'd suffered trying to bring the flag down in a wind storm. Tort reform groups like the NFIB had held up the story as an example of a frivolous lawsuit, because one of the flag companies that was sued didn't make the flag or the pole it'd been flying on.

I tracked down both the lawyer for the plaintiff and the owner of the flag company, to hear their sides of the story. The political debate had obscured very substantial and valid arguments both men had about the lawsuit, which showed not so much that the system wasn't working, but rather, how insurance companies exacerbate some of its deficiencies.

Pete Van de Putte, the owner of Dixie Flag, in San Antonio, turned out to be a nice guy married to a democrat in the Texas legislature, and was not the hard-core tort reformer he'd been made out to be during the congressional debates. But he was pissed about the lawsuit, for good reason. His insurance company had settled the case for $5,000, without consulting him, even though his company had nothing to do with the flag accident. But the insurance company thought it was simply cheaper to pay than to fight.

I suspect this kind of decisionmaking by insurance companies happens all the time, and I don't blame people for being angry about it. Cheap settlements leave them feeling like they've been wrongly accused of a crime and never given a chance to clear their names. For most people, this is an infuriating insult and a moral outrage that goes beyond money. Van de Putte had been willing to spend his own cash to defend his case because he knew he was right, but the insurance company never gave him the opportunity.

As for the plaintiff, Hank Childers, he was indeed severely injured when he stopped in a parking lot one day and tried to help some guys at a quick-lube shop who were struggling to bring down a gigantic American flag in a heavy wind storm (the same August winds that had blown over the Pope's grandstand that year). The flag pulled Childers 70 feet in the air and then splatted him on the pavement, where his face was crushed and both arms broken. He was hospitalized for a long time and lost some vision and use of his hands and arms--ending his guitar playing forever. His face was put back together with rods and plates. He had no health insurance.

By the time he was able to contact a lawyer, the statute of limitations on the case was about to run out. His lawyer, Henry Ridgeway, says he did his best to research the case on very short notice to identify the proper parties, but that he did have to "sue everybody" to avoid missing someone important and thus losing the case later. He said he knew he would be able to remove the errant filings, if any, after the statute of limitations had expired, but he wouldn't be able to add anyone. Dixie Flag just happened to be one of the misfires, the result of imperfect information available at the time the case was filed.

If Pete Van de Putte's insurance company had simply let him fight the suit, he would likely have been dropped from the case pretty quickly and moved on. Instead, he became the poster child for products liability law reform. Ironically, Van de Putte now thinks that at least in Texas, tort reform has gone too far, in part because his house developed a toxic mold problem, and his experience hasn't made him any fonder of insurance companies...

What Big Business gets for its campaign money.

Much of the media coverage of the nasty state judicial elections in recent years has focused on the millions of dollars in campaign contributions that have come from parties appearing before the courts. But reporters and watchdog groups, I think, are often asking the wrong questions about what the donors get for their money. While it's certainly unseemly when, as the New York Times' Adam Liptak reported (sub req), judges vote with their contributors in big cases, state supreme courts are also legal policy making bodies. Their decisions affect cases that never get heard in their chambers, as well as the fate of legislation, most notably, bills enacting tort reform. The fate of such laws can affect not just one defendant but entire industries.

So it's no surprise that the states with the most expensive judicial elections in recent years are those where the courts previously have struck down, or would likely strike down, tort reform laws, for violating constitutional protections guaranteeing equal treatment, access to the courts, and the right to a civil jury trial. (These include Illinois, Mississippi, West Virginia, Georgia and Ohio.)

Now that the U.S. Chamber of Commerce has succeeded in most of its attempts to stack state supreme courts with pro-tort reform judges, we're seeing the cynical results. Take the case of Ohio.

In 1996, the Ohio state legislature passed a law capping noneconomic damages in most tort cases at $500,000 per plaintiff. Three years later, the Ohio supreme court struck down the law as unconstitutional. The decision prompted national business groups to pour money into Ohio's judicial elections, using vicious attack ads to swing the court from more moderate to extremely conservative.

In 2004, knowing full well that it would be unconstitutional, the legislature nonetheless passed a bill that was virtually identical to the 1996 law, except it was more restrictive than the old one, with a $350,000 cap on noneconomic damages in most tort cases. But legislators seemed pretty confident that the new business-friendly Supreme Court would let it fly, even though doing so would overturn years of established precedent in the state. (The state supreme court had also struck down a cap on med-mal damages in 1991.)

Trial lawyers have challenged the new law in a lawsuit over injuries from Johnson & Johnson's Ortho Evra birth control patch. The plaintiff, Melisa Arbino, landed in the hospital in 2005 suffering with life-threatening blood clots in her brain and lungs. One of the clots remains lodged in her brain, with potentially life-threatening complications, just the kind of thing that noneconomic damages are supposed to compensate for. Arbino alleges that the patch, which had much higher levels of estrogen than regular birth control pills, caused her injuries. A federal court recently kicked the case back to the state, where the new pro-tort reform judges will get a shot at it.

This is a huge case, and practically every major industry group has filed briefs in the case. Poor Arbino is up against all of corporate America: big Pharma, the National Association of Manufacturers, the U.S. Chamber of Commerce, the American Chemistry Council, the American Tort Reform Association, the National Association of Independent Business, numerous insurance industry and hospital and medical groups, and a handful of other well-funded tort reform groups have all weighed in.

Coming to Arbino's aid, besides the Ohio Academy of Trial Lawyers, is the Ohio chapter of the National Organization of Women, the NAACP, and that big-money group, Mothers Against Drunk Driving.

What are the odds that the new court will stick by the old precedent and find the tort reform law unconstitutional? Not much, I'm afraid. According to Liptak, Ohio plaintiff's lawyers won only 17 percent of their cases after the conservative takeover, compared with 64 percent before 2003. If the new damage cap is allowed to stand, most of those cases probably won't even make it to the court to lose there. The chamber's money will certainly look like a wise investment indeed.

Domestic Violence insurance?

Should auto insurance cover domestic violence injuries? University of Maine law prof Jennifer Wriggins thinks it should. In an article in American University's Journal of Gender, Social Policy and the Law, Wriggins offers up a novel tort reform proposal. She suggests that tort law should be used to address domestic violence by expanding women's ability to sue their abusers. One reason tort law isn't used more extensively in this area already, according to Wiggins, is that most of the defendants don't have any money. To remedy the problem, Wiggins proposes that the country add mandatory liability insurance through automobile coverage to insure against domestic violence. Doing so would get the insurance industry involved in trying to reduce domestic violence, while possibly providing a level of deterrence against it as well.

Wishful thinking, of course, but provocative idea. The rest of the article, with a brief history of the use of tort law in early race and gender equality battles, is also worth reading. .. (Hat tip to Feminist Law Professors blog.)

Following the blue-ribbon money

New York Times columnist Floyd Norris has a great post on his blog about the money behind the blue-ribbon Committee on Capital Markets Regulation that's pushing to relax corporate governance regulations. Turns out that the panel's biggest funder is none other than Hank Greenberg, the former and longtime CEO of the world's largest liability insurer, AIG. 

Greenberg, as you may know, has also been one of the nation's richest and meanest tort reformers, dumping tons of money into groups working for lawsuit restrictions, including the U.S. Chamber of Commerce and the Manhattan Institute. In 2003, before he had to resign in the face of business fraud allegations, Greenberg said publicly that his company and other investors should stop buying municipal bonds in states that refuse to pass tort reform--an enormously powerful threat given the size of AIG and its affiliates (some run by Greenberg's sons).

A year later, he caught fire for referring to plaintiffs lawyers as terrorists. Given his funding for the "blue-ribbon" panel, its calls for more limits on shareholder lawsuits and corporate investigations by state attorney generals should surprise exactly no one.