Top 5 Myths about Tort Reform
The American healthcare and justice systems are in crisis, we are told. Balance, it appears, must be restored to these systems which at some point tipped in favor of trial lawyers and greedy plaintiffs. Tort reform is heralded as the solution, a cure-all for our ailing healthcare and justice systems. The tort reform movement seeks to rein in trial lawyers and plaintiffs in two significant ways: (i) by increasing the procedural prerequisites for filing lawsuits; and (ii) by limiting the damages that can be awarded in lawsuits. These changes, it is said, will reduce the total number of cases in the legal system and will lower the cost of healthcare by reducing the financial exposure of healthcare professionals and insurance companies. Even assuming such claims to be true, to fully evaluate the propriety of reforms the interests promoted by the tort reform movement cannot be viewed in a vacuum.
The American legal system has long recognized several other interests of public policy that are relevant to this discussion: justice, access to the legal system, redress for victims of wrongful conduct; accountability for those who engage in wrongful conduct, quality of healthcare, public safety, etc. Because many of these important public interests directly conflict with the policy interests endorsed by tort reform, these interests must be weighed against one another. Balancing these competing interests is not nearly as easy as politicians and industry lobbyists would like us to believe. Moreover, the entire tort reform debate is clouded by several myths and misconceptions. Below you can find the top 5 myths influencing the tort reform debate.
Myth No. 1
Lawsuits Only Benefit Greedy Plaintiffs
The public perception of civil cases is that they consist of one plaintiff (read greedy person) looking for a handout against one defendant (read big company with deep pockets). Certainly some civil cases fall within this paradigm. The dynamic in many cases, however, is quite different. If a defendant has wronged several similarly situated individuals in a similar matter, plaintiffs may band together in a class action suit. A notable example is a lawsuit against a major communications company for fraudulent billing consumers. While most of the offending company's customers did not even notice that their rights were being violated by the blatant billing "errors," once a class action suit is filed any customer who was been subjected to the fraudulent practice could benefit from a settlement or a verdict without having to file his or her own individual lawsuit against the company. Class action lawsuits not only serve to alert aggrieved parties of a defendant's wrongful conduct, but these lawsuits seek compensation against the defendant for the benefit of every member of the class.
Where a defendant has behaved in a particularly egregious manner, a judge may award a plaintiff punitive damages. The purpose of punitive damages is not to benefit a plaintiff; rather, punitive damages are imposed by a state to punish defendants for reprehensible conduct and to dissuade other potential defendants from similarly violating the rights of citizens. In this way the state protects the public interest. Moreover, in many states a sizable percentage of the punitive damages award is kept by the state, earmarked for particular government funds (like education) or for the benefit of the state's general fund. Consequently, punitive damages awards protect the public interest and also financially benefit the taxpayers of the state.
In addition to the above-outlined cases, an ordinary civil case (i.e. one plaintiff seeking only to be made whole against one defendant) may also have far reaching effects. While a judge in an ordinary civil lawsuit may only award monetary damages to the actual Plaintiff, the case may be the catalyst for improved safety practices in industry. In this way trial attorneys actually make the public safer.
The Ford Pinto case is a notable example. During the 1970s Ford knew that the placement of the gas tank in its Pinto created a substantial risk of explosion during rear end collisions. Faced with the decision of whether to sell an unreasonably dangerous vehicle or incur additional costs to implement design changes, Ford determined that it would be more cost effective to sell the Pinto as-is. After numerous legal battles, Ford implemented design changes to improve the safety of the Pinto.
Click on the video below to see rear end collision involving a Ford Pinto.
Ford Pinto Explosion
Attorneys v. Ford Pinto
Do you believe attorneys brought about safety improvements in the Pinto?
Myth No. 2
Healthcare Costs Are High Because Of Lawsuits
The public believe that high healthcare costs can be blamed on attorneys. In fact, malpractice costs account for less than two percent (2%) of healthcare costs. That number becomes even less relevant to a tort reform debate in light of the fact that the vast majority of malpractice payouts are not frivolous-- meaning that generally when malpractice insurance pays out to a plaintiff it is because a doctor has done something wrong (see Myth No. 4, infra). Moreover, studies have shown that there is no correlation between medical malpractice payouts (i.e. the amount of money malpractice insurance companies pay to plaintiffs) and the costs of medical malpractice insurance premiums. William M. Sage, M.D., Margaret Thompson, Cynthia Gorman, Melissa King. [ The Jury's Still Out: A Critical Look at Malpractice Reform], Center for American Progress, June 12, 2008.
Myth No. 3
The $2 Million Cup of Coffee
The Liebeck v. McDonald's case (McDonald's coffee case) is, in the eyes of the general public, the poster child for frivolous personal injury lawsuits. The public perception of the case is this: clumsy woman spills coffee on herself while driving, gets minor burns, hires a greedy attorney, the woman laughs her way to the bank with $2 Million in cash. The real story, however, is quite different.
Ms. Liebeck was elderly. She was not driving at the time of the spill, in fact she was a passenger in a car that was parked in the McDonald's parking lot. The woman suffered severe third degree burns all over her legs which required an 8 day hospital stay, extremely painful skin grafts, and two years of treatment.
McDonald's policy at the time was that coffee be brewed at 187 degrees and remain at 187 degrees until served to customers. This temperature is hot enough to inflict third degree burns within seconds of contact with human skin. McDonald's policy regarding coffee temperature may have been based upon the fact that it more cost-effective to brew and store coffee at extremely high temperatures. Essentially, it was a conscious decision on the part of McDonald's to serve coffee at a temperature that could inflict third degree burns.
Ms. Liebeck initially asked for only $20,000 (she had medical costs of $13,000 and lost wages of $5,000). McDonald's made a counter offer of only $800, insisting that it preferred to go to trial. Moreover, McDonald's refused to show up to three court-ordered mediation sessions, seemingly wishing to take its chances with the jury.
While the jury awarded in excess of $2 million in punitive damages, the judge ultimately reduced the amount to $600,000. On appeal, the parties settled for an undisclosed amount for less than $600,000.
The bottom line is that McDonald's seemingly could have ended the case for the extraordinarily reasonable amount of $20,000 (or likely even less). In the process McDonald's would have also avoided having to pay its own expensive attorney fees. This does not seem like a situation where a greedy plaintiff or a greedy personal injury attorney was seeking a payday. Rather, it appears to be a situation where an extraordinarily rich defendant chose to engage in legal gamesmanship in order to set a precedent for other would-be plaintiffs. As it turns out, McDonald's pursued an ill-advised litigation strategy, was burned by an incensed jury, and yet seems intent on blaming the victim for the poor outcome in its case.
Click on the video below for an in depth discussion of the coffee case.
McDonald's Coffee Case
Hot Coffee or Hot Air?
Has hearing all of the facts of the McDonald's Coffee Case changed your mind?
Myth No. 4
Plaintiffs Are Out Of Control
A Harvard study found that only 4% of patients sue a doctor after being harmed by a doctor's negligence. Patients, doctors and lawyers: Medical injury, malpractice litigation, and patient compensation in New York. Cambridge: Harvard University Press; 1990. The extreme majority of people are not out of control.
Not only are the vast majority of people not suing, but of those plaintiffs who do make a claim, the vast majority of the cases are NOT frivolous. A Harvard study wherein legal and medical experts reviewed 1452 malpractice claims concluded that the notion that frivolous malpractice claim are rempant is false. In fact, the study determined that in only 10% of claims did a patient recover a payout from a doctor who committed no negligence. NEJM 2006;354:2024-33. Of greater significance, the study found that negligent doctors were able to avoid making payouts in 16% of cases. NEJM 2006;354:2024-33.
Another myth is that poor people sue doctors looking for a big payout. In fact a study found that people on welfare who have been injured by a doctor's negligence are less likely to sue than others. JAMA 1993;270(14):1740-1741.
It appears that plaintiffs are not out of control. If anything, the data shows that doctors are stingy in owning up to their mistakes.
Myth No. 5
Juries Are Out Of Control
Well, if plaintiffs are not filing frivolous lawsuits, then the problem must be that juries are running amuck. A Harvard study shows that this is not the case either. The study concluded that juries in medical malpractice cases are not systematically biased against doctors. In fact, the study showed that on average doctors win sixty-six percent (66%) of malpractice cases. NEJM 2006;354:2024-33. In cases where a plaintiff has strong evidence of a doctor's negligence doctors still win fifty percent (50%) of the time. NEJM 2006;354:2024-33. Even when juries find for the plaintiff, the amount of damages awarded by juries over the years has increased at the same rate as the costs of healthcare. Health Aff January-June 2005; suppl Web exclusives:W5-240-W5-249. This means that juries are not giving "bigger" verdicts.
Academic Discussion of Tort Reform (Northwestern Law School Symposium)
- Personal Injury Attorneys
For information about resolving claims with insurance companies.
- Holding Doctors Accountable: The Case Against Tort Reform
Wouldn't it be wonderful if we could walk into work after causing a car accident and tell our employer that we will need a raise in order to pay for our increased auto insurance premium?