John Hall of Hall Booth Smith (left) and Scott Bailey. (Courtesy photos)
With the COVID-19 outbreak shuttering courts nationwide, defense lawyers and insurers are likely to enjoy a respite from the much-ballyhooed spate of multimillion dollar “nuclear verdicts” that have sent waves of lobbyists to state legislatures hoping to stem the tide.
Insurers have noted a general trend over the years of “social inflation” driving up jury awards. In a transcript of a January earnings call, Travelers Insurance CEO Alan Schnitzer cited “headwinds from a challenging tort environment” as one factor that had impacted company profits.
“I’ll note that we continue to believe that social inflation is an environmental issue, driven primarily by a more aggressive plaintiffs’ bar,” said Schnitzer, who has been forthcoming about his concerns that litigation is growing across multiple lines of coverage.
“I don’t know if the environment has gotten worse, but clearly the losses have come in worse than our expectations,” Schnitzer said, noting that the company had seen a “higher and more aggressive level of attorney involvement in claims.”
His counterpart at The Hartford, CEO Christopher Swift, was more sanguine in the company’s February call.
“Social inflation related to larger claim settlement continues to put pressure” on losses, he said.
“However, social inflation is not a new phenomena, we have been monitoring these trends for years taking the appropriate actions to ensure our pricing models in underwriting reflect these realities,” Swift said, according to the transcript.
Warning that consumers ultimately pay the price for these massive verdicts and swollen settlements, defense lawyers and business interests have long pressured lawmakers to provide more protection from litigation losses. Those efforts have been fiercely opposed by consumer advocacy organizations and a plaintiffs bar.
Today, however, attorneys on both sides of the civil bar said the tort reform rallying cry may have lost its political allure for the time being as the COVID-19 outbreak upends the country.
Hall Booth Smith partner John Hall said his firm has shifted gears to accommodate the new COVID-19 reality, working to settle cases wherever possible.
Prior to the outbreak, Hall said he’d seen few policy shifts, despite the outcry over large verdicts.
“There’s been some discussion in multiple jurisdictions, but there doesn’t seem to be a wave of nationwide tort reform,” Hall said.
Scott Bailey of defense firm Huff, Powell & Bailey said there will likely be a sea change in the way lawsuits proceed once the pandemic subsides.
“I think the legal landscape may be fundamentally changed when we come out of this,” said Bailey. “Who knows what social and psychological impact this outbreak could have?”
There have been breathtaking numbers penciled in on jury forms in several states as of late, with multiple juries nationwide delivering verdicts worth tens of millions of dollars. That includes a $265 million award and another for $2 billion against Monsanto within the past year over its Roundup herbicide.
The verdicts have stoked the flames of the perennial battles between the plaintiffs bar and tort reformers, led by the U.S. Chamber of Commerce’s Institute for Legal Reform and the American Tort Reform Foundation, whose annual “Legal Hellholes” report on jurisdictions deemed hostile for defendants in personal injury, medical malpractice, product liability and other tort cases offer fodder to bolster state-level defense operatives’ efforts.
On the other side is the American Association for Justice, backed by a phalanx of state trial lawyer associations and lobbyists.
A Judicial Erosion
A key battleground for tort reform has been over attempts to cap damages.
In Georgia, the defense bar is still stinging over a 2010 decision by the state Supreme Court striking down a $350,000 cap on noneconomic damages in medical malpractice cases. The Florida Supreme Court followed suit in 2017, finding its cap unconstitutional in medical malpractice cases, and Illinois’ damage caps also have been struck down.
“We have seen a judicial erosion of caps,” said Hall. “They’ve eroded on medical cases, eroded on noneconomic damages.”
Hall noted there’s still a $350,000 cap on noneconomic damages in Florida for cases in which a health care provider offers to enter into binding arbitration, but the plaintiff refuses and wins at trial.
“There are constant attacks on that (statute),” he said.
In California—consistently derided as a plaintiff’s paradise and among the most acrid hellholes by the ATRF—Micha Star Liberty of Oakland’s Liberty Law said that reputation is only partly deserved.
“California is a leader legislatively in respect to consumers and workers and the environment; that doesn’t mean it’s a walk in the park for any litigants proactively asserting their rights,” said Liberty, who also is president of the advocacy organization Consumer Attorneys of California.
Liberty said a perennial target of the defense bar is the state’s Private Attorney General Act, a 2004 law which allows employees to file lawsuits against employers for violations of the state’s labor laws.
The law only allows such suits if the state’s Labor and Workforce Development Agency declines to follow up on the complaint; if successful in court, any civil penalties are divided with 75% going to the state and 25% to the employee.
“As their lawyers, we have a lot of burden of proof issues, and there’s a lot of hoops we have to jump through,” Liberty said.
The plaintiffs bar also been fighting for years to lift the $250,000 cap on pain and suffering damages imposed by The Medical Injury Compensation Reform Act of 1975, which was the first such cap in the nation and is often hailed as getting the tort reform ball rolling nationally.
“Think about what the price of milk was in 1974; it would be about $1.2 million in today’s dollars,” said Liberty. “You impanel a jury, they hear of horrific damages and award what they think is fair, then after the verdict the judge reduces it. It’s soul-crushing to have to explain that to clients.”
There have been some eye-popping verdicts in California, Liberty noted, including last year’s $2 billion verdict against Monsanto that was reduced by a judge to $86.7 million and verdict for $80 million subsequently reduced to $25 million.
Nonetheless, said Liberty, “we’re not seeing a lot of the big tort reform pushback we used to see. Jurors have seen it so long they can wrap their head around who the bad actors are and hold them accountable.”
“People think because we have a Democratic majority in both houses that it’s very liberal, but it doesn’t translate into pro-consumer, pro-worker policies,” Liberty said. “Every session there are probably 500 or 600 bills introduced that would harm workers in some way.”
The Pennsylvania Supreme Court struck down compensatory damage caps years ago, and punitive damages are only capped in medical malpractice cases.
Fanelli, Evans & Patel partner Sudhir Patel said efforts to cap punitive damages are a recurring issue at the Pennsylvania Legislature, but the state Supreme Court has thus far kept them at bay.
Another tort reform battle involves a special venue rule enacted in 2003, applicable only to medical malpractice cases, that requires cases to be brought in the jurisdiction where the injury occurred. The previous rule, which is still in place, allows any other defendants to be sued where they are headquartered or do business.
“That’s particularly important in the post-Affordable Care Act world, where hospitals are regionalizing,” said Patel. “All the decisions for policies, hiring, marketing are done in a couple of central hubs: Philadelphia, Alleghany—but you still have to file suit in the county where the malpractice occurred, even though the wrongdoing doctors and institutions are based or do business in multiple counties.”
“We’re seeking to undo that carveout,” said Patel, pointing to studies showing it is no longer warranted.
The PAJ also is resisting several measures dubbed “boutique tort reform”: legislation loosening liability standards for emergency medical providers and recreational land owners and instituting “loser pay” provisions.
“Their strategy is to go after small subsets to create carveouts” to shield defendants, Patel said.
More State-Level Skirmishes
In Georgia, a state Senate committee earlier this year approved the passage of a number of defense-friendly measures that would, among other things, expand the reach of Georgia’s $250,000 punitive damages cap; shield landlords from negligent security cases for the criminal acts of third parties; require that a plaintiff’s medical expense claims be based on the actual cost for a procedure rather than what a provider bills (decried as “phantom damages” by the defense bar); and allow lawmakers to cap contingency fees and the interest rates litigation-funders can charge.
Georgia’s Republican General Assembly rejected the legislation once it got to the floor.
In Florida, insurers opposed legislation that would replace the state’s current no-fault personal injury protection auto insurance system with one in which drivers would be required carry bodily injury coverage and would require insurers to offer medical-payments coverage for claims involving large medical bills.
The insurance industry defeated the legislation last month.
Another piece of legislation, backed by the insurance industry, would have toughened Florida’s requirements for a thyroid party claimant to bring a bad-faith action against an insurer. There also was legislation floated aimed at barring “phantom damages” evidence in Florida. Both failed last month.
The Texas Legislature, which meets biennially, last year passed legislation that requires approval from the state attorney general for any contingency fee contract between a private attorney and municipal government.
There also was an effort to pass legislation that would require third-party litigation funders to disclose the details of any such deals to opposing parties. Identical bills to that effect were introduced in the Texas House and Senate last year and referred to committee.
In New Jersey, business interests were dismayed last year when the Democrat-heavy Legislature passed a “wage-theft law” raising the penalty for employers who fail to pay workers all the wages owed from $100 to between $500 and $1,000, or jail sentences of up to 90 days. Repeat or multiple offenders can face fines up to $15,000 and prison terms of up to three years.
In New York, business lobbyists are working to keep legislation expanding the state’s consumer protection laws to include “unfair” practices.
But Empire State insurance interests are even more exercised about pending litigation that will, if passed, allow the plaintiffs in wrongful death cases to add claims for their own pain and suffering stemming from the death of a loved one.
The coronavirus pandemic is likely to offer the next field of battle for tort reform: On April 14, the ATRA issued a dire warning that a wave of civil litigation is bound to follow the COVID-19 outbreak.
“Personal injury law firms are already recruiting individuals to ‘sue now,’ even if they have not contracted the disease,” the ATRA said in a white paper titled “Responding to the Coming Lawsuit Surge.”
“The first lawsuits targeting health care providers, employers, retailers and other businesses for COVID-related injuries have been filed. Many more are to come,” it said, urging states to “proactively adopt legislation that distinguishes legitimate claims from no-injury lawsuits. States can place reasonable constraints on the types of lawsuits that pose an obstacle to the coronavirus response effort, place businesses in jeopardy, and further damage the economy.”
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