01.27.05

Tort Reform

Posted in Opinion at 3:34 pm by jw

With the stories of million dollar law suits, spiralling insurance costs and lawyers suing on the most perposterous of grounds, tort reform seems like a good thing and I agree that something has to be done. Where I find myself disagreeing with most established positions on reform is in the way in which something has to be done. Everything I’ve seen of the more popular proposals just seems to be fighting the symptom and not the root cause of the problem.

So what is the real problem? Simple – civil suits against large companies or insurance agencies are viewed as a cash jackpot for the complainant if they happen to win. The staggering payout of punitive damages makes it worthwhile to pursue these cases even if you only win one in a hundred. That makes every last one of them worth going after because given the right combination of factors you can potentially end up with a windfall but more importantly, a windfall which you don’t deserve.

Regular damages are awarded based on what you deserve for your injury or loss. That’s the money you deserve and that money should never be limited or taken out of the award process. If you’ve been injured and shown it to be someone else’s fault then you deserve to have them pay the cost of your injuries. The part you don’t deserve is the punitive damages. These are awarded to punish the party who was in the wrong and are set so that the sum is an actual punishment. If you are injured by a large company to the tune of $50,000 worth of hospital expenses and emotional damage etc. that payout isn’t even going to be noticed by a company of that magnitude. The company’s financial department may even decide that the cost savings they can glean from being somewhat negligent may even be worth the occasional damages claim. This is why punitive damages are necessary.

The advocates of conventional tort reform are seeking to limit the punitive damages inflicted on these entites that do wrong, but that defeats the very purpose of punitive damages. If the company isn’t actually hurt by the damages payout then where is the incentive for them to change their ways? That’s the real problem with most ideas for tort reform and the reason I most definitely oppose any sort of limits to the damages set. If a company does wrong, punish it in a way that it actually feels. Can anyone argue against that simply philosophy?

So, given punitive damages can’t be removed but they are causing problems by being awarded to the complainant, the only remaining option is to simply no longer award the punitive damages to the person injured. They’ve already been given what they deserve, why also hand over the windfall for their “luck” in being injured by a large company and not a small one.

However, this then leaves the problem of where to send the money and the real sticking point of the idea. You can’t award it to the government (it gives an incentive for the government to be overly aggressive towards companies and fosters government corruption). You can’t give any sort of incentive to anyone to go after these types of lawsuits for any reason other than actual injury. That only leaves one option in my mind – force the company to simply take the money out to the parking lot and burn it. Naturally that’s figurative but punitive damages really should go nowhere at all. They aren’t a windfall, just the punishment in the only way a company feels it – it’s pocketbook.

Next time I hear someone talk about tort reform, I’ll just ask them if they mean a limitation on punitive damages. If they do, ask them if they believe in punishing a child when they do something wrong. After all, if we punish our children for doing the wrong thing why shouldn’t our companies get the legal equivalent?

The only other offsetting issue to this is the insurance business which sells insurance against these sorts of things. Strangely enough when I started writing this article I thought it was a bad thing to offer this sort of insurance but you know what? Insurance is just a way of mitigating risk and insurance companies always make money. Ultimately, the smart thing to do would be to forego insurance and simply work hard at not making mistakes – you’re only going to get sued if *you* are negligent.

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