Articles Posted in Tort “Reform”

For the past several years, the Bush administration has pursued a covert campaign to steal the rights of victims of dangerous drugs and other defective products. Contrary to the conservative Republican mantra of “personal responsibility,” federal agencies have been giving “Get Out of Jail Free” cards to irresponsible corporate wrongdoers. The goal is to deprive the injured victims of defective products of their rights to fair compensation under state law.

An in depth study just released by the American Association for Justice has documented how federal agencies have used “preemption” to try to allow corporate wrongdoers to escape justice. What is preemption? Rightly used, preemption means a federal law preempts all contrary state laws where Congress has expressed its intent to totally occupy a specific area of law.

What is the result of such language? If it is effective, consumers can be prevented from filing lawsuits in state court when the product that injured them complied with federal standards, no matter how inadequate those regulations may be. No suit may be maintained even though the product might be considered defective under state law. By this means, the federal law trumps the state law, and the corporate wrongdoer is immune from liability for the injuries its product caused.

Political appointees of the Bush administration have gutted many of the regulations that are supposed to protect us all. Compounding the wrong, they then inserted into those ineffective regulations language that purports to preempt lawsuits by victims of dangerously defective drugs, defective automobiles, and other harmful products. Since 2005, seven agencies of the United States government have issued more than 60 rules with preemption language in the preamble to the rule. These preemption provisions generally were inserted at the last minute, without notice to interested state governments, consumers or other affected groups. Often, the proposed rule stated that no preemption was intended, but the Bush bureaucrats inserted a preemption provision into the final rule after public comment had ended.

“Why,” you may ask, “would the government want to keep people injured by dangerous drugs or other defective products from asserting their legal rights?” Why, indeed. Protection of the public is the mission of many of the agencies that have tried to cheat these victims and help the corporations that harmed them. Contrary to their true mission, under the Bush administration the agencies have taken up the cause of protecting corporations at the expense of public safety. A bigger perversion of the role of federal regulators would be hard to find.
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The “tort reform” statute passed by the Alaska Legislature in 1997 continues to whittle away, automatically, year after year, at the real damages available to Alaska families who have lost a loved one due to a defendant’s negligent or reckless conduct. The 1997 legislation limited the amount of “non-economic damages” that can be recovered in a wrongful death action to $400,000, or $8,000 times the person’s life expectancy, whichever is greater. AS 09.17.010 These amounts have not changed since 1997. The United States Bureau of Labor Statistics states that someone would need $520,712 in today’s dollars to equal the purchasing power of $400,000 in 1997. Even when “tort reform” was passed in 1997, $400,000 was a modest amount for the death of a loved one. In real terms, the available damages decrease every year with the march of inflation. The $400,000 limit is also particularly harsh when the deceased did not have substantial economic earnings, such as a homemaker. Even assuming $400,000 was an appropriate limit when it was adopted in 1997, that amount should in fairness be updated by the current legislature to account for inflation and then indexed to the rate of future inflation. This limit also remains ripe for a constitutional challenge in court.

On January 9, 2008, a Texas judge sanctioned Texas Mutual Insurance Co. $30,000 for committing fraud on the court. In the litigation, a worker had prevailed against Texas Mutual in his claim seeking worker’s compensation coverage for his work-related injury. To defeat the worker’s claim, the court found that Texas Mutual falsified a medical record and intentionally used it throughout the litigation to prevent the worker from receiving his benefits. The trial court ruled inTexas Mutual Insurance Co. v. Juan Narvaez, that the insurer committed “fraud on this court and the defendant by falsifying a critical medical record, and then using that record throughout discovery, depositions and trial. This fraudulent conduct was committed knowingly and intentionally by agents and representatives of Texas Mutual Insurance Company.” In addition to the monetary sanctions, the court ordered the insurer to post the sanctions order on the insurer’s website, www.texasmutual.com, within seven days of the order and keep it up for 180 days. Remarkably, after being caught, the insurer then secretly solicited from a doctor yet another altered document which a hospital official later confirmed under oath was not a genuine record.

Another reason this case is remarkable is that Texas Mutual Insurance is well-known for its efforts lobbying for tort reform and limitations on bad faith claims against insurers. Here, the company’s own conduct makes the case for why insureds should be permitted to assert claims against insurers when acts in bad faith occur. Without the governance that litigation can bring, it would be open season on insureds by insurers willing to commit fraud to avoid paying legitimate claims.

Source: Texas Mutual Insurance Company v. Juan Narvaez (Cause No. 04-06061-C) in the 68th District Court of Dallas County, Texas.

A report just released by the Consumer Federation of America estimated that the average family in the U.S. has been overcharged for auto and home insurance over the last four years because companies have been charging excessive premiums and paying out proportionately less in claims.

The insurance industry reaped record profits in 2004 and 2005, and profits in 2006 rose to unprecedented heights. Profits in 2007 may also be recordbreaking. The CFA reported that the average percentage of premium payments paid back to cover losses has dramatically declined over the last 20 years – from a high of 70 percent to 54.6 percent last year – translating into a huge loss in the value of insurance to consumers. Insurers, on the other hand, had net income of $65 billion last year. Insurers thus paid out 34 percent of premiums to cover property losses – a figure that was topped in this decade only by the record low 27.7 percent loss ratio in 2004.

Regardless what type of insurance coverage is being discussed, insurers routinely claim that their losses are mounting because of unscrupulous lawyers, frivolous claims, and unexpected natural disasters. Such claims are then used to foment tort reform and explain away premium increases, neither of which are justified when the true loss experience of the insurer is examined. The critical reader is encouraged when hearing such claims by insurers to go to the data. More than likely it will be the case that the insurer’s decision to increase premiums will not be justified by the loss history. Moreover, the insurer will likely be sitting on extraordinary reserves and profits.