- Hensler, Trends in Tort Litigation, The Story Behind the Statistics – SK
Detail Outline for Exam 7 – No Longer on Exam
- Hensler, Trends in Tort Litigation, The Story Behind the Statistics – SK
Introduction
The policy debate over tort reform
The statistical debate …
… on the litigation explosion
… on the growth in amount awarded
The worlds of tort litigation
Treating three worlds as one invites distortion
Key questions to be answered
Litigation: How Much is There?
The controversy
Data sources …
… and data problems
Total amount of tort litigation nationwide is growing slowly
But growth differs for different case types
High-stakes personal injury suits are growing faster
Where the explosion may occur
So how much tort litigation is there?
Jury Awards: Stable or Out of Control?
More statistical confusion
Which yardstick to use
Median awards – probably the best measure of a “typical” award.
Mean awards – extreme high/low values can distort this as a measure of “typical” award.
Expected awards = avg award * probability of winning.
ICJ jury verdict studies
Key issues studied
- kinds of cases tried and trends in outcomes
- how juries compensated various types of injuries and how it changed over time
- how jury verdicts are related to the characteristics of litigants
Data is specific to San Francisco and Cook County.
Overall, median awards haven’t changed much … - from 1960 to 1975, median stayed about the same in both jurisdictions.
… but some recent changes are evident – in the 80’s, Cook County’s median dropped slightly (possibly due to a change from contributory negligence to a comparative negligence standard), but San Francisco rose dramatically (possibly due to the establishment of mandatory arbitration for smaller-value case drove smaller-value cases out of the courts). But if you break it up by line, auto medians are stable, while product and med mal medians rose sharply.
Average awards have risen sharply – for all lines in both jurisdictions.
The chances of winning have increased – in both jurisdictions. In 60’s about ¼ won. In 70’s, about 1/3 won. In 80’s, about ½ won. In San Francisco, there was actually a small decrease in probability for product liability cases, but in 1980s they were still winning more than ½ .
Together w/ higher awards, this leads to higher expected awards.
Are juries “out of control”?
Jury awards might be changing because the cases are changing.
Awards might be changing because juries are better able to calculate proper compensation/deterrents.
Jury trial system might be correcting these awards in posttrial processes.
If any of these are true, then juries are not “out of control”.
Explaining jury behavior …
… trying different kinds of cases – now juries are seeing more cases involving more serious injuries and larger expenses.
… awarding more dollars for serious injuries – above increases due to larger cases, juries are still awarding more money for serious injuries.
… responding differently to cases from different “worlds” of litigation – juries are more likely to award money in product, med mal, or work injury, than they are for an auto accident for an injury of the same degree of severity (premium effect). Juries also tend to award more money if the defendant is an institution (deep-pocket effect).
It’s unknown whether juries respond differently to irrational sympathies or prejudices against defendants.
What happens after trial?
The bottom line
Litigation Costs: How Much, to Whom?
Transactions costs – complaints and rebuttals
Where the dollars go
Effect of case complexity
Growth rate for transactions costs
In sum …
The Story Behind the Statistics
The emerging worlds of tort litigation
3 differences evident in the numbers:
1) Routine personal injury torts (auto) are growing slowly in frequency and costs, and outcomes haven’t changed much over last 25 yrs.
2) Higher-stakes torts (malpractice, product liability) are growing faster in frequency and costs and outcomes have increased dramatically over the past 25 yrs.
3) Mass latent injury torts, when identified, tend to explode in number, carry high transaction costs, and have highly uncertain outcomes.
Table 5.1 summarizes the 3 evolving worlds of Tort Litigation:
Auto and Other Ordinary Lawsuits: high volume; stable law; routinized; increasing ADR; modest stakes; little difference potential; slow growth in frequency, outcomes, costs.
Product Liability, Med Mal, Business Torts: lower volume; evolving law; increasingly specialized; heavy pretrial procedure; little ADR; large $ potential per case; deterrence is factor; faster growth in frequency, outcomes, costs.
Mass Latent Injury Cases: concentrated in time and place; problematic law; small, highly specialized bar; discovery critical; procedural innovation; enormous $ stakes for parties; deterrence is key issue; highly uncertain in number, outcome, and costs.
Routine personal injury torts
Higher-stakes personal injury torts
Mass latent injury torts – a special case of product liability torts. The latency of these injuries make discovery prolonged and costly. Large numbers of these claims can overload courts, leading to further delays. Future costs are highly uncertain.
What the tort evolution implies for policy
- Keeton, “The Impact on Insurance of Trends in Tort Law,” Issues in Insurance – SK (1984)
- Keeton, “The Impact on Insurance of Trends in Tort Law,” Issues in Insurance – SK (1984)
I. Introduction
II. Changes in Sources of Compensation for Accidental Losses
III. A Summary of Changes within the Basic Theories of Tort Liability
Negligence and Strict Liability
Negligence principle emerged in mid-19th century. Previously, strict liability seems to have dominated.
Rylands v. Fletcher – English House of Lords – a landowner contracted with someone to construct a reservoir. This flooded a neighbor’s land. Under strict liability, the landowner was found liable. However, under negligence, he could have been found vicariously liable for the contractor’s negligence.
The history continues – come back if more time….
Changes in the Practical Meaning of Negligence
Reducing the Areas on Nonliability for Negligence
Immunities – the idea that negligent person receives special protection.
Govt immunities – municipalities were not liable for negligence in the course of their activities (operations of police force). Yet they were liable for negligence of employees in scope of proprietary activities (municipal skating rink).
Charitable immunities – could be held liable for negligence in upper echelons of management.
Family immunities
Some developments follow to cut down these immunities:
Charitable immunities – one argument was that if the charity had insurance they waived its immunity. This idea was not held in most courts, since a charity could only get full insurance or none. Second argument – the availability of insurance waives the insurance. This makes more sense – as insurance is now available, it would be wrong to expect a charitable hospital not to protect victims of their own negligence.
Family immunities more resistant to liability insurance. This immunity is meant to protect family harmony and discipline. Liability claims could cause sources of friction in family. Or, two family members could collude to gain financial gain for both.
Govt immunities – even less impacted by liability insurance.
No-Duty Rules
Statutes of Limitation
Comparative Negligence
“last clear chance” doctrine: allows a negligent plaintiff to recover full damages if the defendant had the “last clear chance” to avoid an accident.
contributory negligence places entire loss on plaintiff.
“pure” comparative negligence: recovery = %-age of “full” damages equal to %-age of negligence attributed to the defendant.
“limited” comparative negligence: If a plaintiff is more negligent than the defendant then plaintiff is barred from recovery. Variations include: “not-more-negligent” in which if plaintiff and defendant are equally negligent, plaintiff gets 50% recovery. “less-negligent” requires plaintiff to be 49% or less negligent to receive a recovery.
Abrogation of Guest Statutes – default is that a driver of a car is subject to liability for injuries to a passenger caused by the driver’s negligence. Some states (by judicial decision) require proof of fault beyond ordinary negligence for a “guest” passenger (that is a passenger not for hire or present for the benefit of the host).
In 1920s and 1930s, majority of the states enacted “guest statutes” declaring a host driver would not be liable to a “guest” passenger for injuries caused by ordinary negligence. Liability is however existent for “gross negligence”, “recklessness” or “willful and wanton misconduct”.
Justifications for statutes: 1) to bar claims of an ungrateful guest against a generous host; 2) to protect against collusion between a host and guest.
Consumer protection ideals grew in 1960s and 1970s, and states have begun repealing these statutes, starting with CA Supreme Court who ruled them as being unconstitutional as a violation of “equal protection” clauses.
Changes in Rules of Law Affecting Negligence Claims
Standards of Professional Duty
The Basic Standard – a negligent standard.
A practicing person must not only perform according to his duties, but must also have the qualifications to do so. If a person performs well, but does not qualify, he is still negligent.
1974 – Supreme Court of Washington found that a uniform custom in a profession is not controlling. A person suffered eye damage because she wasn’t diagnosed for glaucoma. The medical experts said it’s not routine to test glaucoma for people under 40, but court found they should have.
Changes in Practical Meaning – there appears to be a trend of seeing less strong negligent claims being heard in court. Though the standard is not changing, the substance (level of tolerance) may change.
State of Knowledge – how much did the profession in itself know at the time of treatment? This can change through time. Strict liability never applies in practice.
Establishing the Standard of Care – the degree of care needs to be established
Proof of Violation – the loss needs to be proved.
res ipsa loquitur – the thing speaks for itself. If something is obvious, there is no need to further prove the violation.
Liability of Insurers for Conduct of Their Own Agents
Liability in Excess of Policy Limits
The company’s duty to defend the insured stems from the relationship between them created by the insurance contract. Company can control defense and settlement that affects its interests and the insureds’ interests. These interests can sometimes come into conflict.
If a claim can settle for an amount not exceeding the limit of liability, the insured’s best interest is to settle within the policy limit. The company’s best interest is to reject settlement and try the case in hopes of winning and pay no liability.
Other Liabilities of Insurers – the knowledge of insurance coverage in a case may affect the attitudes and decisions of judges and juries. This could be a bias against insurers. But there are three principles that can explain this.
1) Disallowing unconscionable advantage – where there is a disparity in knowledge between parties. Usually, the P/H knows little about the contract in comparison w/ the insurer’s representative. This principle disallows an insurer to have such an advantage.
2) Honoring reasonable expectations of the applicants and intended beneficiaries, even though there was painstaking study of policy provisions.
3) Detrimental reliance – a redress may be allowed to the claimant if he justifiably relied on an agent’s representation.
Additionally, recent decisions have indicated that an insurer has a duty to deal fairly w/ insured; that this duty is violated if insurer refuses to honor a claim; and the insured has a cause of action for collecting damages.
Changing Measures of Damages
Compensatory Damages
Bodily Injury Cases
stuff (come back later)
More than before, compensation awards are based on identifying separate elements of damage rather than one lump sum – leading to higher total damages.
Another practice is “per diem” method where an attorney demonstrates one day’s amount for suffering, and multiply by the # of days already suffered and will suffer in the future to get total reward – leading again to higher total damages.
Another is the use of economists as expert witnesses to state an opinion as to increases in earnings through an entire work life expectancy (had injury not occurred) and to predict probable reduced earnings – but this method tends to offset the discount to PV, leading to too high an answer.
In addition, life expectancy has increased – increasing awards, and medical costs are rising higher than price indexes.
Property Damage Cases
Punitive Damages
Countermeasures and the Net Impact of Changes
Damages Rules
Insurance Contract Provisions
Proposals for Legislation Affecting Liability
The Scope, Impact, and Promise of Countermeasures Within Negligence Law
IV. Statutory Substitutions of Compensation Systems for Tort Law
Employee Compensation – A Total Substitute
No-Fault Automobile Insurance: A Partial Substitute
A Survey of No-Fault Laws
A total substitute (much like WC) for auto has been considered in Canada, but never adopted in the US.
What is today called “no-fault” is actually a partial substitute – first appearing in MA in 1971, then in 24 states by 1976, which can be classed in two classes:
1) add-on statutes: where negligence is maintained (no tort exemptions), but no-fault is considered for provisions such as S&S and offset to coordinate benefits to avoid double recovery: AR, DE, MD, OR, SC, SD, TX, VA.
2) partial-tort-exemption eliminate claims for some injuries (of less consequence). Less serious injuries receive only no-fault benefits. More serious injuries receive both no-fault and negligent benefits (with provisions for double recovery): CO, CT, FL, GA, HI, KS, KY, MA, MI, MN, NV, NJ, NY, ND, PA, UT.
Degrees of Partial Tort Exemption
States can differ even in how they define “less” serious from “more” serious. Consider 5 categories: minor, substantial, moderate, serious, and severe.
Some states bar pain and suffering claims for minor: CT, NJ.
Some bar for minor and substantial (12 states).
Some bar for minor, substantial, and moderate: HI, MI.
The Uniform Motor Vehicle Accident Reparations Act would have barred all the way up to serious injuries, but was never adopted.
Forms of Partial Tort Exemption
medical threshold – tort action is permitted if expenses are in excess of a stated dollar amt. This can be unfair or create incentives to incur medical expenses just to get over the threshold.
descriptive standard – a descriptive threshold. It doesn’t have the problems of a financial threshold, but it can be up to interpretation in the courts.
deduction form damages findings – a technique never used by any state. There is a deductible amount ($5000) of which you must overcome to collect for pain & suffering, but it is deducted from the award. This could lead to a push for higher awards to compensate.
Key Issues in the Controversy
Criticisms of existing auto negligent/insurance system follow:
1. System is an incomplete system of reparation. It leaves victims to bear too much loss that could be paid through insurance.
2. System in inequitable. It pays some claimants more than others.
3. System is too slow in delivering payments.
4. System is wastefully expensive (admin costs) due to requiring case-by-case determinations, and lump-sum findings of damages under indeterminate guidelines.
5. System encourages routine exaggeration of claims and fraud.
6. Negligence is impractical to prove in a large %-age of accidents.
7. Liability insurance is an unsatisfactory product – unattractive to consumers. And if regulation causes rates to be too low, insurance becomes less available.
8. The system is self-contradictory in theory and self-defeating in practice. Developments ensure that wrongdoers are protected by insurance from having to pay, and victims are compensated from some source regardless of fault.
Responses to criticisms follow:
1. System is not designed to compensate for all loss – it’s designed to distinguish between more deserving and less deserving victims and to compensate the more deserving victims.
2. Negligence law is based on individual moral accountability.
3. Basing liability on negligence is a deterrent to careless conduct.
4. Difficulties of applying negligence laws to auto are exaggerated.
5. Critics of negligence system should offer a better alternative. Removing fault would mean taking benefits from more deserving victims to pay benefits to less deserving victims.
6. The shortcoming of System are less serious than those of any alternative.
7. If speedy payments are desired, a social welfare system should be chosen.
8. Compensation plans are a threat to the present private insurance system.
9. Court delay is a separate problem and can be bettered through providing adequate courts and improved procedures.
10. Marketing and regulatory problems are separate from questions concerning compensation. Any other system would do nothing to solve these problems.
11. A no-fault compensation plan would penalize low-risk drivers and provide a bonus to those most responsible for causing injuries.
12. Predictions/assertions of greater efficiency/savings from an alternative are greatly exaggerated.
Performance of No-Fault Laws
Proposals for Other Areas
V. Basic Premises of Compensation Systems
Six Influential Premises – some of these are in conflict with each other.
1. Decisions of entitlement (to compensation) and obligation (to pay) should be based on fault.
2. Decisions of entitlement and obligation should be based on a standard that differs from fault in usual sense (strict liability or compulsory loss insurance).
3. 3rd party liability insurance should be used not only for protecting the assets of insureds, but also to protect plaintiffs against financial irresponsibility of defendants.
4. Private enterprise should be used for funding and management of insurance.
5. Broad protection for a minimal level of welfare should be secured for everyone.
6. The security system should be publicly funded and managed through govt insurance or a tax system.
Three Combinations
Tort-Liability and Third-Party, Private-Enterprise Insurance (1), (3), (4) – predominant in auto lines (pre-no-fault)
Strict Liability and Private-Enterprise Liability Insurance; No-Fault Compulsory
Private-Enterprise Insurance (2), (4)
Automobile no-fault is similar to products strict liability, but strict liability isn’t as limited as no-fault.