Tort reform needs a fair trial

Opinion

By David G. Tuerck
Executive Director, BHI

Tort law has become a costly burden on the economic system and one that has done little to increase safety.

Civil Justice Reform in Massachusetts

A worker gets a putty knife stuck in a wall. Disobeying a work rule requiring him to wear protective glasses, he suffers an eye injury as he is pulling the putty knife out of the wall. He sues the manufacturer of the putty knife and receives $70,000 in damages.

A woman purchases a cabinet for her kitchen. She installs the cabinet in drywall, ignoring written instructions admonishing against this. The cabinet falls on her head. She sues the store that sold her the cabinet for $80,000.

At issue are torts, wrongful acts that cause harm to innocent victims. Whereas tort law once played a minor and respectable role in the civil justice system, it has been characterized in recent decades by a proliferation of frivolous cases.

Recently, many states have attempted to curb such cases. But Massachusetts lags in reforming its tort system. These states lure new business by advertising a more tort-friendly climate. Meanwhile, Massachusetts lags in reforming its tort system.

Defenders of the status quo say that despite instances of abuse, the existing system is working well. The facts, they say, indicate that there is no tort crisis. Tort filings in Massachusetts were down 13.7 percent from 1986 to 1996. Most nuisance suits don't go to trial. The economy is booming.

The trouble with this reasoning is that it ignores the fact that tort law has become a costly burden on the economic system and one that has done little to increase safety. This is evidenced by the growth of "tort costs," the costs that individuals and businesses incur by insuring themselves against liability.

If tort law were increasing safety and thus, in effect, putting itself out of business, we would expect tort costs to have fallen over the last several decades. Instead, they have risen dramatically.

Fifty years ago, when tort law played a relatively minor role in the civil justice system, tort costs were only 0.6 percent of gross domestic product. They have since almost quadrupled as a fraction of GDP, reaching 2.3 percent in 1994. This is down from a peak of 2.5 percent in 1986, about the time when other states began their tort reform efforts.

Because Massachusetts has been slow in adopting tort reform, its tort costs are relatively high, 18.6 percent higher than the national average when expressed as a fraction of gross state product and 32 percent higher when expressed on a per-capita basis. In 1995, tort costs were $833 for every man, woman and child in Massachusetts.

It is facts like these that dispel any notion that the right to file frivolous suits is a free lunch. Tort costs show up everywhere. They increase the price of a stepladder by 30 percent, the price of car repairs by 5 percent, and the price of a bag of groceries by 3 percent.

The purpose of tort law is to induce potential defendants to exercise due care, to avoid negligence. A business cannot exercise due care, however, unless there is some knowable link between its negligence and someone else's harm. If a business can be forced to pay 100 percent of the damages for which it is 1 percent responsible, or to compensate victims of product defects about which it could have had no knowledge when the product was developed and marketed, then tort law no longer operates to increase safety. It operates merely to enrich its practitioners.

It also operates to weaken the economy. The capricious, unpredictable nature of modern tort law adds an unnecessary cost to doing business. It requires businesses to figure that, for every job they create and for every plant they build, they have to incur additional costs insuring against liability. In this fashion, tort law imposes a hidden tax, one that has the same effect on business incentives as any explicit tax on profits or payrolls.

If Massachusetts were to raise in tax revenues the money that individuals and businesses now spend insuring themselves against liability, it would be necessary to almost double the tax on earned and small-business income. Such an idea offered openly to the legislature would justifiably be dismissed as failing the laugh test.

Defenders of the status quo want us to believe that there are plenty of jobs anyway. In fact, Massachusetts has barely as many jobs as it had nine years ago. The 127,000 Massachusetts workers who are currently jobless may not be pleased to know that their personal security is being sacrificed to make sure that anyone can bring any suit, no matter how frivolous, to court.

Would the benefits of tort reform come at a loss in safety? The Civil Justice Reform Act now before the Massachusetts Legislature appears to strengthen, not weaken, the role of tort law in deterring harm. By tying the damages assessed against defendants to the harm they actually cause; requiring courts to recognize, as contributory negligence, the fact that a plaintiff was under the influence of alcohol or drugs when injured; and by holding producers responsible for only those product defects about which they could have had any knowledge.

Over the past few years, the Massachusetts Legislature has offered tax breaks to a few sectors of the economy that represent a relatively small source of jobs for state residents. Those tax breaks were offered despite worries about what they would cost in the form of lost tax revenues. By enacting tort reform, the legislature has a chance to create job opportunities for everyone, to expand investment and to add new tax revenues, while simultaneously restoring dignity to the judicial system.

The average Massachusetts worker who prefers a good job to a tort system that tolerates frivolity might wonder what it will take for civil justice reform to get a fair trial in Massachusetts.

Format revised on 18 August, 2004