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Ask Auntie Pinko
February 7, 2002

Dear Auntie Pinko,

What is tort reform and why should I be worried about it? Why shouldn't I support something that keeps sleazy lawyers from making big money on dummies who spill hot coffee on themselves?

Wildwood, NJ

Dear Dean,

Doubtless you refer to the 1995 case of Liebeck vs. McDonald's, in which the media heavily publicized a $2.9 million award for the plaintiff. But the media didn't do nearly as good a job at publicizing other facts connected with the case, like:

  • The 79-year-old Ms Liebeck, having gone through the drive-through window in a car driven by her grandson, had been sitting in the stopped car, trying to get the lid off the cup to add cream, when the 180+ degree coffee spilled on her lap, producing 3rd degree burns over 6 percent of body-legs, thighs, and buttocks
  • McDonalds official company policy was to maintain the coffee at a temperature known to cause severe burns, based on a cost-benefit analysis of customer satisfaction/sales revenues vs. potential litigation awards/costs
  • McDonalds refused to pay Ms Liebeck's $20,000 hospital bills
  • The much-publicized $2.9 million award was subsequently reduced, without much fanfare, to $640,000

The myth of bizarre and spectacular liability awards has been aggressively promoted by the insurance industry and product manufacturers, but facts do not support the myth. A recent study by the RAND Institute for Civil Justice, found that only 19% of injured people made claims and only 2% pursued those claims in court. In fact, Business Week reports that between 1965 and 1990, only 353 product-liability claims produced punitive damage awards.

But what about the cost of doing business, many people ask. How can corporations make and market products and services cost-effectively if their bottom lines are under constant threat from swarms of frivolous lawsuits?

Auntie Pinko recommends that anyone concerned about unrestricted tort laws damaging the competitiveness of American businesses study the SEC filings and prospectuses of those businesses. I'll award a free Auntie Pinko t-shirt to the first person who can show me one such prospectus where the company mentions that current or potential liability cases are likely to interfere with their profitability.

Well, maybe the insurance companies have a point, though. Couldn't we be enjoying lower premiums if tort reform limited liability awards?

If so, you couldn't tell it from Texas, Dean. In 1995, that was precisely the argument used to pass the nation's most rigorous tort "reform" legislation yet-that they were just trying to help consumers out with lower premiums. Guess what? Between 1996 and 1998, Texas auto insurance companies earned a windfall $2.8 billion plus in additional profits due to lower liability payouts. How much of that do you think they passed on to consumers in the form of lowered premiums? Uh, well, let's just say that Texas consumers are not paying lower premiums today than they were in 1994.

Some tort reform proposals that would have particularly damaging effects:

  • Limit contingency-fee contracts between attorneys and clients. Contingency fees are often the only way poor- and middle-class people can afford legal assistance at all.
  • Limit the types of cases which can be tried before a jury, thereby denying citizens a valuable safeguard against corruption and political influence in civil trial.s
  • Increase the number of cases where a "sealed verdict" may be awarded, thus denying the information in that case to future plaintiffs and their lawyers
  • Charging plaintiffs filing fees equivalent to a percentage of the damages sought, thereby reducing the access of poor citizens to civil justice.
  • Implement "loser pays" rules that would have a deeply chilling effect on citizens' willingness to seek appropriate redress through the courts - if you lost your case you'd have to reimburse the company you sued for hours of inflated legal bills.

I don't know about you, Dean, but Auntie Pinko just doesn't think it's worth that price to stick it a little to a few sleazy, greedy lawyers.

But thanks for asking Auntie Pinko!

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