Tort reform advocates have many bones to pick with our judicial system. By now we have all heard about “lawsuit lotteries,” “judicial hellholes,” and the miracles that non-economic damage caps are supposed to provide. We have plenty of evidence (both anecdotal and concrete) that lawsuits are not lotteries, most of the “judicial hellholes” are simply places where corporations are not given special treatment, and that non-economic damage caps don’t help doctors or patients as much as they help medical malpractice insurance companies, who actually don’t need much help at all.
Obviously, medical malpractice insurance companies are big fans of these legal protections, and regular insurance companies and huge corporations everywhere are clamoring for protections of their own. These protections would limit the amount of punitive damages that a corporation would be forced to pay in the event that they are found guilty of gross negligence.
For those of you who don’t know, punitive damages are financial penalties assessed by the court that don’t have anything to do with the financial losses that the plaintiff suffered. In civil court cases, these damages are levied by the court when a corporation or commercial enterprise acts when the defendants’ harmful actions were considered either grossly negligent or intentional. Obviously, insurance companies and corporations do not like them, neither does the tort reform organizations. So they are working diligently, both through legislation and litigation, to have the same sort of caps put on punitive damages as there already are on non-economic damages in medical malpractice cases.
The way that these corporations are going about it is essentially the same way that malpractice insurance companies went about getting their protections. In 8 easy steps, here is the process:
1. Drastically raise rates or prices on your products or services with the cooperation of your direct competitiors. “We’re sorry, but we have to charge you twice as much this month.”
2. Blame the price hike on lawyers. “We get sued so much that the only way we can stay solvent as a business is to increase our rates!”
3. Find overblown examples of lawsuits and present them as an everyday occurrence. “Remember that Judge who sued the dry cleaner for $50 million? That happens every single day.”
4. Focus on an aspect of the judicial system that is not advantageous to you and pretend that this aspect affects everyone much more than it actually does. “Innocent, hardworking Americans all live under the threat of runaway, out of control punitive damages.”
5. Claim that our judicial system is “in crisis,” utilize public relations, media outlets and lobbyists to hammer home the idea that something has to be done. “The National Lawsuit Crisis is making it impossible for hard working Americans to do anything. You can’t go get the newspaper without somebody suing you for punitive damages these days.”
6. Lobby pro-business politicians for a legislative fix: “America cannot survive unless we enact strict limits on punitive damages.”
7. Get caps on damages legislation pushed through sympathetic state assemblies. “The Americans for Liberty, Justice and Freedom Act has saved the country from utter ruin.”
8. Celebrate the protections this legislation has provided your business by reducing your rates by about half of the amount you increased them initially. “See? Our rates have dropped! The system works!”
This is not an exaggeration. Medical malpractice companies pulled this stunt in the early 2000’s almost to perfection, and to this day there are still non-economic damage caps in multiple states. And while the rates have gone down, in many cases they haven’t dropped down to pre-“crisis” levels.
Before you start believing the tales of woe and horror of innocent, hard working businessmen driven to ruin due to punitive damages, here are a few things you should know.
In the first place, punitive damages are a fairly rare occurrence. It is very difficult to prove that a corporation (or even a person) did something grossly negligent on purpose. For instance, in the current Toyota recall cases, Toyota’s defense will be that they had absolutely no idea that so many of their cars were defective, and the burden of proving that will be on the prosecution. Secondly, in tort cases (injury cases,) only 3% of the tens of thousands of cases that happen every year involve punitive damages.
Nor is every punitive damage verdict an automatic seven figures in the bank account of the plaintiff. Most punitive damages are significantly less. In fact, the median punitive damage award is around $55,000. To be sure, that is a great deal of money if the defendant is a small business owner or private citizen, but when the plaintiff is a multi-billion dollar corporation, it is difficult to muster the sort of sympathy that the tort reform organizations seem to require of you.
So if the average monetary amount of punitive damages is so low, and punitive damages happen so rarely, why is it that corporations and insurers and tort reform organizations are trying to put lids on them? Probably because they know all too well that occasionally, there will be an Exxon Valdez. There will be a BP oil well leak. There will be a Dalkon Shield, or a Vioxx, or a Phen Fen. All of these corporations know that there will inevitably be a faulty product or an easily preventable disaster, but they don’t know when it will happen. So rather than face the music eventually, it’s better to fix the system now.
To understand the nature of punitive damages, you simply have to look at the word. “Punitive” means “to punish.” The most effective way to hurt a corporation is by attacking its wallets. A massive chemical conglomerate may come to the realization that there is a right way and a wrong way to do business if their actions cost them millions of dollars. If there is a “cap” on punitive damages, that cap can simply be factored in to whatever they choose to do. Punitive damages should not be written off as simply a cost of doing business. The amount should not be capped, nor should it be predictable. They exist to remind companies and corporations that their actions have consequences.
Greenberg and Bederman is a Maryland –based injury law firm. We are currently offering legal help to people who have been injured due to no fault of their own. That includes people in Virginia, Maryland and Washington, D.C. who have been injured in car accidents, injured due to medical malpractice, injured due to environmental or groundwater pollution, or injured due to dangerous and defective pharmaceutical drugs. If you or a loved one has been injured in an accident, contact Greenberg and Bederman for a free legal consultation today.