EXPERT ROUNDTABLE: Tort Reform

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ISSUE SPOTLIGHT: Tort Reform
Tearing Down The Scaffold Law

Sen. Jim Seward
Senate Insurance Committee Chairman
Q: Are tort payouts in New York State damaging the state’s economy?
JS: I’m aware of the impact of New York’s tort laws on insurance premiums, and while it’s important that injured plaintiffs are able to ensure reasonable compensation for their injury, lawsuits shouldn’t result in a windfall that everyone living in or doing business in New York pays through higher insurance costs. In that respect, it is somewhat of a drag on our economy, because it is reflected in higher insurance costs.

Q: If large payouts are not the cost drivers that can be controlled in torts, what are some changes you think should be made to help save money?
JS: One thing we dealt with in the session this past year as part of Medicaid reform: We did create the New York State Medical Indemnity Fund, a mechanism to provide for future health-care costs of infants who have suffered birth-related neurological injuries. This will be a special fund where rather than future costs coming out of insurance coverage, they will be paid by the fund. There are many bills introduced every year that would take these incremental steps. For example, I’m sponsoring the Trespasser Responsibility bill, which would prevent trespassers from being able to sue the landowner when they’re injured on their property when they’re there illegally.

Q: Has the Legislature become more receptive to tort reforms in the past few years?
JS: Certainly the need to reduce spending, tight budgets on the part of government and business, I think does force changes and does increase the likelihood of changes. That’s how we got the Medical Indemnity Fund, as an example. But only occasionally do the sun, moon and the stars all align to make changes, so that happens only occasionally in the past. And in the current environment, the economic difficulties faced by both the private and the public sector does better lend itself to some change.

Sen. Neil Breslin
Former Senate Insurance Committee Chairman
Q: Are tort payouts in New York State damaging the state’s economy?
NB: They’re not so much damaging to the state’s bottom line, but they’re damaging to the insurance premiums that people pay. Sometimes they’re unfair. Sometimes they’re too much. And tort reform generally deals with two areas, medical malpractice and automobile insurance. With automobile insurance, there are several factors you would think about, as we have no-fault insurance. No-fault is, in theory, supposed to take care of a lot of very minor accidents. However, you’re seeing a tremendous number of lawsuits that are going into the court system against the insurance companies, who haven’t paid these minor expenses, and much of that should be done administratively—and it would save the state a lot of money, but it would particularly save consumers a lot of money, to take those out of the court system.

Q: Has the Legislature become more receptive to tort reforms in the past few years?
NB: I think they are receptive to it. The devil is in the details. I don’t think you can do it in a piecemeal way. And two years ago, we introduced a major piece of legislation that would have reformed no-fault insurance. The trial attorneys who are part of this, they wanted better definitions of serious injury, because that would help their cases, they think. Some of them wanted to leave the no-fault limitations in the court system. The insurance companies want you to wipe out any ability, for the most part, to litigate in the courts in the no-fault cases, and they want 10,000 prosecutors to stamp out the fraud that goes on in the industry. But everybody has to give a little. I believe that legislation went a long way because we had all the parties together.

Q: What are significant obstacles to passing tort reform?
NB: Well, it’s the insurance companies wanting damages capped. The trial lawyers want additional fees and better definitions of serious injury. It’s really bringing all the parties together and saying, “You’re each going to get a little bit, but you’re not going to get everything you want.” And the governor can do that.

Assemblyman Joseph Morelle
Assembly Insurance Committee Chairman
Q: Are tort payouts in New York State damaging the state’s economy?
JM: I think that, obviously, everyone deserves their day in court to be able to seek a redress of grievances that have been caused by a whole host of conditions, whether it’s in the no-fault world, whether it’s in the construction industry. But I do think in New York you need balance. I think New York is one of the more litigious states in the country. I think it has had a negative effect on the ability to grow the economy in New York. We want to follow the lead of other states. I think, again, the average person has the right for legitimate claims where there are legitimate issues of negligence, but I think some of the standards we have, have swung that balance to a degree where it’s an impediment for economic development and job creation.

Q: Has the political climate around potential tort reforms changed in New York State to make it more feasible?
JM: I think there are a number of legislators who would be interested in a conversation about, for instance, the scaffold law. Last year the governor in his budget proposed some changes as it related to malpractice reform. I think it’s a topic that merits consideration, and it ought to be on the agenda for a conversation. If the Legislature decides that they’re comfortable with things as they are, then that’s fine, but we ought to have that conversation. We shouldn’t avoid it. I think we need to reconsider whether our standards are an impediment to our economic growth.

Q: What are other pieces of legislation New York could pass to enact tort reform?
JM: We have issues of product liability. We need to take it on a case-by-case basis, but I think no-fault, certainly, that’s a huge issue, and we need to be looking at some of the issues that relate to no-fault. Obviously I think we would very much like to have more arbitration cases done and get these out of the courts, but still preserve people’s right to go to court

Michael Cardozo
New York City Corporation Counsel
Q: How big a problem are torts payouts for the city’s finances?
MC: The city paid out over
$565 million in the past fiscal year for tort and related claims. The growth of these payouts has been well under inflation during the Bloomberg administration, but the growth in previous decades that got us to this point was astonishing. The city’s bill is 2,600 percent more than in 1978, when the city paid only $21.4 million in such cases. Think of what the city could do if we paid less to tort plaintiffs—for example, $100 million less would pay for over 1,500 more teachers.

Q: What is the political climate like in New York State for passing tort reforms?
MC: The political climate in New York State has been adverse to tort reform in recent times. I am somewhat hopeful about the prospect for passing tort reforms now, because the current financial crisis and budget cuts make the cost of plaintiff-friendly tort laws acutely unaffordable for the state itself and for local governments throughout the state, as well as to taxpayers and businesses. At a time when local governments face cutting services and laying off teachers, police and firefighters, we can see clearly the cost to New Yorkers of inflated payouts to individual plaintiffs. Tort reform would create a more competitive New York business environment, which in turn would bring more jobs and higher tax revenue to the state and localities.

Q: What are the specific pieces of legislation that you would like to pass to change the tort climate in New York?
MC: Prevailing market interest rates for judgments: Currently defendants pay 9 percent interest—an unheard-of return considering current interest rates. Predominant fault: The public should not compensate a plaintiff who is equally or primarily responsible for his or her injuries. Currently such a plaintiff can collect damages from defendants. Even if the claimant is overwhelmingly responsible for his or her injury, the claimant’s culpability proportionately reduces but does not bar recovery of damages. Reform of joint and several liability: The city, and other defendants with deep pockets, should not have to pay all damages for economic loss caused by multiple defendants when the city is 50 percent or less at fault. Capping awards for noneconomic damages would establish reasonable limitations to jury awards for pain and suffering. And the public should not have to pay excessive damage awards for “pain and suffering” for minor injuries that required only minimal treatment and care.