Lawyer Trifecta

As John McCain kept telling us, campaign finance reform was going to reduce if not end special-interest influence in Washington. Perhaps the Senator forgot to tell the plaintiffs' bar, which is dominating the current Congressional session as completely as any lobby ever has.

From asbestos-litigation reform to terrorism insurance to even the patients' bill of rights, the tort lawyers areblocking whatever they don't like. So great is their clout in the Senate that the lawyers are even inducing Democrats to kill their own self-professed priorities. Ed Hyman's ISI Group calls it the "trial lawyer trifecta," but even that understates their influence.

Take the patients' bill of rights. Let's assume, generously, that this long-debated legislation is really aimed at the interests of patients. Democrats have claimed as much for years and their leader Tom Daschle made a show of passing it as one of his first priorities after regaining Senate control last year.

Yet talks between Senate Democrats and the GOP House fell apart recently over -- guess what? -- liability caps. North Carolina Democrat John Edwards, the nation's most prominent trial lawyer, is leading the charge against compromise. We don't mind if the bill fails as a result, since what it would really do is price more and more employers out of the market for health insurance by piling on mandate and lawsuit costs. But the worth noting as an example of how Democrats put trial-lawyer priorities above all others.

What about urbanites, with whom Democrats claim a special affinity? Fears about the post-September 11 real estate market cratering have so far proved exaggerated. But one reason may be market confidence that such uninsurable risks as nuclear terrorism would, in the end, call forth a responsible government policy. That faith becomes less viable with every month that Mr. Daschle continues to stall terror insurance legislation over a single issue: whether trial lawyers will be able to sue property owners who become victims of terrorism. Lesson: Lawyers beat construction workers, hands down.

The third big trial-lawyer triumph is stopping any restraint on the economic plague of asbestos litigation. Even many Democrats want to answer repeated pleas from the Supreme Court to bring some sanity here. But their Senate colleagues in the party of "working families" refuse to do anything about lawsuits that have busted out from companies that made or sold asbestos and now threaten to bankrupt those that merely used the stuff or knew someone who did. Reform here is dead too.

We recently asked Delaware Democrat Tom Carper about all this clout and he explained it crisply: "Trial lawyers raise a lot of money." He should know. As a rare Democrat willing to challenge the trial bar, he's sponsoring a Senate version of the class-action reform that has already passed the House. But he can't get Mr. Daschle to bring that one up for a vote, either. We're beyond trifecta now, into Grand Slam territory.

Harry Hopkins once said the Democratic electoral formula was tax and spend. Nowadays it's sue and sue, so the settlement proceeds can be recycled into campaign donations. The only thing left is for the lawyers to cut out the middle man and elect one of their own to the White House, which they may do in two years in the person of Mr. Edwards.

The intellectual elite is already rationalizing the Democratic Party's trial-lawyer captivity, as in New Yorker writer Nicholas Lemann's recent massage of Senator Edwards. Lawsuits, he writes, have become "the metaphor that does the political work for liberalism." Oh, please.

This is the article of which you refer, The Tort Mess by Michael Freedman. I subscribe to Forbes.com and was able to cust and paste the article. It’s a free subscription and you’ll have to register to view the actual article.

The Tort Mess, 05.13.02
It's even worse than you think. Out-of-control lawsuits are shutting down medical practices, killing businesses and costing the economy $200 billion a year.

For two and a half weeks this winter, Dr. Walter Eckman, 58, sat in a courtroom in the center of Tupelo, Miss. as a defendant in a lawsuit. In 1999 a 27-year-old man had taken a fall at a movie theater and was admitted to the emergency room at the North Mississippi Medical Center, where Eckman was on call as a neurosurgeon. The patient was alert and awake but he had a headache and a cut on the back of his head. Two days later he went into respiratory arrest, resulting in severe brain damage. He died 15 months later.

Did Eckman screw up by not ordering enough tests? Yes, testified the widow's medical experts; no, responded Eckman's equally qualified experts. It appeared to be the kind of judgment call doctors make daily, this one with a tragic ending. But doctors and insurance companies are easy targets in the hands of tort lawyers. The jury awarded the widow $5 million, double what a similar case might have yielded just a few years ago.

The country has grown immune to verdicts like these: $5 million for a medical tragedy; $50 million in punitive damages for business interference in a case involving $1.5 million; $150 million to six Mississippi plaintiffs in October who are not sick but fear they may suffer someday from asbestos-related illnesses; $1 billion for punitive damages over the alleged contamination of 33 acres of land. It sounds at first like yesterday's news--weren't we hearing a decade ago about a $3 million verdict for a hot cup of coffee or $4 million for a repainted BMW? The tort crisis, though, is really tomorrow's news. If the momentum of litigation costs cannot be slowed, it could easily, in the space of a few years, crush important parts of the economy.

Look at the devastating consequences in Mississippi. The North Mississippi Medical Center, a hospital that serves 22 counties and 600,000 people, is now finding it all but impossible to recruit new doctors. They're scared away by the state's tort-friendly medical malpractice environment, soaring insurance premiums and word of the $5 million award. The hospital's insurance premiums have doubled in the last year to $2 million. It may have to cut back on emergency services. There is now no neurosurgeon on call one out of every four days. If there's a wreck on the highway that bisects town, or on any of the winding roads in northern Mississippi or Alabama, it will take at least one hour for the victim to be transported to the nearest neurosurgeon in Memphis or Jackson. That hour is crucial; it could cost a life.

In the next few years, predicts insurance consultancy Tillinghast-Towers Perrin, tort costs could increase twice as fast as the economy, going from $200 billion last year to $298 billion, or 2.4% of GDP, by 2005. Since 1994 the average jury award in tort cases as a whole has tripled to $1.2 million, in medical malpractice it has tripled to $3.5 million and in product liability cases it has quadrupled to $6.8 million, according to just released data from Jury Verdict Research.

At the rate tort costs are rising, wide swaths of the country, particularly rural areas, will soon be without medical specialists. Drug companies will elect to stop producing vital but less profitable drugs. Construction companies will give up building the condos and high-density projects necessary to affordable living. And smart corporate directors will recognize that the income and prestige that come with serving on boards are not worth the risk to their personal assets.

Chicken Little? Who would have predicted asbestos litigation would cripple so many companies? But 52 companies have already filed for bankruptcy and hundreds more, with only the tiniest connection to the material, are being targeted by lawyers. Listen to Houston lawyer W. Mark Lanier, who claims to be looking into a St. Louis company called Metal Goods Corp., which he says once sold fake snow for indoor Christmas trees that was made of pure asbestos. "I'm going to find where the St. Louis metals company is today, and I will bring them to their knees," he says.

It's not Chicken Little to Charlie F. Connor, who is paying $580,000 for an insurance policy for his Bellevue, Wash. construction company--up from $92,000 last year. He's thinking about getting out of building condominiums because they are especially prone to suits over construction defects. Or to Wal-Mart, which got hit with that $51.5 million verdict in June after requiring a vendor whose contract had ended to remove its vending equipment from stores (now on appeal). Or to Halliburton and 3M, companies that got hit with the $150 million asbestos award. Or to Exxon Mobil, which was hit last May with that $1 billion award (now on appeal).

Tort lawsuits are a necessary evil in a market economy. There has to be a mechanism for making polluters and incompetent doctors and penny-stock scamsters pay. But when the payments lose any tether to the harm caused or the culpability of the defendant, they create economic havoc. "Many will sense that this is a replay of the liability crisis of the 1980s," says Robert Hartwig, chief economist of the Insurance Information Institute. "But it is more broad-based this time and more severe." Here's a look at the impact in five areas of the economy.

* The Doctor Won't See You Now
In December the nation's second-largest medical malpractice insurer, St. Paul Cos., announced it would abandon this line of business after losing $985 million on it in 2001. It was running up $1.99 in costs and expected ultimate payouts on malpractice for every $1 of premium it was taking in. A liability insurer can make up a small underwriting loss with investment income from its reserve funds. It cannot make up 99 cents on the dollar.

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