The tide is turning and all the bogus tort lawyers that have been pointing fingers are going to have the spot light shown on them. But they're going to hate it because it is their own actions that expose their corruption. Many of them will experience scorn (much more than they already do) from many, their friends and families abandoning them unless... unless they use the spot light to honestly make amends. Still, there will be a few that will carry this scenario out to it's horrific conclusion and commit suicide rather than try to make amends.
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.