Few political issues get the business community’s attention like tort reform. Not surprisingly, business owners do not like to be sued any more than they like paying higher insurance costs fueled by lawsuits.
One of the most influential business lobbies, the U.S. Chamber of Commerce, through its Institute for Legal Reform (ILR), focuses on states’ tort systems. The Lawsuit Climate 2007: Ranking the States is ILR’s annual assessment of liability systems conducted by the polster Harris Interactive.
“This study shows how a handful of jackpot jurisdictions can drag down the reputation of the entire state, even in those states that have enacted meaningful legal reform measures,” notes Tom Donohue, president and CEO of the chamber. “Similarly, a handful of states with bad lawsuit systems can affect the U.S. business climate, hurting our global competitiveness.”
According to the group, the annual cost of the tort system in America is about $261 billion, or $880 per citizen.
The most recent ILR study shows that Delaware has the best legal climate for business, and West Virginia has the worst. Delaware has held the top spot for the six-year run of the survey. Other top states include Minnesota, Nebraska, Iowa, and Maine.
West Virginia is ranked in last place. Others at the bottom of the list include Mississippi, Louisiana, Alabama, and Illinois.
The data from the past six years indicates an overall improvement in state legal climates. In a number of states, this trend correlates with legal reforms.
But improvement is not all about enacting new laws. Rankings can also be affected by states making sure their courts correctly apply existing laws, appointing impartial judges, and monitoring rules regarding venue, class actions, evidence and the discovery process.
For example, New York’s two-position improvement to 19th is due partly to perceived better treatment of class action and mass consolidation suits, and punitive damages. Massachusetts (18) also improved on the strength of its scores on enforcing meaningful venue requirements, treatment of class action and mass consolidation suits, and its handling of the discovery process.
Not all states are showing improvement.
Virginia, still highly-ranked, nevertheless had a bad year, dropping nine places to 12th, due to lowered scores on punitive damages, equity in the discovery process, handling of non-economic damages, and treatment of class action and mass consolidation litigation.
Connecticut’s (14) nine-place fall is attributed to lower scores on perceptions of judges’ impartiality and handling of punitive damages. Maryland (29) fell nine-places because businesses questioned its courts’ handling of the discovery process, the competence and impartiality of judges, and its enforcing of meaningful venue requirements. Vermont slid three places to 27th for similar reasons.
According to the U.S. Chamber, the best thing a state can do to attract business is to have a balanced legal system.
“The bottom line is this: even though we’re seeing some improvements, from the perspective of global competitiveness, we’re only as good as our worst states. So we need to keep working,” adds Donohue.
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