View this article online: https://www.insurancejournal.com/news/east/2011/02/18/186942.htm
Pennsylvania lawmakers are once again eyeing a tort reform package — a resurrection of the “Fair Share” act — that many in the insurance industry say would help put downward pressure on premiums and rein in what critics say is a legal system abused by plaintiffs’ lawyers in the state.
The tort reform package — which is similar to others previously proposed in Pennsylvania — would alter the mechanics of civil liability; that is, how the courts and juries assign a dollar value to judgments rendered against defendants.
Pennsylvania works differently from most other states, where guilty parties typically can be apportioned liability in civil cases. In other states, typically, a party that was found 50 percent at fault for causing $100 worth of damage would be responsible for paying $50. But in Pennsylvania, that same person could be held responsible for $100, under the legal theory joint and several liability. In a nutshell: one party can be forced to pay for the misdeeds of another.
The peculiar quirk is sometimes referred to as the “1 percent rule” since it’s conceivable — but unlikely — that a party in a lawsuit can be found 1 percent liable for causing an injury, but be forced to pay 100 percent of any monetary damages. In states where it’s allowed, it’s extremely rare, although it can happen. It’s also called the “deep pocket” rule by critics, who say it encourages lawsuits against companies with substantial assets.
Pennsylvania tort reformers, chiefly Republicans, say the measures — which would change rules regarding comparative and contributory negligence — are long overdue, benefit businesses in a struggling economy and would ultimately help drive down insurance costs. But plaintiffs’ attorneys counter that the measures would actually drive up legal costs — and could even open a slew of potential new lawsuits and claims against insurance agents.
It’s a huge concern for insurers, who often front the legal bills and pay the judgments against guilty defendants in the state, said Kari Kissinger, government affairs director for the Insurance Agents and Brokers (IA&B) group in Pennsylvania. “Those damages can sometimes be very, very high, so it really puts the cost burden on those that are perceived to have these deep pockets.” In other words: insurers.
But those concerns can have a real impact on other businesses, particularly when owners worry they will be sued for someone else’s mistakes. That type of tort climate brings higher insurance premiums and dissuades new businesses from opening, Kissinger said. “It’s well understood that businesses are hesitant to come to Pennsylvania, simply because they look at the Tort climate, number one being that we do not have an enactment of the Fair Share Act and are hesitant to come into the state… it creates that fearful and defensive environment.”
Agents groups aren’t the only ones criticizing the tort system in the state. According to its most recent “Judicial Hellholes” report, The American Tort Reform Association said Philadelphia’s civil courts are the worst in the nation for lopsided verdicts and dubious practices by plaintiffs’ attorneys. “State tort law that is out of the mainstream further encourages lawsuits,” the report says.
A coalition of numerous business groups in the state have also banded together to try and get the measure passed.
“A state’s legal climate has a direct bearing on job creation; the cost of goods and services; and the cost and availability of health care; and impacts business decisions, such as where to locate or expand, and even new product research and development,” said Pennsylvania Chamber Vice President Gene Barr. “Pennsylvania’s legal system – one of the worst, if not the worst, in the nation – hinders all of these areas.”
Added IA&B’s Kissinger: “With the current tort system, it creates more of a defensive or fearful climate for businesses in this state. Enacting these reforms will certainly lead to a friendlier place for the insurance industry, but they will also reduce litigation against insurance companies. Then that trickles down to our members: insurance agents.”
Of course, it’s not the first time that lawmakers in the state have tried to pass a bill. In 2006, former Gov. Ed Rendell vetoed similar tort reform legislation. And in 2005, the state’s Supreme Court struck down much of the tort reform legislation that was previously passed by lawmakers in 2002,
But this year, the expectations for tort reform are high. New Governor Tom Corbett, — a Republican and former attorney general in the state — has pledged his support for an overhaul. Numerically, tort reform was the first bill introduced this legislative year in the House and the second in the Senate. Tort reformers are optimistic.
The plaintiffs’ bar, however, say the move is a bad idea and could actually increase potential lawsuits — including errors & omissions or similar against insurance agents
Scott Cooper — a Harrisburg-based personal injury lawyer and vice president of the Pennsylvania Association for Justice — said that if the current system is revamped, lawyers will be forced to add as many defendants as possible to a lawsuit as way to ensure their clients are compensated for injuries. That could mean a lot of agents getting sued, Cooper says.
“Under the reform proposal, I would not only have to sue the insurance company, but I’d now also have to sue the independent insurance agent,” Cooper said. “If an agent did something wrong, a verdict could be split 50 percent and 50 percent and my client’s not going to fully recover from just one defendant. And I need to make sure that my client is fully protected.
“So, now an independent agent — who may or may not be brought into this case, is now going to have to be brought in,” Cooper said.
The tort reforms being considered encourage corporations to use shell companies — with little insurance or assets — as a way to insulated themselves from potential lawsuits and claims of negligence.
Cooper said Pennsylvania’s current system is more fair. By making one defendant liable for all defendants’ action — as is the case currently — the system is designed to ensure victims are compensated, and leaves the becomes the responsibility, time and expense for defendants to sue each other to recoup money if they feel they’ve overpaid.
It’s akin to what parents might tell misbehaving children who break a window, he said: “If you’re with two kids and you break a window, you’re just as responsible as the kid who threw the rock through the window… and if that kid’s parents can’t pay for it, we’re going to have to come up with a way to pay for it.”
Issues of fairness aside, Kissinger, of the IA&B group, said the tort reform package would go a long way toward lowering insurance premiums — which would help agents keep their customers happy.
“The awards being paid out impact everybody’s premiums, so reforming the tort climate will definitely mean cheaper insurance rates in the state,” she said.