Big payouts benefits few

Sylvia Porter

March 19, 1991|By Sylvia Porter | Sylvia Porter,(c) 1991, Los Angeles Times Syndicate SS. (LIABILITY) Last in a series

Activists hailed it a victory for consumers when the Supreme Court decided early this month to do nothing to stop juries from imposing excessive punitive damage awards.

It is not clear just how consumers benefited. But it is clear that all consumers are bearing the cost of this "lottery for the lucky" not just in dollars but in lost goods and services. The dollars add up to billions that ultimately come out of your pockets, not from the "deep pockets" of insurance companies and corporations.

"Juries are permitted to target unpopular defendants, penalize controversial views and redistribute wealth. Multimillion-dollar losses are inflicted on a whim," Justice Sandra Day O'Connor wrote in her lone dissenting opinion.

The loss of hundreds of jobs and shrinkage in the gross national product are two consequences of the collapse of the general aviation industry in the United States. The cause: runaway liability costs. But if that does not seem to affect your pocketbook, be aware that the devastation comes closer to home when you examine the impact of tort law on automobiles, chemicals, heavy machinery, pharmaceuticals and medical practice.

"You pay a liability tax on just about every product you purchase today," according to the American Tort Reform Association. "This includes a $35 tort tax on the football helmet your child wears at school. A ladder that normally would sell for about $80 sells for $100 because of the $20 tort tax."

If your physician is charging higher fees, has decided to take early retirement, or if you find him less communicative than in the past, it simply may be that he is no longer willing to risk a jury decision that could impoverish him. Medical malpractice awards in the United States are six times those in the United Kingdom, and the cost of medical malpractice insurance is about 10 times higher in the U.S. than the U.K., where physicians pay an average of $1,800 per year, according to Gary T. Schwartz of the UCLA Law School.

The threat of punitive damages in product liability cases does more than create expenses that are passed along to you. It puts a cold chill on innovation and causes beneficial products to be abandoned in the laboratory or removed from the market.

Whether it's drugs or cars, there's no such thing as a riskless society. The pharmaceutical industry is particularly vulnerable because all drugs carry some degree of risk, no matter how well they have been researched and tested. Drugs are highly regulated. The Food and Drug Administration may test a product for 12 years before permitting it be marketed. Yet, government assurances that the benefits outweigh the risks seem to have little or no influence on juries.

The jury members, after all, have nothing to guide them except their common sense and contradictory testimony from hired experts. Yet they are asked to deal with highly complex subjects. Some experts believe the courts should defer to the regulatory judgment.

The greater loss is the public's, since a drug that may be injurious to a few saves thousands of lives.

The shift from negligence to strict liability, regardless of fault, the skyrocketing number of cases and the size of jury awards are a "Wheel of Fortune" created by legal activists, trial lawyers and judges. A good portion of the billions never reaches the plaintiffs, who retain less than half, according to a report from the government's General Accounting Office. Between 30 and 40 percent goes to lawyers, and the rest goes for court and administrative costs.

Both Congress and many state legislatures will be considering tort law reform this year. It's the giant Association of Trial Lawyers versus you and the American Tort Reform Association, a business-sponsored group with five employees.

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