What Does Tort Reform Mean?

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The term tort reform refers to laws that are designed to reduce litigation. These laws typically focus on a particular industry, such as the medical profession. Most tort reform legislation has been enacted by the states, but the federal government has passed some as well.

Pros and Cons

The subject of tort reform is contentious. Proponents argue that the laws are necessary to prevent abusive practices that hurt businesses.

They contend that lawyers file vast numbers of lawsuits, many of which are frivolous. These lawsuits result in excessive awards and generate exorbitant fees for attorneys. The big awards and high fees drive up the cost of doing business. Businesses must pass these costs on to their customers in order to survive. Their customers pay the cost of litigation in the form of higher prices for products and services.

Critics of tort reform argue that the laws don't fix the problems that led to the claims in the first place. Rather, they limit people's ability to obtain justice for injuries they have suffered. Many victims cannot afford a lawyer so their cases are handled on a contingency fee basis. When potential damages are reduced by tort reform, attorneys have less incentive take on new cases. Without a lawyer to assist them, victims cannot to obtain compensation.

State Tort Reform

Most of the tort reform laws enacted by the states are intended to protect healthcare providers.

However, a few are designed to safeguard manufacturers of pharmaceuticals, asbestos or other products. While the laws vary from state to state, they typically require one or more of the following:

  • Elimination of joint and several liability (where one party can be held liable for damages assessed against a group of co-defendants).
  • Limits on non-economic damages. These are damages awarded for injuries such as pain and suffering, disfigurement, and humiliation. Non-economic damages are often limited by law because they are subjective. They are a type of compensatory damages.
  • Reduction of damage awards when the plaintiff has other sources of recovery, such as workers compensation benefits or health insurance.
  • Limits on contingency fees lawyers can collect
  • A statute of limitations
  • A scheme allowing defendants to pay economic damages in installments rather than all at once.
  • A requirement that plaintiffs and defendants attempt to resolve their case via alternative dispute resolution methods, such as mediation or arbitration, before proceeding with a lawsuit.
  • Good Samaritan provisions that protect healthcare providers from lawsuits resulting from errors made while voluntarily providing emergency care to injured individuals.

Medical Malpractice: Tort reform began in the 1970s when many states passed laws to limit the liability of health care providers. Medical malpractice claims had increased and several insurers had stopped writing coverage. The exodus of insurers reduced the availability of coverage and insurance prices skyrocketed.

Some practitioners were unable to obtain insurance at all. To address the situation, state legislators enacted laws to reduce the size and number of claims. An example is a law passed in California in 1975 called the Medical Injury Compensation Reform Act (MICRA).

MICRA is considered a model for other states who wish to pass tort reform legislation. The law, which is still in effect, imposes a $250,000 cap (not adjusted for inflation) on non-economic damages. It does not impose any limits on economic damages or punitive damages. MICRA also uses a sliding scale to limit the fees attorneys can charge.

Many states passed additional laws applicable to healthcare providers in the 1980s, 1990s, and 2000s. These laws were enacted to stabilize premiums and increase the availability of medical malpractice insurance.

Asbestos: It was used throughout much of the 20th century to manufacture ships, brake linings, boilers, and other products. By the 1970s the mineral had been linked to lung diseases like asbestosis and mesothelioma, a type of cancer. Workers who had contracted these diseases began filing lawsuits against employers and manufacturers. Asbestos-related suits surged in the 1980s and 1990s. By the early 2000s, they were clogging state and federal courts. Attorneys were filing mass tort actions on behalf of groups of plaintiffs. Many plaintiffs had been exposed to asbestos but hadn't suffered a physical impairment.

A few states have passed tort reform in an effort to reduce the number of asbestos suits. An example is Texas, which passed SB15 in 2005. The law requires plaintiffs to obtain a medical diagnosis of an asbestos-related physical impairment before filing a claim. Plaintiffs must file claims individually rather than as part of a mass tort action. A subsequent law (HB1325) passed in 2013 required the dismissal of suits filed before 2005 if the claimants had not suffered any impairment. The claimants may refile their suits if they are eventually diagnosed with an asbestos-related illness.  

Product Liability: A few states have enacted laws to reduce product liability litigation. For instance, Texas passed a law in 2003 to protect pharmaceutical and medical device manufacturers from litigation based on failure to warn. The law presumes that manufacturers have provided adequate information regarding the dangers of their products if their products contain warnings approved by the FDA. Manufacturers of products that contain FDA-approved warnings are immune from suits unless plaintiffs can prove, say, that a manufacturer engaged in bribery or that its product had been ordered off the market by the FDA.

Wisconsin passed product liability tort reform in 2011. Called the Omnibus Tort Reform Act, the law applies to all manufacturers, not just pharmaceuticals and medical device makers. Among other things, it imposes a 15-year statute of repose. This means that claimants cannot sue manufacturers for injuries caused by products manufactured 15 or more years ago. The law limits punitive damages to $200,000 or twice the compensatory damages, whichever is greater. It also requires the application of comparative negligence rather than joint and several liability if a defendant is less than 51 percent responsible for the plaintiff's injury.

Federal Tort Reform

The federal government has also passed laws to reduce certain types of lawsuits. These laws are relatively new.

Class Action Lawsuits: The federal government has instituted some tort reform with regard to class action lawsuits. In 2005 Congress enacted the Class Action Fairness Act. The law allows defendants to have their cases tried in federal courts, rather than state courts, if certain criteria are met. To be tried in federal court, a case must involve at least 100 plaintiffs. One or more plaintiffs must reside in a different state than one or more defendants. Also, the damages sought by all plaintiffs combined must be at least $5 million. The law's intent is for more cases to be tried in federal courts, which are typically less friendly to plaintiffs than state courts.

Volunteers: Another example of tort reform enacted by the federal government is the Volunteer Protection Act (VPA). Passed in 1997, the VPA is intended to promote volunteerism. It protects volunteer workers from lawsuits based on acts or omissions they committed while acting on behalf of a nonprofit organization or government entity. If a worker performs a service that requires a license, he or she must be properly licensed to be safeguarded from suits.

The VPA does not protect workers from suits based on willful, reckless, or criminal misconduct. It does not apply to harm caused by a volunteer operating a vehicle, craft, or vessel if the owner or operator of the vehicle or vessel is required to obtain a license or maintain insurance.