Lawsuits cost the average consumer up to $1200 per year. For instance, an estimated $20 billion a year is spent on unnecessary medical testing procedures to protect doctors and hospitals against malpractice claims. Product liability and litigation concerns have led several companies and laboratories to postpone or cancel altogether their testing of promising AIDS vaccines. In the 1970’s, there were thirteen U.S.-based pharmaceutical companies conducting research in fertility and contraception. By 1988, there was only one because of the threat of liability claims. These examples demonstrate that lawsuit liabilities dampen needed scientific innovation and research. This damages America’s future.
Harvard Business School found that innovation is the key to success in global markets and that in the United States, “lawsuits are so extreme and uncertain as to retard innovation.” With an average of 40,000 product liability lawsuits filed in the United States every year, analysts predict that almost 90 percent of U.S. manufacturing companies will be sued at some point, with significant costs to the U.S. economy. Their study found that 47 percent of United States companies withdrew products from the marketplace and 39 percent decided not to introduce new product lines because of fear of lawsuits. Would American society have benefited from these new products? We will never know.
The disturbing facts concerning America’s tort system cry out for the need for reform. The United States has made itself the lawsuit leader in the world. The U.S. has 30 times more lawsuits per person than Japan, and 20 times the number of lawyers. There are 40,000 product liability lawsuits in the United States annually, and only 200 in the United Kingdom. If the United States continues to tolerate extreme lawsuit liabilities the future will be less prosperous in every aspect.
Nearly everyone is hurt badly by the lawsuit abuse crisis. Consumers and small businesses are hit the hardest. Reflecting the regressive impact of the so called “liability tax,” a recent survey found that 55 percent of small business owners in New York State rated liability and legal costs as a “very serious” or even “extreme” problem for their firms. More than 69 percent said a lawsuit of any kind would cause a significant disruption of their business, and nearly three out of four small-business respondents said liability concerns had forced them to raise costs of their products and services.
Fear of lawsuits reduces the volunteer workforce on which organizations and many disadvantaged citizens depend. The current civil liability system undermines personal responsibility. Spill hot coffee on your lap? Sue the company that made you the coffee. Your kid misses a pop fly and bruises his face? Sue the volunteer Little League coach. Lawsuit abuse affects virtually everyone, no matter how selfless their work or how important their mission. Victims include the Girl Scouts and the Little League. Girl Scouts in the metro Detroit area must sell 36,000 boxes of Girl Scout cookies each year just to pay for liability insurance. The Little League has seen its insurance premiums skyrocket over 1,000 percent in a recent five-year period.
While the affect that increased liability costs have on the Little League and the Girl Scouts is devastating to those organisations, that affect is relatively insignificant compared its impact on the public through the increased burdens on teachers and physicians.
While schoolchildren often worry about fitting in with their peers, teachers are becoming more and more concerned each school year with the threat of lawsuits. In fact, a survey by the American Federation of Teachers shows that liability protection ranks among the top three concerns teachers want their unions to address. Thankfully, a bill in the U.S. Senate, “The Paul D. Coverdell Teacher Liability Protection Act,” will help ease teachers’ concerns and allow them to focus on educating our nations children, rather than the threat of litigation.
Many lawsuits against teachers are completely frivolous. For instance, a girl in Ohio sued her school and 11 teachers for $6 million after they gave her failing grades for missing more than the maximum number of days allowed. She felt this hurt her chances of getting into college, receiving scholarships, and getting a good job.
Lawsuits similar to this are responsible for the 25 percent increase in the number of teachers purchasing liability insurance from Forrest T. Jones Inc., which is the United States’ third largest insurer of teachers. Most teachers unions offer up to $1 million in liability coverage, yet some smaller unions are beginning to offer even larger packages in an effort to attract more members. For example, the Texas State Teachers Association provides $6 million in liability insurance.
Senator Judd Gregg, a proponent of the Paul D. Coverdell Teacher Liability Protection Act, states, “the most common concern I’ve heard from teachers for years is that they’re concerned about litigation and being sued within the parameters of their job.” With their minds distracted by the thought of litigation, teachers cannot fully concentrate on their lesson plans, and as a result children suffer the most.
“Teachers have learned they have to be extremely careful- and I think that’s changed to the detriment of the children,” claims Jeanne Adams, professor at California State University Northridge. Teachers now hesitate before helping students in need. According to an American Tort Reform Association survey, 15 percent of principals claim to have banned all contact between teachers and students simply out of fear of lawsuits. Furthermore, the activities available to children are more limited today due to legal concerns. According to the survey, 65 percent of principals have ended or changed school programs because of this problem. “People will sue much quicker and for must less of a circumstance than ever before. Everyone has to be litigation conscious,” claims J.W. Smith, the director of the department of sports administration for the Chicago Public Schools.
Litigations in schools affect more than just the teachers and the students. The price of lawsuits affects everyone in the community. The majority of most school budgets are paid by local taxes. Small school districts can pay anywhere between $5,000 and $15,000 a year in legal fees, while larger districts may have costs up to $100,000. Not only could this money be better spent on upgrading school resources and textbooks, but it comes directly from the taxpayers. When confronted with a large lawsuit, the easiest solution to pay for it is to raise taxes. Residents of Kenwood, Oklahoma found their property tax tripled as a result of judgement against their school district.
Not only are American citizens deprived of sufficient teaching because of lawsuit liabilities, but their health is directly affected too. For example, in New York more than a thousand physicians, from across the state, recently joined together in two-dozen rallies to demonstrate their concern over skyrocketing liability premium costs and their ability to deliver sufficient patient care. “We now see that many physicians are struggling to cover their overheads and are having to cut back on services,” according to the President of the Medical Society of the State of New York, Ann Cea, MD, “If physicians can’t get some relief then more cutbacks in medical services are inevitable. Against a backdrop of Medicare fee cuts, physicians are just out of room.”
New York physicians currently lead the country in total medical malpractice payouts. In the year 2000 their payouts were 80 percent higher than those in Pennsylvania, which currently ranks second. New York state physicians also pay higher malpractice insurance premiums than most physicians in other states. Premiums for liability insurance are expected to rise again this year and coupled with the reduced Medicare payments and reduced or delayed payments from other health insurers, have made New York physicians rather vexed.
Physician spokespersons at the rallies stressed that these economic pressures are forcing New York physicians to leave the state, reduce the scope of their practices or retire from practice altogether. Physician shortages are already present in some parts of the state and it is becoming more difficult for patients to obtain certain high-risk services.
The citizens of America suffer as a whole because of the few individuals who claim outrageous compensation for alleged damages. The future generation of America is threatened both mentally (intellect) and physically (health-care). It is inevitable, if ludicrous lawsuit liability practice continues, that fewer and fewer individuals will aspire to become teachers and doctors, which are two occupations that are a dire necessity for the nations future success.
The devastating affects of liability insurance can be seen in Pennsylvania, which is a microcosm representing the entire United States. Pennsylvania State University conducted a project called the “Projected Economic Impact of Lawsuit Abuse Reform on the Pennsylvania Economy. It concluded that the costs of the civil justice system are large and are growing faster than the national rate of inflation. Premiums for general liability insurance went from $6.5 billion in 1984 to $20 billion in 1996, two to three times the general rate of inflation. The study conducted estimates that the costs of the tort system in Pennsylvania were $7.2 billion in 1996. Based on experiences in nearby states, Pennsylvania State University estimates that case filings for tort actions in Pennsylvania have risen four to nine percent annually during the past ten years, which concludes devastating implications in the future.
Pennsylvania businesses, non-profit organizations, local governments, practicing professionals and economists all perceive that the civil justice system needs to be reformed. A 1990 survey of the CEOs of major Pennsylvania businesses concluded the threat of liability exposure had a negative impact on the state’s economy. A 1998 survey of Pennsylvania economists disclosed that only 12 percent of the respondents believed that the present liability system is working well.
Pennsylvania consumers also believe, according to Pennsylvania State University, that the civil justice system operates poorly and needs to be reformed. A 1998 survey claimed that 84 percent of Pennsylvania voters said that the present civil justice system is being abused because too many lawsuits are being filed. More than two-thirds of voters concluded that lawsuit abuse reform would benefit large and small businesses, taxpayers, consumers, insurance companies, people with legitimate lawsuits, doctors, and other professionals in almost equal proportions.
Many other states (not including Pennsylvania) have adopted lawsuit abuse reform and have derived substantial benefits. The American Tort Reform Association found that the 45 states that adopted tort reform experienced substantial benefits. A National Bureau of Economic Research study estimated that states that adopted lawsuit abuse reforms experienced employment growth of 8.8 percent, productivity of 3.5 percent, and growth of total output of 12 percent for each liability reducing reform. In Pennsylvania alone, forecasts show that lawsuit abuse reform could produce an additional 34,000 jobs, an increase of 0.5 percent. The result of economic models suggests that unemployment in Pennsylvania might drop 39,000 and the number of Pennsylvanians who live below the poverty level may decline by 49,000 annually after lawsuit abuse reform.
The problems created by the current U.S. tort system are harming the U.S. economy and American society. While the legislative attempts at tort reform are deserving of credit and support, they are unlikely to solve the problem. Virtually all of the outrageous judgements in the United States involve decisions made by juries. Unfortunately, many talented lawyers have the ability to convince juries to punish the impersonal large corporate defendant to compensate a perceived victim. Americans need to carefully debate and consider whether to adopt the English type system whereby firstly, civil cases are not decided by juries, but rather by judges, and secondly, those who file lawsuits and lose are required to pay the legal fees and other costs of the winning party. If the United States were to adopt these simply rules, the problems with the tort system would be significantly reduced.