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Capping Damage Awards and Denying Consumers Their Day in Court

Santa Monica– Tort “reform” — capping lawsuit damage awards and erecting other obstacles to consumers having their day in court — does not lower insurance rates, according to a comprehensive national study published today by Citizens for Corporate Accountability and Individual Rights (CCAIR), a project of the Foundation for Taxpayer and Consumer Rights, a non-profit consumer research and advocacy group.

The study, authored by actuary J. Robert Hunter, Director of Insurance for the Consumer Federation of America (CFA) and former Commissioner of Insurance for the State of Texas, and Joanne Doroshow, Executive Director of CCAIR, examined thirteen years of data published by the insurance industry. It proves that insurance companies and other large corporations which have promoted tort “reform” have deceived the public and policymakers.

The report comes just days after jurors in Los Angeles punished General Motors with a $4.5 billion punitive damage award for deliberately continuing to manufacture dangerous gas tanks.

“This landmark effort shows that the only folks who have benefited from caps on damage awards and other legislation to deny injured consumers their day in court are the corporations, and the insurance companies which insure them. They have spent millions of dollars promoting these proposals throughout the nation and in Congress in order to escape legal liability when they kill, injure or maim people,” said Harvey Rosenfield, consumer advocate and President of the Foundation for Taxpayer and Consumer Rights.

Noting that in the General Motors case company officials knew 26 years ago that their defective gas tanks would harm many people, but secretly chose to save money by not fixing the defect, Rosenfield continued, “Whether it’s GM or HMOs, the only way to keep big, profit-driven corporations honest is the massive threat to their bottom line posed by the ability of a consumer to take them to court. No wonder these giant corporations and their insurance companies have tried to strip Americans of their historic right of access to justice. This study will, at least, deprive the tort deform lobby of one of its most deceptive arguments: the promise that if you close the courthouse door to consumers, insurance rates will go down.”

Tort Restrictions Do Not Lower Insurance Rates for Consumers

The report, Premium Deceit ñ the Failure of “Tort Reform” to Cut Insurance Prices, finds that:

  • Enactment of tort law limits around the country over the last 14 years has not succeeded in reducing insurance prices for insurance consumers;

  • Some states that have resisted enacting any “tort reform” since 1985 have experienced low increases in insurance rates or loss costs relative to the national trends, and some states that enacted major “tort reform” packages have seen very high rate or loss cost increases relative to the national trends;

  • For general tort liability (across the board limits in personal injury cases), states with the fewest new limits on the tort system experienced lower insurance rate increases than states with moderate or severe legislated tort restrictions;

  • States with the most severe tort law changes for product liability cases experienced 22% larger insurance rate increases than states with only moderate tort law changes;

  • Medical malpractice rates increased by 35% more in states with moderate tort law changes than in states with few new restrictions;

  • Californiaís product liability insurance rates increased by 45% with two major tort law changes enacted, while Massachusetts rates only increased by 43% with no law changes, and Kentucky ó few tort restrictions enacted ó saw rates drop by 16%.

The report concludes, “Laws that restrict the rights of injured consumers to go to court do not produce lower insurance costs or rates, and insurance companies that claim they do are severely misleading this countryís lawmakers.”

According to the reportís co-author J. Robert Hunter, “This report is the most extensive review of insurance rate activity in the wake of the ‘liability insurance crisis’ of the mid-1980s ever undertaken. It was designed to test the impact on liability insurance rates of ‘tort reforms’ enacted in reaction to the liability insurance crisis of the mid-1980s, and in the years since. Despite years of claims by insurance companies that rates would go down following enactment of tort reform, we found that tort law limits enacted since the mid-1980s have not lowered insurance rates in the ensuing years. States with little or no tort law restrictions have experienced approximately the same changes in insurance rates as those states that have enacted severe restrictions on victims’ rights.”

According to co-author Doroshow, an attorney who has represented consumer interests on civil justice issues since 1986, “For years, insurance companies and their corporate allies have argued that our civil justice system is responsible for unaffordable liability insurance. They have convinced lawmakers around the country to enact legislation that makes it nearly impossible for many seriously injured consumers to hold their offenders financially responsible in court by promising such laws would bring down insurance rates.

“This study has, for the first time, definitively exposed the campaign to restrict consumers’ rights for what it is — an insidious public relations scam that has had terrible consequences for many innocent people, while doing nothing to improve the affordability or availability of liability insurance for businesses or professions,” Doroshow added.


The report examines Insurance Services Office (ISO) data in every state plus the District of Columbia, for the years 1985 through 1998, covering the following lines of insurance that would be affected by “tort reform”: Commercial Auto Bodily Injury and Property Damage Liability, Personal Combined Total Limits Liability, Owner’s, Landlord’s and Tenants (OL&T) Liability, Manufacturer’s and Contractor’s (M&C) Combined Total Limits Liability, Special Multi-Peril, Hospital Professional Liability, Physicians’, Surgeons’ and Dentists’ (PS&D) Professional Liability, and Product Combined Total Limits Liability. (ISO data represent the most reliable and largest database for determining trends in insurance costs as measured either by final rates being suggested by ISO in the 1980s or by the trends in loss costs — i.e. the expected claims costs — in more recent years.)

The report then measured the impact on insurance costs of major “tort reforms” enacted in each state since 1985. To ensure that only relevant lines of insurance were evaluated, laws were divided into three separate sections: limits that apply across the board in tort cases, limits that apply in medical malpractice cases, and limits that affect product liability actions. States were then arranged into three categories, depending on the number of tort law limits passed and the length of time each has been in place, and analyzed.

Copies of the report are available for purchase, for $100, from Citizens for Corporate Accountability & Individual Rights. Discounts are available for non-profit groups and for bulk orders. Contact CCAIR for more information: 212/267-2801. The report contains several color charts.


Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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