Monday, May 22, 2006

Medical malpractice suits in the US - no evidence of frivolous suits found

Is there a real need for a federal cap on non-economic damages in medical malpractice suits (to be voted on by the US Senate)? It is widely claimed that frivolous medical malpractice suits are on the increase, causing healthcare costs to rise and enriching only claimant lawyers. The recent research conducted by Harvard School of Public Health (HSPH), Brigham and Women's Hospital and the Harvard Risk Management Foundation shows that no evidence of increase in frivolous suits exists (published in The New England Journal of Medicine, Volume 354: 2024 - 2033, May 11, 2006). The research demonstrates that most medical malpractice suits are actually justified (involve medical errors).

The researchers suggest that, instead of trying to cap damages or limit attorneys' fees, the legislators should focus on "streamlining the processing of claims that do belong".

Friday, May 19, 2006

US Tort Liability Index 2006 - the costs of tort - 'saints, sinners and salvageables'

The costs of tort law and litigation in the US are receiving lots of attention recently: The Pacific Research Institute (not-for-profit think tank based in California) published The US Tort Liability Index: 2006 Report on 11 May 2006. This comprehensive report based on extensive research assesses the best and the worst tort systems in the US. The Index measures the 'inputs' and 'outputs' in tort systems in all 50 states using 39 variables, assessing the present situation and predicting the future. The 39 variables are divided into five subgroups:

1. monetary tort losses (including insurance loss ratios for commercial automobile liability, product liability, medical malpractice, workers' compensation etc.),
2. threats (did the state have 'judicial hellholes' in 2005, attorneys per dollar of GSP and total state incoming civil cases),
3. monetary caps in 2005 (caps on non-economic damages, punitive damages or damages in medical malpractice suits),
4. substantive law rules and reforms in 2005 (class actions, contingency fee limits, product liability or medical malpractice),
5. procedural /structural rules and reforms in 2005 (frivolous suits, jury service etc.).

Some of the best systems according to the Index are : Texas, Colorado, North Dacota and Ohio. The worst: Vermont, Rhode Island, New York. None of the good systems ranked as good in all the categories, though, and the Index stresses the need for further work.

The Index highlights a very important issue - states with high tort costs have lower standards of living, slower economic growth, and the economic climate which discourages innovation.
There is no doubt that tort costs are too high in the US (Index quotes the Tillinghast Study - see entry on 18 May), but it is fascinating to see how much is changing in this area.

The Index predicts the future situation as regards tort costs in the US and divides the states into three groups - saints (states with low tort costs which exacted reforms likely to further decrease these costs, such as Kansas, Texas or Utah), sinners (states with high tort costs which did not introduce any significant reforms, such as Alabama, Florida or Illinois), and salvageables (states with high costs which introduced reforms likely to decrease the costs in the future, such as Arizona, Georgia or Idaho).

Thursday, May 18, 2006

USA - the Tillinghast Study on tort costs - "bogus" and "propaganda"?

The latest Tillinghast Towers Perrin (insurance industry consulting firm) study on the costs of tort in the US estimated that the costs reached $260 billion annually (2005 update).
It also estimated that the costs would be rising by 6,5% in the next three years, subject to a number of factors, for instance litigation related to directors and officers of publicly held companies, litigation concerning some prescription drugs, any litigation resulting from the Hurricane Katrina and recent medical malpractice reforms in many states
(see the forthcoming comments on our blog on the proposed changes to the UK Company Law Bill aimed at reducing possible litigation against company directors).

Ken Suggs, the president of the Association of Trial Lawyers of America referred to the study as a "phoney study" and "propaganda". He pointed out that the real costs were created by those who caused injuries. The Association disputes the methodology used by the study which includes "questionnable statistics" such as payouts for minor accidents, rents on office buildings and insurance company CEOs salaries (as reported by The Colorado Springs Business Journal on 12 may 2006).

Whether the study and its methodology are reliable or not, there is no doubt that the costs of tort litigation are crucial and need to be monitored. The study offers some valuable insight into the changes in the profile of tort litigation in the US - slow decrease of person-to-person litigation (as a result of tort reforms) and an increase in commercial litigation.

We welcome comments on the study and its value.

Thursday, May 04, 2006

Asbestos victims to receive reduced damages - liability of employers apportioned according to the 'degree of contribution' to chance of disease

The liability of employers (or, more precisely, their insurers) who exposed their employees to asbestos ought to be apportioned according to the 'degree of contribution' to the chance of contracting mesothelioma, held the House of Lords yesterday.

On May 3 the House of Lords gave a judgement in the cases Barker v Corus (formerly Saint Gobain Pipelines plc, Murray v British Shipbuilders (Hydrodynamics) Ltd and Patterson v Smiths Dock Ltd and others (to be published - [2006] All ER (D) 23 (May)) . The judgement is bound to have a significant impact on cases involving injuries caused by asbestos and damages awarded in such cases. Very often people suffering from diseases such as mesothelioma are exposed to asbestos a number of times during their lifetime and while working for different employers - thus establishing causal link is very problematic. The nature of this asbestos-caused disease is such that it is impossible to determine with scientific certainty when exactly the disease was contracted. The claimants here suffered from mesothelioma, and it was established that they were explosed to asbestos fibres by different employers (and one of them, additionally, while being self-employed). Contrary to the trend set out by the judgement in Fairchild v Glenhaven Funeral Services [2002] UKHL 22 the House was of the opinion that the defendants ought to be liable for claimant's injuries only to the extent to which they shared the risk of contributing to the chance of contracting the disease with other defendants. While Fairchild modified the approach to causation so that a proof that a defendant's wrongdoing 'had materially increased the risk of contracting the disease' was sufficient to establish this defendant's liability for the claimant's injuries, Barker v Corus seems to have reversed this tendency. The House stressed that in this case liability was imposed exceptionally (it was not certain which one of the defendants actually caused the injury), and thus it was fair that defendants shared liability. The judgement will cause reduction in the amount of damages the claimants receive (for instance because some of the employers are insolvent).