Tort reform movement in the 1980s
The tort reform movement of the 1980s emerged in response to a significant increase in tort awards related to personal injury, medical malpractice, and product liability cases. This rise prompted insurance companies to elevate premiums, which ultimately strained both businesses and individuals, leading to bankruptcies and uninsured operations. High jury awards, especially in punitive damages, garnered attention, as they often exceeded compensatory damages significantly. In an effort to address these issues, various states began implementing legislation aimed at capping awards, limiting the scope of suits, and revising the joint and several liability doctrine. This doctrine had previously held multiple defendants jointly responsible for a plaintiff's injury, regardless of individual fault. The reforms sought to adjust financial liabilities in proportion to fault and reduce the incidence of frivolous lawsuits. While some measures led to modest reductions in lawsuit frequency and insurance premiums, many reforms had limited overall effect. The movement marked a shift in attitudes toward plaintiffs, influencing jury behavior and complicating the landscape of personal injury claims.
Tort reform movement in the 1980s
Legislation passed by the majority of the states in order to alleviate the tort and insurance crises
Date Mid- to late 1980’s
The majority of the states enacted legislation that included caps on “pain and suffering” awards, limits on punitive damages, and modification of joint and several liability rules.
Among the reasons cited for the tort reform movement was the increased size and number of tort awards in personal injury, medical malpractice, and product liability cases, causing insurance companies to raise premiums to cover increased awards. The so-called insurance cycle began at the end of the 1960’s, when the insurance industry’s profitability was declining and when the doctrine of strict liability was expanded to include personal liability cases. (The doctrine originally applied solely to businesses conducting abnormally dangerous activities.) With that expansion, a plaintiff no longer had to prove negligence but merely had to prove that the plaintiff was injured while using the product in the manner intended.
In the mid-1970’s, the slump in insurance industry activity brought insurance premium increases. In 1976, President Gerald R. Ford convened a White House conference on product liability, and in 1979, during President Jimmy Carter’s administration, a special task force produced a model uniform product liability act for the states. The early 1980’s saw the insurance industry booming again because of good investment income and high interest rates. Policies were underpriced to generate premiums for investments. By 1984, interest rates fell, as did insurance investment income and profits. Pressure to increase premiums came about because of higher tort damage awards. The jury awards were so high that companies as well as individuals who could not pay their premiums went bankrupt. Others “went bare”; that is, they operated without insurance, knowing that a large verdict against them could annihilate them. The Tort Policy Working Group, formed during the administration of President Ronald Reagan, released a report advocating tort reforms, including the elimination of joint and several liability, limits on contingent fees, and a $100,000 cap on noneconomic damages.
Some Reforms
Numerous states passed legislation that aimed at reducing huge jury awards, limiting the areas for which suits may be brought, and imposing caps on punitive damage awards (damages granted beyond compensatory damage awards assessed as punishment for aggravated, wanton, reckless, or oppressive conduct and as a deterrence to others to prevent them from engaging in like conduct) either through a specific numerical cap or through limiting the circumstances under which punitive damage claims can be awarded. It had not been uncommon for juries to award actual damages of a few thousand dollars yet award millions of dollars in punitive damages. Additionally, amounts assessed by juries to compensate for lost wages, medical payments, and the like (called “special damages”) made up a small part of many liability awards. Juries were likely to add on larger amounts for noneconomic damages, such as pain and suffering and loss of the ability to enjoy life (called “general damages”).
In an effort to quell this trend, new legislation was sought. Tort reform involved putting limits on damage awards in malpractice, negligence, and personal injury cases. The legislation passed by the states was not uniform; not every reform was enacted in each state.
In addition to imposing caps on punitive damage awards, limits were imposed for pain and suffering awards, and strict standards were adopted for proving liability for an accident or injury. In order to accomplish this, the joint and several liability principle was revised or abolished. Under the joint and several liability doctrine, two or more defendants are jointly (together) held financially responsible for a plaintiff’s injury, and each defendant severally (individually) may be held financially responsible for the full value of the harm. The most common form of joint and several liability reform was to limit its application when awarding general or noneconomic damages. Under this reform, defendants could be severally liable for economic damages but not for noneconomic damages.
The intent of the reform was to provide assurance that injured plaintiffs are paid for their out-of-pocket expenses even if some defendants are insolvent. At the same time, this reform limited the “deep pocket” approach to awarding damages for noneconomic losses. Another pattern limited joint and several liability when the defendants are together less than 50 percent at fault or less at fault than the plaintiff. This reform aimed at “fairness”: limiting the number of situations in which a defendant who is only slightly at fault will have to pay for the entire amount or a large portion of damages. Generally, tort reform in this area was focused on financial responsibility in proportion to fault rather than on one’s ability to pay. Few, if any, of the reforms completely abolished joint and several liability. Of the thirty-three states that passed joint and several liability reform, only four completely eliminated the use of that doctrine.
Some states enacted restrictions limiting frivolous lawsuits (in which there is no foundation for a liability claim); others instituted fines against attorneys who filed frivolous suits. Contingent fee arrangements were also limited so that attorneys would have less incentive to seek unusually large damages for clients.
Impact
Some of the measures passed, such as caps on damage awards, both compensatory and punitive, have modestly reduced lawsuits, damage awards, and liability insurance premiums. Most of the reforms, however, have had little or no effect. Research has indicated that publicity about the “litigation explosion” may be changing the attitudes of juries and judges toward plaintiffs in personal injury cases. Juries have become increasingly suspicious of plaintiffs in tort cases, and judges in product liability cases have curtailed some of the litigious policies of the 1960’s, 1970’s, or 1980’s, perhaps in reaction to publicity generated by tort reformers. Consequently, numbers of claims have dropped and plaintiffs’ awards have become more difficult to obtain.
Bibliography
Burke, Thomas F. Lawyers, Lawsuits, and Legal Rights: The Battle over Litigation in American Society. Berkeley: University of California Press, 2002. Describes the policies that promote the use of litigation in resolving disputes and implementing public policy. Contains detailed endnotes and numerous scholarly references.
Church, George J. “Sorry, Your Insurance Has Been Cancelled.” Time 127, no. 12 (March 24, 1986): 16-26. An overview of the scenarios leading to tort reform and several of the proposals for reform.
Daniels, Stephen, and Joanne Martin. Civil Juries and the Politics of Reform. Evanston, Ill.: Northwestern University Press, 1995. Analysis of patterns of jury verdicts in areas such as medical malpractice, product liability, and punitive damages within the context of the larger political and academic debate over tort reform.
Depperschmidt, Thomas O. “State Tort and Insurance Reform: The Net Result of Two Years Effort.” Journal of Forensic Economics 2, no. 1 (1989): 23-46. A well-researched scholarly article on tort reform, with numerous references.
Lee, Han-Duck, Mark J. Browne, and Joan T. Schmit. “How Does Joint and Several Tort Reform Affect the Rate of Tort Filings? Evidence from the State Courts.” The Journal of Risk and Insurance 61, no. 2 (1994): 295-316. A scholarly article emphasizing the doctrine of joint and several liability in tort reform.