I have always found it interesting that there is tremendous anger at tort lawyers, but not at the insurance industry. How bad is the problem of frivolous lawsuits? Stephanie Mencime’s Washington Monthly article tells it like it is:
most tort lawsuits in this country–nearly 60 percent–involve simple fender-benders, and the awards are generally quite small and getting smaller. New data released in April by the Justice Department’s BJS show that in state courts, the median “jackpot” jury verdict in all tort suits was a mere $37,000 in 2001–down from $65,000 in 1992.
And what of the undeserved billions in punitive damages that Newsweek says Americans win from sympathetic juries? Punitive damage awards are intended to punish wrongdoers for reprehensible conduct, and as a result, must be high enough to get the defendant’s attention. That’s why an Alaska jury hit Exxon with a $4.5 billion penalty in the wake of the Valdez spill. But such awards are so rare that, according to BJS, the median punitive damage award in 2001 was only $50,000. Only 7 percent of all plaintiffs were awarded $1 million or more.
So, if claims are so small, and getting smaller, why all the concern about lawsuits? It is a simple case of clever industry P.R.
The current PR campaign by the insurance industry and other big corporations is just the latest iteration of a long fight tracing back to the 1950s. That was when plaintiffs’ lawyers started breaking down some of the legal barriers that had long protected industry from responsibility for injuries to workers and consumers and opened up jury pools to make them more representative of the general public. The blood bath on the nation’s highways during the post-war auto boom also created a whole new arena of litigation over who should pay for the injuries and deaths caused in car accidents. Auto insurance companies were frequently in the middle of these disputes (as they are today; insurance companies are the defendants in 90 percent of all auto-accident lawsuits).
With their profits threatened by unfavorable jury verdicts, the insurance industry started running anti-lawsuit ads targeted at jurors. For instance, in 1953, the industry ran ads in Life magazine and The Saturday Evening Post that declared, “ruled by emotion rather than facts, [jurors] arrive at unfounded or excessive awards–verdicts occasionally even higher than requested!” The ads implored potential jurors to remember that “you pay for liability and damage suit verdicts whether you are insured or not.”
The ads worked. In the 1980s the conservative Manhattan Institute got into the act, producing “a blizzard of reports, conferences, op-eds, books, and mailings all decrying the ‘litigation explosion’ and greedy trial lawyers.”
After 50 years and hundreds of millions of dollars spent convincing the public of a litigation crisis, the tort reformers have largely succeeded. There’s very little that journalists won’t repeat and readers won’t swallow about the evils of the civil liability system. One thing people never talk about is the fact that proper government regulation and socialized health care would reduce many of the causes for lawsuits more effectively than trying to handicap the legal system to which people often only turn to as a last resort.
UPDATE: It has been pointed out to me that the “median” doesn’t tell us much about the overall distribution. Is the median going down because their are more small suites? Is the distribution top-heavy with large claims? I can’t find the answers from the article, so take these statistics with a grain of salt. Still, I think the points she makes about industry spin are still relevant, as are my final points about the importance of having legal recourse when there is no safety net.