Brian Dickerson wrote a fantastic article summing up what's wrong with our tort system these days. No, it's not runaway juries. Nope, it's not ambulance chasing personal injury attorneys. Nope, it's not crazy, activist judges.
It's insurance companies.
Instead of making good on the policies they write, they refuse to pay on legitimate claims, and they nickel and dime everyone. They nickel and dime victims, they nickel and dime expert witnesses, and they nickel and dime their own attorneys. The reason insurance rates are so high, in my view, isn't because of huge payouts or frivolous lawsuits. It's because insurance companies drive up the costs of litigation defending indefensible cases and refusing to pay reasonable compensation to seriously injured victims. By doing this, many, many cases end up costing policy holders hundreds of thousands of dollars to defend, and they result in policy payouts anyhow after too much money is spent "learning" that the claim can't be reasonably defended. They are essentially flushing good money down the toilet by pursuing this pervasive strategy.
Insurers don't really mind doing this, because if you actually need your insurance policy for any reason, they will simply raise your rates to recoup some of their money back. And if you switch insurers, they will share your claims information with the other insurer, which will ensure that the other insurance company will overcharge you as well. Anti-trust and unfair competition laws don't apply to insurance companies. Did ya' know that? Really, they don't.
Insurance companies have created a trillion-dollar industry, much of which is dependent upon our American jury system. If our jury system imploded, or was legislated away by tort reform, there would be virtually no reason for many insurance companies to exist, as the people they insure would no longer need liability insurance. If you can't be held liable for a injury you caused, there won't be a market to provide you insurance for that potential liability. It's really quite simple.
This is precisely why tort reform doesn't get rid of frivolous lawsuits, by the way. So long as people, professionals, and corporations are worried that they will be sued (frivolously or not), they will continue to pay top dollar for insurance to defend and pay those lawsuits. This is also why tort reform hasn't reduce insurance premiums and why no-fault auto insurance is still costly in most states. Instead of helping the consumer, as is touted by the insurance industry publicly, tort reform merely reduced payouts by insurers, pretty much for no other reason than to save those insurers money and increase their profits.
Insurers control the defense of these lawsuits with an iron fist. When you see a lawsuit against doctors and hospitals, against the drivers of cars that ran red lights and killed people, against lawyers who mess up their clients' cases, the defense is never actually run by the defense lawyer. On the contrary, the defense is run by an insurance company. The defense lawyer has virtually no discretion to do anything except that which the insurance company wants him or her to do. If the defense lawyer continually says, "Hey insurance company -- you've got to settle this case or the trial will be a disaster with a huge verdict against you," the defense lawyer will likely be fired and another, quieter, less outspoken attorney will be hired to do as they are told.
As insurance companies defend personal injury cases, they think about one thing and one thing only -- saving themselves money. We once spent all day trying to settle a case against two hospitals and a single physician. Because this physician missed a key diagnosis that should have been obvious to him, a baby suffered a terrible injury that would permanently impact her life until the day she died.
The hospitals had been sued also, because under Michigan law, they were responsible for the actions of the doctor (like an employer can be responsible for an employee's actions). Technically speaking, the hospitals hadn't done anything wrong on their own, but they were responsible for the doctor's misdiagnosis. Between the two hospitals, a $900,000 was on the table for settlement. The law is this way mainly because doctors want it this way, so that they can count on the hospital to save them if they end up with liability in excess of their professional liability policies.
The doctor only had an insurance policy worth $100,000, and the hospital's expected the settlement to total $1 Million based upon his contribution. The physician's insurance company, however, wanted to try and save money instead. The insurance representative (notorious throughout Michigan for doing these kind of things) refused to offer the policy and instead offered $87,500. His rationale was that the plaintiff would have to spend at least another $12,500 litigating the case for a few more months, and consequently this injured baby's parents should accept less to get their settlement now.
We rejected the offer. The hospitals, who were to be left holding the bag for the physician if the case was tried, finally, after a long day of negotiations, agreed to pay that $12,500 between them. Which just goes to show you that this kind of crap actually works. One insurer received a discount at the cost of two other insurers.
Next time you hear that tort reform is needed to solve our society's woes, don't believe the hype. What we need is insurance reform. |
