Bar Panel Rejects Idea of a Ceiling on Damage Awards

A panel of the American Bar Assn. set up to study the so-called liability crisis has rejected the idea of placing a ceiling on the amounts of money awards and has urged instead that judges be more active in scaling down “excessive” awards.

The committee, whose members included judges, law professors and attorneys for both plaintiffs and insurance firms, also recommended that lawyers be required to disclose how their fees are figured and to offer options to their clients.

The panel’s report, released Sunday, grew out of widespread complaints about liability lawsuits that appeared to enrich attorneys disproportionately. The bar association said that it saw a need to do something more than just oppose the suggestions of others, but in the end, the committee members could not agree on any drastic measure to overhaul the liability system.

“Our basic position is that the system is not really defective,” said Prof. Robert B. McKay of the New York University School of Law, chairman of the panel. “It may be out of kilter, and it needs some fairly modest changes.”

Bar Debate Ahead

The ABA at its mid-winter meeting will vote on the panel’s recommendations, and McKay said he expects a heated debate. Trial lawyers who represent people injured in accidents or through alleged medical malpractice say that the recommendations go too far, while some corporate, insurance and government attorneys think they do not go far enough.

Many of the changes recommended in the report could be effected by judges; others would require passage of legislation by the states.

“I went into this with the feeling that a cap (on damage awards) was a solution, but I came away convinced that there are victims who have suffered pain and agony and that they should be compensated for it,” McKay said in a telephone interview.

Last year, the Reagan Administration proposed a maximum of $100,000 on the amount of awards for “pain and suffering” in cases of medical malpractice or faulty products. Assistant Atty. Gen. Richard K. Willard complained that many juries seemed to believe in a “free lunch,” that exorbitant damage awards simply are paid by insurance carriers. The result of this, he said, has been soaring insurance premiums, which led either to higher prices or higher taxes.

Reagan Ceiling Failed

The Administration’s proposal, which also would have limited attorneys’ fees, died last year when it reached the Senate floor, and it went nowhere in the Democratic-controlled House. Groups representing trial lawyers and consumers have charged that the liability crisis was largely manufactured by insurance companies trying to increase their profits.

“We don’t see any crisis among the insurance companies. They’re rolling in dough,” said Bob Havel, spokesman for the Assn. of Trial Lawyers of America.

The ABA panel, in background papers accompanying its report, also disputed the idea that the amount of the typical damage award in accident or liability cases is soaring. Rather, the report said, “recoveries at the upper end”--multimillion-dollar awards--are pushing up the costs. It cited a report from the Rand Corp., which found that the amounts of settlements and verdicts in auto accident cases rose 12% a year from 1981 to 1985, while the amounts awarded in non-auto cases increased by 17% a year.

The ABA panel endorsed a broader version of the “deep pockets” notion that was overwhelmingly adopted by California voters last November.

Old Liability Doctrine

Under the traditional “joint-and-several liability” doctrine, all those found liable for an injury are entirely responsible for paying the full cost of it, even if one is only partly to blame.

Cities, school boards and other government agencies said that they were regularly being hit with huge verdicts, even if they were found to have contributed only marginally to the cause of an accident--for example, by not trimming the hedges around an intersection.

The “deep pockets” initiative limits their liability for non-economic damages, such as “pain and suffering,” to their share of the liability. The ABA proposes that individual defendants “be held liable for only their equitable share” of both economic and non-economic costs suffered by a plaintiff.