Numbers Fail to Show Feared Lawsuit Frenzy

The assault on the civil justice system was in full swing. Radio and television ads denounced greedy lawyers and depicted rescue workers as too afraid of being sued to do their jobs. Small business, the ads said, faced extinction because of lawsuits.

Part of an orchestrated campaign by business groups and others to limit personal injury suits, the media spots earlier this year portrayed a litigation-crazed society that costs consumers millions and jeopardizes their safety. Lawmakers in Sacramento and Washington pledged an overhaul.

But is an overhaul of the legal system really needed? Have personal injury and product liability lawsuits really exploded? Is the economy being hurt by trumped-up lawsuits?

The numbers suggest trouble on some fronts, but no exploding crisis. In fact, lawsuits alleging injury have not risen substantially in the past 10 years. Since 1990, the number of suits in the states that report them even declined slightly. A jury-verdict reporting service has also found that monetary awards have been falling since 1989.

The civil justice system is faulted by scholars not for giving huge amounts of money to unworthy litigants but for awarding too much for marginal injuries and too little for more serious losses.

“It’s part of the folklore of our time,” said Prof. Marc Galanter, director of the Institute for Legal Studies at the University of Wisconsin. “For whatever reason, people have focused on lawsuits as this horror hovering over them.”

Americans have been just as litigious or more so in earlier periods of history, possibly because the legal system was cheaper to use, Galanter said. Citizens of the early Republic sued often, frequently over trivial amounts of money.

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Clamor for restrictions on the freedom to sue and collect damages began after World War II and escalated when civil litigation exploded in the 1960s, after a historic ebb.

Society’s authority figures-- doctors, manufacturers, small business owners, school officials and prison wardens--felt the rising sting of lawsuits, and wanted relief.

“Suddenly all the managers and authorities in society felt they were exposed, that there was this new onerous accountability that was being imposed on them,” Galanter said.

The laments culminated this year in a flurry of legislative proposals in Washington and Sacramento, where Republicans enjoy new power. California supporters of limitations also gathered signatures to place three lawsuit proposals on the state ballot next year.

While ads deplored suit-happy lawyers, the House earlier this year adopted a sweeping package that, among other things, would put a cap on pain and suffering damages for medical malpractice, limit punitive damages and assess non-economic damages in all civil litigation according to a defendant’s proportion of fault. A bill passed by the Senate would limit damages in product liability cases. Both are headed for a conference committee.

Two of the measures passed by the House already have been tried in California with mixed results. The state’s experience with them is instructive, suggesting that some claims by proponents may be exaggerated.

One of the measures, a $250,000 cap on pain and suffering damages in malpractice cases, has been touted as a way to help control national health care costs. Such a lid has been in place in California since 1975, but the state remains one of the most expensive for health care in the country.

The law treats injuries caused by the medical profession differently from those caused in other situations. Because of the cap on damages, a patient who sues a doctor or hospital is entitled to less compensation than a litigant suing over an identical injury caused in a traffic accident or other non-medical setting.

The California law also limits what lawyers can earn representing malpractice victims. Consumer activist Harvey Rosenfield, a fierce opponent of the measure, complains this has made it difficult for some to find attorneys to take their cases.

“The truth is patients have to sue, and pain and suffering is what pays the lawyers,” agreed Harry Snyder, co-director of the West Coast regional office of Consumers Union. Snyder said the cap should “at least” be raised to $700,000 to reflect inflation since 1975.

California doctors, however, probably have benefited from the malpractice cap. Their malpractice premiums have grown at a slower pace than the national average.

“I wouldn’t be in business if it weren’t for the [California] law,” said Dr. George Koenig, a Redwood City neurosurgeon.

In his 24 years of practice, Koenig said he has been sued “two or three” times and settled “one or two for nuisance value.” He estimated that his malpractice insurance costs about $30,000 a year.

“In spine surgery,” he explained, “there is any number of things that could make a patient unhappy.”

The cost of insurance, however, obscures what for some is the more important question: Is the law just?

Suzanne Lobb, still grieving for her husband, says it prevented her from adequately punishing Kaiser Permanente for his July, 1993, death. Dwight Lobb, 47, succumbed to internal bleeding after undergoing elective surgery at a San Diego Kaiser facility.

Although internal bleeding was known to be a risk, nurses failed to put him on a monitor after his operation, heed his complaints of excruciating pain or call a doctor for his plummeting blood pressure, his widow said.

Hospital records showed he had been left unattended for 90 minutes despite the evidence of complications, she said. A medical examiner found he died of blood loss and advised his son-in-law, a police officer, to hire a lawyer.

“I can almost feel him die,” Lobb said. “I think: Did he know he was bleeding to death? Did he lie there and feel his life just slip away?”

Kaiser paid a $400,000 settlement, including the maximum $250,000 allowed by state law for pain and suffering. Lobb kept $128,000 and gave $150,000 to her two children: a gift from her husband, who had always hoped to help his children buy their first homes. The rest went to cover legal and funeral costs.

More money would not have eased her grief, but it might have assuaged her anger.

“I felt if I could hurt them financially, I could get their attention and make them change,” she said bitterly. “They can take you and literally murder you in a hospital, and there is not much you can do about it.”

Trischa O’Hanlon, senior counsel for Kaiser, said the hospital admitted “errors were made that we seriously regret,” moved quickly to settle the case and took undisclosed steps to prevent a recurrence.

“We recognized there was a problem. . . . “ O’Hanlon said. “Human error can happen anywhere. And unfortunately in medicine, when it does occur, at times the result can be devastating.”

In addition to the malpractice measure, California’s 1986 “deep pockets” initiative also would be embodied in national law under the House-passed legislation. County governments in California had backed the ballot measure in hopes it would curb skyrocketing insurance premiums.

The initiative, Proposition 51, limited the amount defendants must pay for pain and suffering, emotional distress and other non-economic damages to their proportion of fault. If the most culpable defendant is broke, the party that was only partially responsible for the injury can no longer be required to pay all the emotional distress damages. Damages for lost wages and medical bills were not affected.

But county governments that supported the measure now are uncertain whether it reduced their liability costs, and an ongoing study has yet to find any impact on jury awards.

Its effect so far has “probably been minimal,” said Los Angeles County Counsel Robert Ambrose, because it only changed liability for non-economic damages.

Nor did the law entice the insurance industry back into the market for local governments, said Michael Flemming, general manager of an authority that pools insurance for counties.

“The insurance companies really withdrew from the market in about 1985,” Fleming said, “and for the most part they haven’t really come back.”

The effect of Proposition 51 has been “nil, zero,” said Consumer Union’s Snyder, because juries were not hitting counties with excessive awards prior to the measure’s passage.

But the measure limited the liability of counties and other defendants, even if it did not lower premiums, and some defendants have clearly benefited.

Kevin Dunne, who defends companies sued for product liability, pointed to a recent case in which a woman sued a lawn mower manufacturer after she suffered disfiguring burns. Dunne, a San Francisco lawyer, represented the lawn mower company.

The woman’s husband had filled the lawn mower with gasoline but had trouble starting the machine. He had a mechanical background and decided he could fix it with some help from his wife.

His tinkering left his wife with burns over almost half her body, Dunne said. The victim argued that the product should have contained warnings about the potential dangers.

“Without Proposition 51, we could never have argued his negligence,” Dunne said. “With it, we could argue he [the husband] was a significant factor in causing the accident.”

The case was settled. The amount is supposed to be confidential, but Dunne said it was “significantly less than seven figures.” Without the law, the settlement probably would have exceeded $1 million, he said.

The deep pockets measure and other lawsuit limitations are aimed at reducing liability, but the problems with the civil justice system are more complex, scholars maintain. They say litigants with questionable injuries tend to collect too much money while those with legitimate injuries get too little or do not even use the system.

A 1990 Harvard University study examined injuries caused by negligent medical care in New York. Less than 10% of those believed by a medical panel to have been injured because of malpractice took legal action. Similarly, a RAND study found that fewer than 5% of people injured by a product consult a lawyer.

“There is significant evidence that the system pays too many non-meritorious claims . . . while people with serious injuries can’t get adequate compensation,” said Deborah Hensler, director of the Santa Monica think tank’s Institute for Civil Justice.

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She cited a RAND study that found one-third of insurance claims in 1993 for auto accident-related medical costs were inflated or fraudulent, contributing to higher premiums and medical costs.

The rate at which such claims are filed has been rising about 4% a year, faster than the rise in population, said Hensler, whose organization receives about a third of its money from the insurance industry.

Mass personal injury litigation also is rising and may deliver some victims too much and others too little, Hensler said. She cited the burst of litigation over breast implants.

Many claimants contend the implants gave them connective tissue diseases such as rheumatoid arthritis. But epidemiological studies have been unable to link such illnesses to the implants. Some women have experienced no ill effects but have filed claims anyway as a precautionary measure.

This means that a $4.23-billion settlement must be shared by 400,000 claimants, reducing what the neediest of women will receive and jeopardizing the future of the agreement.

“The real question is, is the system dealing with the cases it is supposed to be dealing with or are the cases in the system frivolous?” Hensler said.

Another problem is the cost of compensating people through the civil justice system. A RAND study in the early 1980s found that 61 cents of every dollar spent on asbestos litigation went into the pockets of lawyers.

“It costs about a dollar to move a dollar in the tort system,” Galanter said, “and Social Security can do it for 6 cents.”

Some victims who deserve compensation may not get access to the courts because of the costs, analysts say. In some class action lawsuits, the biggest winners are the lawyers. Defendants often try to settle such suits by throwing money at the plaintiffs’ lawyer instead of directing it to the class of aggrieved litigants.

“To the extent that some of the consumer groups say the system doesn’t need fixing, I think they are wrong,” RAND’s Hensler said. “But the question is what the fixes should be, and it isn’t clear to me that some of the proposals from the business sector will fix the real problems.”