Should california follow in texas’ tort reform footsteps?

With 324,000 jobs gone in the first five months of 2008, some are expecting the government to introduce legislation to help alleviate the problem and bolster the country’s economy. In places such as California, however, the suggestion has been made that legal reform would accomplish better results, with longer-lasting benefits. University of California-Berkeley economist Lisa Kimmel examined six tort reforms which were adopted by other states between 1970 and 1997, and found that states which instituted the reforms experienced significant benefits.  In California, up to 152,000 jobs could be created if the state instituted similar reforms. Currently, California ranks 34 out of 50 states in terms of the quality of its tort liability system, according to the “U.S. Tort Liability Index: 2008 Report.” California is known as a state with weak tort rules, high costs, and high litigation risks, and is particularly vulnerable when it comes to “abusive” asbestos-related lawsuits. The Civil Justice Association of California has noted that California is often targeted for asbestos-related suits. The trickle-down problem is that new businesses tend to avoid setting up in states with weak tort rules, because they’re more vulnerable to litigation. That means fewer jobs and a weaker economy in states with weaker tort rules. Texas is an excellent example of what can be accomplished by strengthening tort rules. A recent report released by economist M. Ray Perryman indicates that legal reforms in Texas which limited civil litigation have resulted in a big boost for the state’s economy. In the report entitled “A Texas Turnaround: The Impact of Lawsuit Reform on Business Activity in the Lone Star Sate,” Perryman says that the boost is to the tune of $7.88 billion in annual spending, and almost 40,000 permanent jobs, in the city of San Antonio alone. The study examined the impact of legislative measures that limit the damages that can be awarded in liability cases against Texas businesses. The liability limits include damages awarded in asbestos-related lawsuits as well as other civil damages suits. The report notes some interesting facts about the relationship between civil litigation and the local economy. For example, Perryman’s report says that between 1999 and 2003, medical insurance premiums doubled for many doctors in Texas-because of excessive litigation and excessively large jury awards. The result, said Perryman, was that many medical insurance carriers had begun to exit the market, and medical specialists-including neurosurgeons, orthopedic surgeons, and obstetricians-had begun leaving the state. As a result, the shortage of qualified health professionals throughout the state had become severe. In 2003, however, Texas lawmakers adopted a constitutional amendment that capped ‘non-economic’ damages in medical cases to $750,000. The legislature also moved to reduce what Perryman called “abusive” asbestos and silica-related lawsuits. As a result, Perryman says, the entire state has benefited from a substantial economic boost. The report says that medical insurance rates became more competitive as a direct result of the reforms, and that doctors and hospitals used their liability insurance savings to expand and improve healthcare services. The lawsuit reform had the net result of creating hundreds of thousands of new jobs in Texas, and that around 8.5% of the state’s economic growth over the past decade is a direct result of the lawsuit reforms. Proponents of similar tort reforms in California say that such reforms could not only mean thousands of new jobs, but could also improve the state’s healthcare system and make health insurance more affordable. (Source: Asbestos and Mesothelioma News)