The Case for Tort Reform in Louisiana
Everyone has heard the commercial that asks if you are tired of spending so much of your hard-earned money on car insurance.
The commercial suggests switching insurance companies, and while that could certainly help, Louisianans would probably save a lot more by moving to a new state.
The Pelican State was recently reported as having the fourth most expensive automobile insurance premiums in the country, costing an average of $1,774. The same report found Florida and West Virginia also rank among the most costly rates while New Hampshire, Iowa and Idaho have some of the least costly.
Interestingly, the U.S. Chamber Institute for Legal Reform’s 2015 report shows these six states rank similarly in terms of their liability systems.
The report found New Hampshire, Iowa and Idaho have some of the best legal climates in the nation while Louisiana, Florida and West Virginia have among the worst. In fact literally the worst in regards to Louisiana and West Virginia, which rank 49th and 50th.
These findings are no coincidence. While insurance rates are determined by several factors, liability systems are certainly one of them. A look at the U.S. Chamber Institute for Legal Reform’s ranking of Louisiana shows how legal climates and insurance rates go hand in hand.
Louisiana’s Legal Landscape
The U.S. Chamber Institute for Legal Reform’s report evaluated 10 key elements to determine the quality of a state’s liability system:
- Overall treatment of tort and contract litigation
- Having and enforcing meaningful venue requirements
- Treatment of class action suits and mass consolidation suits
- Timeline of summary judgement or dismissal
- Scientific and technical evidence
- Judges’ impartiality
- Judges’ competence
- Juries’ fairness
Louisiana ranks in the bottom five – or technically bottom four – in every element. How do these rankings playout in real life?
The state’s poor venue requirements allow trial lawyers to seek out judges – forum shop – known for awarding large settlements to plaintiffs (trial lawyers’ clients). Because Louisiana ranks 50th in terms of judge impartiality, a plaintiff-favoring judge probably isn’t too hard to find. And with that, since Louisiana judges also rank 50th in terms of judge competency, trial lawyers likely have a pool of judges that tend to over-award plaintiffs out of ignorance.
You don’t need any more examples to play this simple game of connect the dots. A poor legal climate is a trial lawyer’s haven and a defendant’s – an insurance company in the case of a vehicular case – hell.
In Louisiana, trial lawyers can expect to win large settlements and insurance companies can expect to pay large settlements. Thus, automobile insurance rates are high to foot costly legal bills.
Unfortunately, Louisiana’s legal environment does not only affect car insurance premiums. A poor legal climate has a slanted effect on all civil cases, causing economic problems across the board.
Businesses are less likely to open and expand out of fear they will be facing frivolous lawsuits and paying expensive settlements. With that, job creation is stunted. The Louisiana Lawsuit Fairness Coalition (LLFC) noted:
“Louisiana’s poor legal climate costs the state approximately 50,000 new jobs every year. Businesses don’t want to enter into such an unpredictable, litigious climate. The current state of Louisiana’s court system is slowing down new investment and business expansion.”
Bad liability systems also make it harder to access healthcare since there is typically a higher number of malpractice suits and an increase in defensive medical practices. And as a whole, the cost of living in a poor legal climate is higher since, like in the case of car insurance, the potential costs are shifted onto the consumer.
Fortunately, the legislature can pass several laws that will improve the quality of Louisiana’s legal climate, make living in the state more affordable, and improve the business climate.
It is clear that a poor ranking in just one of the elements examined by the U.S. Chamber Institute for Legal Reform’s report can significantly help trial lawyers win big. Since Louisiana ranked poorly in every element, trial lawyers are able to really stack the deck against defendants.
Here are a few examples of easy reforms that would go a long way in improving Louisiana’s liability system:
1) Louisiana should implement stricter venue requirements. If trial lawyers are required to use jurisdictions that link to either the location of the accident or the parties involved, the number of settlements awarded from biased or incompetent judges would be reduced.
2) Louisiana should use jury trials more frequently. The Pelican State has the highest threshold for a jury trial in the nation at $50,000. For reference, the second highest threshold is in Maryland at $15,000, while 36 other states have a threshold of $0.
Limiting the use of a jury means trial lawyers are rarely required to sell their case to anyone other than the judge they selected. Like increasing venue requirements, using a jury trial would curb the amount of damages awarded by a single judge’s – the judge – emotions or incompetence.
3) Caps should be placed on non-economic damages. A plaintiff can be awarded three types of damages: economic, non-economic and punitive.
As the name suggests, economic damages are awarded to reimburse economic loss, non-economic damages are used to financially compensate for subjective loss and punitive damages are awarded to punish the defendant.
While the amount to be awarded for economic loss is pretty easy to calculate, non-economic damages are not so clear. To ensure huge damages aren’t awarded frivolously, many states have capped the amount that can be awarded.
While Louisiana does cap the amount of non-economic damages awarded during medical malpractice suits, it still lags behind the many states that cap non-economic damages awarded in every kind of legal case.
“[C]aps upheld over the long run can have the affect of tempering insurance premiums and encouraging economic activity…”
4) Legacy lawsuits should be controlled. Put simply, a legacy lawsuit involves a person who lives on property that was previously occupied by an oil and gas company suing said company for allegedly – no evidence of damage is necessary – contaminating the land.
The plaintiff can sue every company that occupied the property prior to them for massive amounts of money, money that is not legally required to go towards the cleanup of the land.
Legacy lawsuits are detrimental to the job market in Louisiana. Costing oil and gas companies millions, it is no wonder nearly 10 CEO’s announced late last year that they were moving their businesses out of Louisiana due to its horrible legal climate.
Legacy lawsuit reform would entail changes to evidence, and the amount and types damages awarded. The changes would keep oil and gas companies in the state, ultimately boosting the economy on many levels.
If Louisiana wants to lower its cost of living, attract more businesses and ultimately improve its economy as a whole, tort reform is necessary. These simple reforms are nothing radical. They would simply bring Louisiana up to speed with the rest of the nation.
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