To Reverse Its Course, Louisiana Must Have Lawsuit Reform
Louisiana has a problem. With the release of each new job and economic growth report, we get more evidence of our state falling further behind the rest of the nation in nearly every category. Unsurprisingly, jobs are the most reported reason people are giving for leaving Louisiana.
While there are many culprits for the departure of jobs and opportunity that impacts everyone in Louisiana, a major driver of the problem is the ongoing abuses occurring in our state’s broken legal system.
A quick examination of the data on Louisiana’s legal system reveals the substantial costs it places on the state’s citizens and overall economy. A recent study measured the cost of Louisiana’s legal climate compared to an average state and found the abuses of our system costs each Louisianan more than $400 a year. This translated to more than 20,000 jobs lost and a billion in lost productivity annually. A Pelican Institute survey also recently found about half of all Louisianans surveyed either have personally lost a job or know a close friend or family member who has in the last 12 months.
Need a great example of the overwhelming burden our legal system places on our state and its citizens? Look no further than Farm Bureau Insurance, which covers people in six states. Louisianans only make up 17 percent of the policy holders across the 6 states. But Louisianans still manage to account for 51 percent of pending lawsuits against the insurer in those six states.
The problems with Louisiana’s legal system have existed for so long and can seem so vast that it’s difficult to know where to even begin when considering reforms. Fortunately, the Pelican Institute has developed the following solutions to fix Louisiana’s broken legal climate:
Eliminate Jury Trial Thresholds:
- PROBLEM: Louisiana’s jury trial threshold is $50,000, meaning you must claim at least $50,000 in damages to have your case appear in front of a jury. We have the highest threshold in the nation – by a lot – with the next highest state’s set at $15,000. This problem is leading to expensive settlements and increased insurance rates on all Louisianans.
- SOLUTION: Louisiana should join the 36 other states around the country in having NO jury trial threshold.
Stop the Practice of Direct Action:
- PROBLEM: Louisiana is one of only eight states in the country that allows insurance companies of defendants to be named in a potential lawsuit, a practice called “direct action.” This law has proven to make juries more likely to return larger verdicts, knowing deep-pocketed insurance companies will be the ones to pay rather than the individuals involved in the accidents.
- SOLUTION: It’s time to bring Louisiana in line with nearly every other state in the country and end allowing direct action against insurers.
End the Collateral Source Rule:
- PROBLEM: Louisiana’s collateral source rule allows plaintiffs to sue to recover medical costs already paid by their health insurance company. This turns the legal system from a mechanism of ensuring people are compensated for costs they didn’t incur themselves into a profit-generating machine.
- SOLUTION: End the collateral source rule to refocus the legal system and ensure it serves to compensate individuals fairly and lessen the overall costs of the system on all Louisianans.
End State and Local Sanctioned Coastal Lawsuits:
- PROBLEM: Both the state and local parishes are using lawsuits against energy companies as mechanisms to fill their coffers. Meanwhile, these lawsuits caused over 2,000 jobs lost from 2012 to 2014 alone and continue to cost tens of millions of dollars in annual economic losses. Job creators will not come to Louisiana if we do not have a clear, consistent and fair legal framework.
- SOLUTION: End these lawsuits to create a better legal climate for our businesses. Too often this fear of lawsuits causes companies to leave Louisiana and take their jobs and opportunities with them.
While majority of Louisianans agree these common-sense reforms are necessary to improving Louisiana’s legal climate, there will certainly be opposition to the proposed fixes. Those benefiting from Louisiana’s broken legal system will try to distract and dissuade citizens and the media from supporting these critical reforms. Through anecdotal evidence and emotionally charged appeals, they’re already working hard to cast the blame for our state’s legal system costs onto others.
In many cases, they are proposing their own “solutions,” which will not lower the cost burden and instead, make the situation worse. For example, by levying new regulations on auto insurers, they will drive insurers out of the state and empower those who stay to raise prices. Louisianans must keep in mind that those representing the entrenched status quo have no intention of doing anything to address Louisiana’s myriad of other legal issues not pertaining to auto insurance.
Louisiana is a state that is struggling yet there is still a path forward to reverse the negative trends. If we want to make our state a place that creates and encourages the growth of jobs and opportunity for its citizens, we must enact legal reform.