Injuries have many causes,
including economic activities: consumers are injured or killed by defective
products, workers are hurt on the job, train passengers are injured by
derailments, and patients are harmed by medical errors. Markets provide
broad incentives to control the number and costs of such injuries. For
example, employers can save on wage costs by making jobs less hazardous;
drivers with good safety records pay lower insurance premiums; and enhanced
safety features can give a product a marketing advantage over its
competitors. In addition, the insurance market responds to people's desire
to reduce the financial uncertainty associated with potential injuries.
Society uses three tools to augment the safety incentives
and insurance opportunities provided by the market: regulation, public
compensation programs, and tort liability. In particular, the U.S. tort
liability system is intended to reduce the number of injuries--by providing
incentives for individuals and firms to take appropriate care--and to
compensate those who are harmed.
"Tort" is defined very broadly in law as an injury to
"one's person, reputation or feelings" or damage to "real
or personal property."
Tort liability is the court-enforced obligation of a "tortfeasor"
(injurer) to pay for a victim's losses.
Tort law is almost exclusively contained in state law, and
the large majority of tort cases are filed in state courts. Not
surprisingly, therefore, most past efforts to reform the tort liability
system in the United States have taken place at the state level. In
particular, most states have adopted one or more reforms favoring defendants
during the past 30 years--especially in 1986, when a perceived insurance
crisis led to 41 new state laws. The courts have also taken action at
various times: recently, for example, the U.S. Supreme Court reiterated an
earlier ruling that the Due Process Clause of the Constitution establishes
limits on punitive damages.
Still, many critics of the current tort
system say that additional federal action is needed for several reasons. At the
general level, they argue that the system's costs are too high, particularly
because of excessive transaction
compensation to plaintiffs
attorneys) as well as excessive and arbitrary awards for noneconomic losses (pain
and suffering) and for
punitive damages. Such high costs sometimes have perverse negative effects on
safety, they argue--for example, by discouraging firms from conducting safety
research that could create a legal
or by raising the prices of risk-reducing goods and services, such as medical
care. Critics also contend that plaintiffs frequently bring frivolous lawsuits
when they know that the defendant is inclined to settle out of court to avoid
the costs of litigation.
The tort system's
critics also take issue with specific types of cases. They argue that medical
malpractice claims are contributing to a crisis in the cost and availability of
certain health care services, that claims for exposure to asbestos by people who
show no evidence of illness are burdening the courts and pushing firms into
bankruptcy, and that misuse of the class-action mechanism is allowing local
judges and juries who are biased against distant corporate defendants to bring
verdicts that have damaging national implications.
Supporters of the current tort system question the factual basis
of some of those criticisms. They note that the number of tort cases filed
nationwide has been falling since 1996. Moreover, they say, large awards for
punitive damages are rare and are often reduced before payment is made. They
further argue that the costs of the tort system are worthwhile given the
system's contributions to the social goals of compensating victims, holding
injurers responsible for their actions, and improving safety. Supporters of the
present system also maintain that proposed reforms are generally too broad and
that fewer negative consequences would occur if the Congress allowed the states
and the judiciary to address any real problems that exist.
Medical Malpractice Reform
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