Reviewed by Anne M. Dooley and Bradley J. Nicholson*
New Haven: Yale University Press, 1997
This book provides an excellent starting point for anyone, especially
a nonlawyer, who wishes to understand the debate over tort reform.
The authors, professors of law at Syracuse and Virginia, wrote this
book not to defend any particular thesis about the tort system,
but to educate the public about the strengths and weaknesses of
our legal framework for compensating personal injuries and to outline
the most significant proposals for improvement. They have performed
this task admirably well.
To give structure to the book and to provide a human element to
the discussions of legal theory, the authors tell the tale of a
young lawyer with a family who, having risked his reputation within
his firm on an ill-fated (apparently expensive contingent-fee) discrimination
case, consoles himself with drink after a judge dismisses the case.
While on his way home, he falls before a subway train and is seriously
injured. Driven to desperation by rising bills and loss of income,
the young man sues the driver of the train -- in addition to some
more deeply-pocketed entities -- seeking compensation for his injuries.
The authors' approach is an effective one, permitting them to discuss
nuts-and-bolts topics such as how plaintiffs' lawyers choose clients
and how claims are negotiated with insurance companies, thus providing
an effective foil to the more theoretical discussions about what
kinds of legal schemes would best provide just compensation for
people's injuries.
The authors recognize that compensation is one of the most widely
debated issues in tort law. Under the current tort system, plaintiffs
seek payment for their medical expenses, even if they were paid
by a collateral source, lost income and non-economic damages such
as "pain and suffering." Viewed by some as advancing social
welfare by sharing responsibility for financial distress, transferring
the injured person's loss to others is clearly a redistribution
of income. Assuming this is a legitimate goal, tort law fails to
achieve it in several ways. First, most injured people are never
compensated as they have no legal claim based on fault and causation;
only a small group of persons injured by someone else's fault will
ever receive close to full compensation for their injuries. Second,
payments are not absolutely necessary to ease suffering when there
are other sources of compensation available such as health and disability
insurance and workers' compensation. Third, compensation is often
excessive. It is a kind of forced insurance against intangible injuries
for which people do not normally insure themselves. Also, payments
are relatively higher for minor injuries due to factors such as
inflated claims and exposure to bad-faith claims. Fourth, individualized
compensation is regressive, favoring wealthier persons; the poor
pay the same tort insurance costs as everyone else. Last, extravagant
transaction costs result in plaintiffs' receiving less than half
of the total money spent on the average tort suit.
In theory, the authors note, the economic threat of tort liability
accurately deters behavior that risks injury with its image of "the
cop on the beat." As regulator of the marketplace, tort law
adds the costs of avoidable accidents to the cost-benefit analysis
of behaviors, increases the cost of dangerous products and activities,
thereby dampening demand for injury-producing items, and encourages
the development of safer ways of living. Critics see other effects.
They consider sanctions weak (although they may be significant to
relatively rational actors such as businesses and insurance companies.)
They point to unclear communication about tort rules, dangers of
behavior and uncertain liability costs; this can be ameliorated
by information and experience. They claim unchangeable behavior,
both human and organizational, is unresponsive to the threat of
sanctions largely because it is non-conscious to potential penalties.
Tort-prone behaviors can be modified, however. Finally, countertheorists
say the threat of tort liability discourages innovation, although
their evidence is mostly anecdotal.
Evidence of the validity of tort's deterrent theory is mixed, according
to the authors. It is strongest regarding auto accidents, weakest
regarding environmental hazards. Would-be reformers allege other
factors are likelier than tort law to enhance safe behavior, including
criminal law, self-preservation, government regulation, individual
and organizational morality and the market. This last depends on
how well informed people are about the safety of goods and services.
Tort law may complement some of these factors, however.
In addition to legal fees and expenses which typically meet or
exceed the amount of compensation actually received by injured parties,
there are social costs due to the characteristic delay and uncertainty
of the tort system. Other compensation systems have much easier
determinations and correspondingly lower administrative costs. Tort
law must decide issues of fault, causation and damages on an individualized
basis with no concrete rules to follow. Plaintiffs face a trade-off
between access to legal services and full compensation for their
injuries.
The authors list several criticisms of tort as a system of corrective
justice. Payment from the actual wrongdoer is rare, although he
or she may suffer unpleasant consequences. Similarly injured people
without an arguable tort claim are not compensated at all. There
is great inconsistency in decisions through individualized court
judgments, and damages disproportionate to the defendant's wrong
are often assessed. In addition, critics claim that the system maintains
and may actually contribute to distributive injustice. There are
also differing concepts of justice. But the authors also note the
advantages of tort over other compensation systems, including access
to the courts and equality of representation, where court proceedings
are supposed to be infused with the idea of justice.
The book outlines three major categories of reform plans which
have been implemented in varying degrees. Each must resolve questions
regarding eligibility criteria, amount of compensation, source of
funding and type of administration. "Tinkerers" propose
keeping the system and making incremental, sometimes one-sided,
changes in tort rules, for example, abolition of collateral source
rules and establishment of limits on non-economic damages. Class
actions, which arose in response to mass or toxic tort cases, are
a type of tinkering with the current system. Another suggested reform
of this kind would be to hold institutions liable for actions of
individuals in medical malpractice cases.
"Shakers" want to discard the system as we know it and
substitute new compensation systems. These would be no-fault plans
focused on compensation without payment for pain and suffering,
funded by taxes and levies on employers. The strengths of these
initiatives are reduced transaction costs, higher compensation for
economic losses and speedier resolution of claims. Ideas of justice
and deterrence would be abandoned along with familiar common law
tort rights. There are no guarantees that benefits would not be
reduced in the future.
"Movers" envision a combination of alternative compensation
systems and tort law. Most auto no-fault plans in the United States
today fall into this category. One drawback is that claims are often
inflated to allow tort claims above a certain threshold. Consumers
could waive common law rights for savings by choosing no-fault policies
for economic losses only. A "neo-no-fault" plan developed
by author O'Connell is potentially applicable to all kinds of accidents.
In this early offer/choice plan, payment for economic loss and reasonable
legal fees would encourage early dispute resolution while continuing
to discourage unreasonable behavior. Limited contingency fees would
avoid abuses by plaintiffs' lawyers and reduce incentives for defendants
to stall.
In closing, we think that while many people would benefit from
reading this book, the undergraduate contemplating law school might
benefit as much as anyone. Many attorneys eventually find themselves
practicing some kind of tort law. The authors present a realistic
portrait of how the legal system works in attempting, and sometimes
failing, to provide compensation to the injured in a rational and
efficient manner. Many idealistic would-be law students would do
well to think about the costs of the tort system that they may one
day shape as lawyers.
*Anne M. Dooley is a former claims adjuster for a major insurance
company and Bradley J. Nicholson is the Vice President of Publications
for the Federalist Society's E.L. Weigand Litigation Practice Group.
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