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Lawsuit abuse dispute breaks open

Alabama has a history that many in the state believe we shouldn’t be proud of – the history of extremely high punitive damage awards in lawsuits tried in Alabama courts.

&uot;For years, Alabama has been known as ‘tort hell,’ local attorney Richard Hartley said. &uot;But in 1999, the legislature passed Section 6-11-21 of the Alabama Code that limited the amount of punitive damages that can be awarded in a civil case to ‘three times the amount of the compensatory damages or $500,000, whichever is greater.’

The section designates a cap of $50,000 for small businesses and $1,500,000 for cases where physical injury is involved.

Hartley serves as the legal counsel for the Alabama Nursing Home Association, an organization that sits right in the middle of the current lawsuit abuse dispute.

&uot;Although the state has limits for most civil cases,&uot; he said. &uot;This only applies to cases where the victim is alive. There is no cap for lawsuits that are brought on cases for wrongful death. In a wrongful death case, the jury can award for punitive damages only and can award any amount it sees fit.&uot;

For the record, compensatory damages are those amounts of actual economic loss someone suffers – if you had to pay $1,000 for damage caused by a company’s product, a jury would award you $1,000 to recover that cost.

Punitive damages are amounts that are awarded for non-economic damages, such as pain, suffering or emotional distress.

In dispute are cases where the punitive damages far exceed the actual economic loss the victim suffered.

For example, verdicts listed on the law firm Beasley, Allen, Crow, Methvin, Portis and Miles’ website are for amounts ranging from $1 million to $580 million. The site lists 66 verdicts that were $1 million or more – all for lawsuits filed by this one firm.

To further the case of businesses, such as the beleaguered hospitals and nursing homes which are under the trail lawyers’guns these days, is a study conducted by the U.S. Chamber of Commerce that says Alabama is listed as the third worst state in the nation for litigation environments.

The study looked at the areas of tort and contract litigation, treatment of class-action suits, punitive damages, timeliness of summary judgments/dismissals, discovery, scientific and technical evidence, judges’ impartiality and competence and juries’ predictability and fairness.

The participants in the study were in-house counsels and other litigators at public corporations. Each state was ranked from 1 to 50 (50 being the worst).

Alabama received 43 or more for every category listed above. It’s overall ranking was 48.

Another notch in the belt of those fighting lawsuit abuse was a recent Supreme Court decision in which the nation’s highest court overturned a verdict handed down against State Farm Mutual Automobile Insurance Co.

The jury in the case awarded $145 million to Curtis Campbell, who sued State Farm for that amount after the company refused to pay a $1million claim to Campbell, who was found guilty of causing the death of one man and disabling another in a car accident.

Supreme Court Justice Anthony Kennedy wrote for the majority, saying that Campbell was not entitled to the $145 million when his actual loss was $1 million.

Justice Ginsberg went on to write that the large award in the case &uot;indicates why damage-capping legislation may be altogether fitting.&uot;

Hartley said the nursing home association feels strongly that caps are imperative if nursing homes and other related service businesses, such as hospitals and physical rehabilitation organizations, are capable of stay in business.

&uot;The repercussion of these outrageous punitive damage awards is that it is directly tied to the businesses’ insurance costs,&uot; the attorney said. &uot;As those cost rise, so do the costs that have to be passed on to the patient.&uot;

Hartley said one point many people miss when they consider the pros and cons of large punitive awards is that when these verdicts are handed down against the nursing homes or hospitals, it’s the insurance companies who have to pay those awards through the businesses’ malpractice insurance policies.

&uot;As many as 85 percent of the current nursing home residents are Medicaid recipients,&uot; he said. &uot;When the insurance companies pay those awards, they, in turn, raise their premiums. From 1992 to 2002, the insurance cost per bed in nursing homes went from $400 to $3,000. When premiums go up, so do the amounts that the nursing homes recover from the federal government through Medicaid. So the federal government is forced to increase our taxes to cover the increased cost to Medicaid.&uot;

What does that mean to you and me? Hartley asks. &uot;We are the ones paying those taxes – so the bottom line is that we are all paying for those large punitive damage awards that are handed down for wrongful death cases.&uot;

Another problem for the nursing homes and hospitals is that these awards are forcing more and more insurance companies out of the malpractice insurance business.

&uot;It is not only more expensive to pay for malpractice insurance, but it also is getting harder and harder to find companies that even offer the insurance,&uot; Hartley said. &uot;They either have to pay the high premiums and risk going out of business or go without the insurance and risk getting sued and being forced to go out of business anyway.&uot;

The trial lawyers have another take on the situation.

The Beasley Allen law firm, which has handled a majority of the large award cases in the state, says that the insurance companies’ problems are not the result of these verdicts, but mismanagement of investments by those companies. The firm also alleges that the nursing homes themselves are misleading the public about the true state of their finances.

&uot;What most Alabama citizens don’t know is that the owners of the nursing homes in our state have a monopoly under current Alabama law that sets the number of beds that can be offered in the state,&uot; Beasley wrote in his current Jere Beasley Report. &uot;The Certificate of Need process that governs new facilities is locked up and must be changed.&uot;

Beasley’s report claims that the nursing homes could sell out at any time for a huge profit, and should be spending money that is currently spent on advertising campaigns and high-priced lobbyists on increasing facility staffs and improving resident care.

In an attempt to settle the matter, Hartley and other attorneys representing nursing homes in the state have written four bills that would set caps for punitive damages in wrongful death cases at $250,000, establish a review panel that would approve the viability of cases to be filed in court, establish patients’ rights and designate a primary care person with legal rights to make decision, for nursing home residents.

These bills are before three Senate committees right now, but as of this week, had not been voted on.