In an age when corporations seem to have more and more power over our lives and yet are less and less accountable for the harm they do, tort reform has become a proverbial “hot-button” issue. One one hand, those who push for tort reform – which essentially sets limits on what a court can award to a plaintiff in a civil lawsuit – say that such reform will make business more competitive and lower expenses for consumers. On the other hand, consumer advocates say that limiting court awards and penalties for corporate wrongdoing absolves these companies from accountability even more at a time when big business seem to be running roughshod over society.
What are the rational facts, here? And how would this affect your auto insurance, if at all? Right now, property and casualty insurers in North Carolina are making an appeal to consumers as the state legislature moves forward to change the way courts make monetary awards in civil lawsuits.
Liability Models
In many jurisdictions, when a plaintiff (the injured party) wins a lawsuit against a defendant, the jury must decide how blame for the accident is assigned. For example, suppose you are out driving on a stormy day and skid into an illegally parked truck on the side of the road. While the owner of truck bears liability for having his vehicle parked in an unsafe manner, the defendant’s lawyer might argue that based on the police report, you had been driving too fast for conditions and thus were partially at fault – say, 40%. In this case, if the court decided you were entitled to $100,000, you would be awarded this amount less $40,000.
This model is known as comparative negligence. It is used in all but four states.
North Carolina’s current law uses a standard known as contributory negligence. In the hypothetical case presented above, you as the plaintiff might be entitled to nothing, even if you were only 1% at fault (for example, you were momentarily distracted).
The Arguments
The insurance industry argues that going to the comparative negligence model would raise rates significantly for North Carolina consumers – because insurers (who are often defendants in such cases) would wind up paying out more. They would thus be forced to pass these expenses on to the consumer.
On the other hand, a trial lawyers’ organization, the North Carolina Advocates for Justice, point out that according to actuarial evidence, insurance rates have in fact not gone up as fast in neighboring states that moved to the comparative negligence models.
It is interesting to note that both sides have something to gain or lose here if/when the law changes. Litigators usually take liability lawsuits on contingency – meaning they get a percentage of any court award (usually 33%). If their clients lose, they get nothing.
On the other hand, the North Carolina Federation of Insurers is currently spending $30,000 a week on media advertising to convince the public that any change in the law would not be in their best interest – and the North Carolina Chamber of Commerce has openly stated that they would support any changes in the law only if it favored defendants.
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