Tort reform and risk management-related legislation met a decidedly mixed reception in statehouses this year.
The pace of comprehensive tort reform has slowed, in part because so many states have already enacted wide-ranging measures. More targeted reforms have come into play, as lawmakers attempt to deal with such matters as circumscribing employers' liability when asked for job references or protecting physicians who volunteer their services at clinics for the poor.
"The trend in the last couple of years has been to deal with employer reference liability. That's continuing right now," said Sherman Joyce, president of the American Tort Reform Assn. in Washington.
Mr. Joyce pointed out, however, that at least three states-Alaska, Iowa and Montana-enacted major reforms during the most recent legislative sessions.
"I think it turned out to be a pretty good tort reform year," said Anne Allen, legislative counsel for the Risk & Insurance Management Society Inc. in New York. She added that legislative action on environmental and other risk management-related issues has been a "mixed bag."
Also, both Mr. Joyce and Ms. Allen pointed to continuing attempts to roll back tort reforms as cause for concern. Ms. Allen noted unsuccessful attempts to do so in Tennessee as "a warning to us not to let down our guard."
"We are clearly seeing that when broad-based civil justice reform is enacted, there's an immediate challenge in the courts," said Mr. Joyce. Such a challenge already has been launched in Illinois, with similar action expected in Ohio and elsewhere, he said.
"Most of our focus is on the Illinois Supreme Court, which will rule on the constitutionality of the major reforms passed in 1995," said Ed Murnane, president of the Illinois Civil Justice League in Chicago.
There have been a few minor and not very serious efforts to repeal the tort reform measures or expand them, though none has gotten very far, he said.
In Ohio, the focus is now on state trial courts where several lawsuits are challenging provisions of that state's new tort law, said Roger Geiger, the Columbus, Ohio-based director of the Ohio Chapter of the National Federation of Independent Business and president of the Ohio Alliance for Civil Justice.
"There will not be too many broad challenges to the tort reform law, but rather a whole bunch of individual challenges to specific provisions," he speculated. That approach will be "much more difficult for us to defend," he said.
"I suspect that there is no appetite for wholesale rewriting of tort reform," though lawyer-legislators have said they may temper what they have done, he added.
"We first and foremost are an advocate of legislative reform," said ATRA's Mr. Joyce, who called the state constitutional challenges "a very troubling development."
Elsewhere, on the risk management front, Ms. Allen said that an ongoing legislative attempt in North Carolina to set new reporting requirements in certain insurance fronting arrangements is of particular concern to RIMS. The measure passed the Senate but is currently stalled in a House committee.
She pointed out that several other states are "looking at deregulation," while the North Carolina proposal would increase regulation.
Following is a roundup of tort reform, insurance and risk management legislative activity around the states, based on reports by Business Insurance staff and coordinated by Washington Editor Mark A. Hofmann:
Maine became the newest U.S. captive domicile this month under a bill signed by Gov. Angus King. The new law also allows captives to write insurance "for controlled unaffiliated business," which is defined as business that has a contractual relationship with the parent of an affiliated company and follows certain risk management guidelines (BI, June 23). Maine's minimum capitalization requirements are $250,000 for single-parent captives, $500,000 for industrial insured captives and $750,000 for association captives.
The Maine Legislature did not pass any tort reform bills this year. But a measure that addresses insurance fraud includes a provision awarding attorney's fees and costs to the prevailing party in certain civil actions.
A major tort reform measure is currently being considered by the Joint Judiciary Committee of the Massachusetts Legislature. Provisions in the bill include: changing the joint and several liability system to a proportional system; tying judgment interest rates to U.S. Treasury bond rates instead of the current flat 12% rate; a requirement that in suits against professionals another professional in the field certifies that the case has merit; a 15-year statute of repose for product liability actions that incorporate a "state of the art" defense; standards for expert witnesses in medical malpractice actions; and a reduction of the statute of limitations in slip and fall cases to one year from three years.
There was no significant tort reform legislation in Connecticut, New Hampshire, Rhode Island or Vermont.
A tort reform bill moving through the New York Legislature would permit non-economic damages for survivors in a wrongful death suit. Currently, only damages for financial losses may be awarded. The measure has passed the Assembly and is awaiting action by the Senate Rules Committee.
Another Senate bill would allow policyholders to sue insurance companies directly for unfair claims settlement practices. This measure passed the Assembly and is pending in the Senate Rules Committee.
Another bill being considered by the Senate Rules Committee and the Assembly Insurance Committee would permit the establishment of captive insurance companies in the state.
Governor George Pataki has not taken a position on any of these bills. Any bills not acted on when the session ends in early July will be held until the Legislature reconvenes in January.
Medical malpractice legislation was enacted in Pennsylvania late last year. The law limits punitive damage awards to two times the compensatory award, requires an expert to certify the defendant deviated from the appropriate standard of care, institutes pretrial conferences for discovery and allows defendants to certify they were not involved in the care of the defendant, which allows them to be dismissed from the case.
The law also makes changes in the state's catastrophic loss fund. The rate physicians pay into the fund is now based on the scheduled rate set by the insurance commissioner, and not the discounted rate commonly paid by providers for their primary layer of coverage. Also, the attachment point for the fund was raised and a committee was created to investigate the total elimination of the fund.
Another bill awaiting the governor's signature would allow banks to sell insurance.
There were no significant tort reform measures enacted in Delaware, the District of Columbia, Maryland, New Jersey or West Virginia.
Tort reform efforts fell short in Florida but discussions regarding a package of reforms will continue this summer. Former House Speaker James Harold Thompson will act as a mediator in talks between a coalition of Florida business and insurance interests and the Florida Academy of Trial Lawyers as the two sides negotiate over reforms to be introduced in 1998.
Florida businesses and insurers pushed for legislation drafted by the House Financial Services Committee. The bill, which failed to gain final approval before the session ended May 2, contains a number of reforms, including barring lawsuits in product liability cases involving products more than 12 years old; eliminating vicarious liability of a company or person because of the intentional tort of another. The legislation also would eliminate vicarious liability against the owner of a product if a user injured by the product has insurance coverage that will indemnify; and clarify that punitive damages are only to be awarded for intentional misconduct or conduct for which it is highly probable an injury was caused. The bill called for allocating 75% of punitive awards to the state's Public Medical Assistance Trust Fund and the remainder to the plaintiff.
Insurers in Florida are required to follow standards under the National Assn. of Insurance Commissioners model acts on risk-based capital and material transactions as a result of the passage of a measure this year, which was allowed to become law without the signature of Gov. Lawton Chiles. The legislation is effective July 1.
Insurers will be subject to financial examinations by insurance regulators whenever it is deemed necessary under the new law. Previously, insurers were examined at least once every five years.
Several tort reform measures were approved last week but not signed in Louisiana, where the legislative session ended on June 23.
One bill provides that lawsuits filed but not pursued for three years would be considered abandoned, a reduction from the five-year period in current law.
Another sets out a clearer definition of what would constitute a certifiable class action lawsuit and set procedural requirements for class actions. Another measure would require that service of lawsuits be requested within 90 days of the filing of the suits. Current law provides no time limit.
Attention in North Carolina centered on an attempt by the Insurance Department to persuade the General Assembly to approve legislation that would subject certain fronting arrangements to new reporting requirements. The measure, which was opposed by RIMS and other business groups, won Senate approval but is currently stalled in the House. Little tort reform legislation has been considered during the current session other than competing House and Senate measures that would provide employers with some relief from liability when making employee references. The session is expected to conclude early next month.
There was no significant tort reform enacted in Alabama, Georgia, Mississippi, South Carolina or Virginia. Kentucky is not in session.
In Illinois, a bill that would expand the scope of the tort immunity act for local governments and their employees is still pending in a Senate subcommittee. Another measure that would provide damage recovery for an individual injured by a youth under 18 years of age is now pending in the House Rules Committee. The Illinois Legislative session will resume in the fall after a summer hiatus, and run until December.
In Indiana, an environmental insurance bill that would have enabled insurers to clarify policy language defining pollution risks was vetoed. That bill was a response to a May 1996 state Supreme Court ruling that held the state's standard insurance pollution exclusion was ambiguous and shifted liability to insurers (BI, March 10). Gov. Frank O'Bannon's surprise veto of the House bill last month enraged insurers, which had anticipated his support. They now say the veto will have a chilling, destabilizing effect on the writing of liability policies in the state.
No significant tort reforms were enacted in Michigan in the current session to date, which runs through the fall. A proposed bill would set July 13, 1995, as the starting point for the statute of limitations for product liability suits involving blood products and HIV/AIDS.
In Minnesota, a bill enacted on April 11 created civil immunity for alternative dispute resolution personnel.
The attention of Ohio employers is focused on preserving the major tort reform gains made in legislation signed last October, which went into effect on Jan. 27.
The law significantly limits non-economic and punitive damages (BI, Oct. 7, 1996). For example, it abolished joint and several liability for non-economic damages. However, joint and several liability for economic damages would be maintained for defendants more than 50% responsible for a plaintiff's harm. Defendants less than 50% responsible for a plaintiff's harm would be severally liable for economic damages and only pay damages in proportion to their share of liability.
The law also capped non-economic damages in severe injury cases, limited punitive damages assessed to large employers and limited the statute of repose to 15 years for most product liability claims and six years for most medical malpractice claims.
Thus far, no other major tort reform bills have been introduced into the Legislature.
Wisconsin legislators are considering a measure that would repeal a $350,000 cap on non-economic damages in medical malpractice cases established under a 1995 law. The bill is currently in the Senate Judiciary Committee, which has already conducted a public hearing on the measure. This year's session of the Wisconsin Legislature began Jan. 6 and continues through the end of the year.
Iowa Gov. Terry Brandstad signed a multipronged tort reform bill on May 29. The law establishes a 15-year statute of repose for product liability lawsuits-except in the case of certain silicon gel implants, asbestos, dioxins, tobacco, polychloride biphenyls and substances posing an unreasonable risk of injury; sets the interest rates on judgments equal to U.S. Treasury bills; limits future damages to present value. The law also establishes limits on how much a plaintiff can collect for loss of consortium and eliminates the traditional rule of joint and several liability for non-economic damages. The existing joint and several liability rule is preserved for actual damages when defendants' fault is between 50% and 100%
One provision of the legislation limits the ability of a minor who was under the age of 8 when an alleged act of medical malpractice was committed to bring legal action later than the child's 10th birthday.
Now, minors can bring personal injury suits until age 19. As a result, the new law treats minors over age 8 the same as adults: they have two years from the discovery of an injury, or up to six years from occurrence of an injury, to file suit.
Under the law, defense counsel would have greater access to relevant medical records in all malpractice cases, with some safeguards for patient rights.
North Dakota legislators approved several tort reform measures in the biennial session concluded April 29. Gov. Edward Shafer subsequently signed them into law.
One law requires a medical malpractice case to be dismissed without prejudice when the plaintiff fails within three months to obtain an admissible expert opinion to support the allegation of malpractice.
Another raises the state's maximum liability for claims against it to $1 million per occurrence from $750,000 per occurrence. The law also requires that the state will indemnify and hold harmless state employees acting within the scope of employment for any claims or judgments as long as the employees provide complete disclosure and cooperation in the defense of the claim.
Two new South Dakota laws that become effective July 1 are designed to discourage frivolous actions by plaintiffs and defendants in civil lawsuits.
The first creates a cause of action for frivolous or malicious claims or defenses in civil cases. The other requires courts to order the party whose actions were found frivolous to pay at least some court costs and reasonable attorneys fees.
Gov. William J. Janklow signed both measures March 11.
Kansas, Missouri and Nebraska did not pass any tort reform measures during the 1997 legislative session.
Arkansas Gov. Mike Huckabee signed one tort reform measure during the 1997 legislative session, which ended April 17. One bill extends volunteer immunity for any civil damages to physicians and health care professionals who are licensed by the state and render medical services free of charge to people unable to pay, or provide medical services for a nominal fee. The immunity does not apply if the act or omission was the result of gross negligence or willful misconduct.
But another reform bill, which would have limited punitive damages to the greater of three times the amount of compensatory damages awarded in an action, or $250,000, died during Arkansas' legislative session.
Arizona Gov. Fife Symington signed into law three bills that will reduce the financial burden of parties that are at least partially liable for creating hazardous waste sites. All become effective July 21.
One eliminates joint liability for the cost of cleaning up hazardous waste sites.
Another eliminates joint liability for related third-party bodily injury and property damages. The law applies to pending as well as future claims because it clarifies the Legislature's intent under a 1987 tort reform law.
That law eliminated joint and several liability in tort cases except those involving hazardous substance or waste sites. The Legislature's intent, though, was to preserve joint and several liability only under a 1986 statute that created a fund to clean up contaminated surface and ground water.
Under both laws, responsible parties now can be held liable only for their degree of fault. A state fund financed by several taxes will pay for the cleanup costs and third-party damages attributable to parties that are out of business or are financially unable to pay.
An environmental law in Arizona creates a pilot project designed to encourage the first 100 eligible owners of underutilized property with soil contamination to clean up their sites and make them economically attractive for development. Once a site has been remediated, the state will release the property owner from liability for any further action to remediate the known contamination at the site.
The state also anticipates the project could be the first step in developing a program that would release participating property owners from federal Superfund actions. Property owners who currently are embroiled in civil or criminal litigation with state or federal environmental regulators are ineligible. In addition, owners of property with groundwater contamination and owners with leaky underground storage tanks who have sought coverage from a special state UST cleanup fund are ineligible.
Another new Arizona law that provides insurers some regulatory relief could help standard lines insurers prevent some unusual risks from moving to the surplus lines market. Under the measure that becomes effective July 21, insurers no longer will have to go through the costly and time-consuming process of filing with the state Insurance Department so-called "A rates" for unusual risks that do not fall within a normal rating category.
On June 13, Oklahoma Gov. Frank Keating signed a bill that gives the insurance commissioner authority to determine which of about two dozen rating criteria are applicable to each line of coverage. The law, which becomes effective Nov. 1, also allows the commissioner to promulgate regulations that would allow insurers not to refile rates every four years if, for example, the rates are unchanged.
The Legislature killed several bills that it determined would reform tort laws. In 1995, it agreed to a three-year moratorium on tort reforms from 1996 through 1998.
Venue shopping will be restricted under a new law that makes it more difficult for residents of other states to file some types of lawsuits in Texas.
The legislation, signed by Gov. George W. Bush, allows courts to dismiss asbestos-related personal injury or wrongful death suits filed after Jan. 1, 1997, if defendants show that the action "would be more properly heard in a forum" outside Texas.
Asbestos suits filed between Aug. 1, 1995 and Jan. 1, 1997 can be heard if plaintiffs agree to certain stipulations, including limits on damage awards.
The act also applies to suits filed against railroad companies under the Federal Employers Liability Act and in cases alleging injuries caused during air transportation to or from Texas.
New Mexico enacted no significant tort reform legislation.
The Colorado Assn. of Commerce and Industry was successful in defeating a trial lawyer-supported bill, which would have allowed plaintiffs to recover from "deep pocket" defendants, regardless of their proportionate share of liability. Existing Colorado law places limits on such joint and several liability.
Despite heavy opposition from business interests, however, lawmakers did pass another Colorado Trial Lawyer Assn.-backed bill
that provides for increasing damage awards to reflect the effects of inflation. The measure, which is awaiting Gov. Roy Romer's signature, applies to compensatory damage awards in cases involving social-host liquor liability, dram shop liability and wrongful death. It also applies to non-economic damage awards in personal injury and wrongful death cases.
The Montana Legislature approved several tort reform and risk management-related measures during the session that ended April 23. Gov. Marc Racicot signed all of the bills into law.
One requires a unanimous jury verdict before punitive damages can be awarded. Another law states that in determining liability in a lawsuit, the fault of parties that have settled their portion of the lawsuit or those that have been released from the suit can be considered. A companion bill will become effective only if the first one is ever found unconstitutional by the state Supreme Court. The companion bill repeals joint liability but retains the new modified comparative fault liability system signed into law.
Still other reforms include allowing jury costs to be assessed against parties filing frivolous lawsuits; and allowing companies to do environmental audits of their own operations to achieve some level of immunity from administrative fines. The immunity does not apply if the company knowingly violates the law or if its action would be a criminal rather than a civil offense.
Another measure that passed establishes criteria for drug and alcohol testing of employees and prospective employees and provides for the confidentiality of test results except in certain circumstances.
A bill signed into law in Nevada requires the deposition of certain persons before holding the settlement conference required in medical and dental malpractice claims. The law becomes effective July 1.
In Utah, the Malpractice Against Health Care Providers Amendments law establishes a 180-day time limit within which the required health care provider pre-litigation panels must be conducted. The law, which went into effect in May, also provides that these panels need not be held if both parties agree to dispense with them.
No tort reforms were passed by the Idaho or Wyoming legislatures.
Alaska legislators met Jan. 13 through May 11. A comprehensive tort reform bill was passed that caps punitive damages at the greater of three times compensatory damages or $500,000. However, in cases involving commercial activities, the punitive award would be capped at the greater of $7 million, four times the amount of financial gain that resulted from the defendant's misconduct, or four times compensatory damages.
Punitive damages are to be established at a separate proceeding, and 50% of any punitive award goes to the state's general fund.
In cases of unlawful employment practices, punitive damage awards against employers are to be determined by a scale based on the number of employees working for the employer within the state.
Non-economic damages are limited to the greater of $400,000 or the injured person's life expectancy in years multiplied by $8,000. However, for specified injuries the limit rises to the greater of $1 million or life expectancy multiplied by $25,000.
The bill also establishes a 10-year statute of repose, expert witness qualifications, and disallows damages if the plaintiff was involved in the commission of a felony when the injury occurred. The law was sponsored by an employer group, Alaskans for Liability Reform. It takes effect Aug. 7.
Other legislation establishes two incentives for business to conduct voluntary self-audits of their compliance with environmental laws and regulations. The legislation provides immunity from civil penalties for violations if the noncompliance is discovered through a self-audit and reported promptly to the appropriate regulatory agency. The law also makes certain voluntary compliance reports privileged and not admissible as evidence or subject to discovery. The legislation was first vetoed by Gov. Tony Knowles, but he was overridden. The law takes effect Aug. 9.
Other legislation could provide protection for employers with established drug and alcohol testing programs. For example, an employer could not be sued for failing to test for a specific drug. Employees could not sue for damages resulting from test results unless the employer acts on results the employer knows are false positive. Gov. Knowles has until July 2 to return the bill to the Legislature.
In California, a bill that would have permitted third-party bad faith lawsuits against insurers was placed in the inactive file when supporters realized they didn't have enough votes to move it out of the Assembly.
The bill, which had the support of both the California Assn. of Consumer Attorneys and the California Applicants Attorneys Assn., also would have permitted injured workers to file bad faith suits against their employers' workers compensation insurers.
Named the Royal Globe bill after a controversial 1979 court decision, the bill could be resurrected next year (BI, March 17).
Meanwhile, case law set by the 1988 California Supreme Court decision in Moradi-Shalal vs. Fireman's Fund Insurance Cos. continues to bar such suits in the Golden State.
A bill that would lift the $250,000 cap on medical malpractice pain and suffering awards also was placed in this year's inactive file.
An effort by the California Assn. for Tort Reform to place limits on punitive damages also failed to reach a vote. A measure that would have given judges the authority to set punitive damage awards never passed out of committee.
Hawaii legislators passed four bills backed by the Hawaii Captive Insurance Council. Two became effective in April. One allows reciprocal insurance groups to set up association or risk retention groups. The HCIC hopes this law will attract non-profit organizations that now go to the Cayman Islands. The other new law liberalizes a captive's ability to write credit life disability policies.
The two other bills are awaiting action by the governor, who had until July 1 to act on them. One would broaden the insurance commissioner's latitude in adopting rules for the financial oversight and regulation of captive insurers. Another would create a full-time insurance administrator within the Insurance Division who would be responsible for monitoring and regulating the captive insurance industry. The legislation also would provide funds for support staff.
Gov. Ben Cayetano also signed a bill that changes the state's modified no-fault automobile insurance system. This new law makes an automobile accident victim's health care plan-rather than an automobile insurance plan-responsible for covering accident medical expenses above $10,000.
Oregon lawmakers were trying to wrap up their legislative session at press time. Legislation to make insurance fraud a crime of theft passed the Senate and moved on to the House. But as of June 23 it had not passed the House. The bill also would provide immunities for people reporting fraud and require insurers to provide information about fraud to government agencies.
In Washington, the Washington Liability Reform Coalition, representing a broad group of employers and associations, is backing a legislative package that attempts to restore the state's 1986 Tort Reform Act. Portions of the act have been eroded by court decisions, such as a health care statute of limitations that supporters believed applied to minors as well as to adults. But the state's Supreme Court eventually diminished the statute for minors.
The legislation also calls for early dispute resolution, and proposes that contingency fees not be charged against any amount offered in settlement by the defendant prior to the personal injury plaintiff obtaining an attorney.
Defendants in personal injury cases could make early settlement offers, and if made within 60 days of receipt of a demand for compensation, and accepted, then plaintiffs attorneys' fees would be limited to hourly rate charges or capped at 10%. If early offers are rejected, contingency fees could only be charged against net recoveries in excess of those offers.
For professional negligence or product liability cases, plaintiffs would have to obtain a certificate of merit within 90 days of filing a lawsuit. The certificate would establish that a qualified expert has determined the merits of the claim and that the reported negligence caused the plaintiff's injuries.
Current law imposes joint and several liability, but the legislation would allow defendants to be held liable only for their proportionate share of fault. The legislation was not adopted this year, but it will be automatically reintroduced next year.
Also in Washington, the governor vetoed portions of a bill sponsored by insurers attempting to strip Insurance Commissioner Deborah Senn of certain rule-making authority, such as her ability to adopt unfair practices rules.
However, insurers were successful in their bid for a use-and-file law, allowing them to begin using new rates or forms for commercial accounts before submitting them to the commissioner for review. The commissioner still will retain the ability to disapprove rates found to be excessive or inadequate. The law takes effect July 27.
Another measure signed by the governor requires all licensed insurers-except health, life, title, medical malpractice and credit-to institute and maintain an antifraud plan. The law takes effect July 27.