Stateline.org Commentary on “Tort Reform”

Courtesy of a friend, here’s a link to an interesting overview article on the politics and economics of "tort reform" in our various states. The article is from Stateline.org., which is an interesting group focused in state law and policy. The article provides some insights into the current state of the "tort reform" battles.

The bottom line of much of "tort reform" is driven by the reality that insurance companies want to eliminate material uncertainty, and to have firm limits on recoverable amounts and when statues of limitation are open or closed. By creating absolute limits, financial engineering is made much simpler, and thus it’s easier to generate a predictable profit. The limiting goals make sense from the perspective of an entity such as an insurance company. An insurer presumably seeks to maximize cash flow, and obtain a higher stock price based on a multiple of free cash flow or earnings.

The goals of insurers, however, conflict with the goals and needs of persons exposed to "carcinogens." Thus, a person exposed to a "carcinogen" faces uncertainty about whether or when they will become sick. And, sometimes, the person cannot know how sick they will become. Persons with actual, meaningful exposures may rightly ask why they are forced to bear the burden of the uncertainty created by exposure to a "carcinogen."

Unfortunately, extreme lawsuit stories (on both sides) are often used to divert legislators from understanding and weighing the real issues. Hopefully the debates will become less extreme and will improve in quality.

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