Friday, August 08, 2008

Liability and fault

DagoodS has more to say about the civil justice system, in response to More on peppers.
Our civil justice system is not always about determining fault.
To clarify (and be persnickety), the entire American Justice system incorporates different forums; some are extremely concerned with fault, others may only slightly touch on fault. For example, the criminal justice system is firstly and primarily focused on fault: Did the accused commit the crime? After fault is determined, however, the system then focuses on punishment on the crime, regardless of the extent of fault.

In a divorce, however—fault may never come up. The systems concentrates on allocation of assets & liabilities, as well as assigning custody, parenting time, support, pension rights, etc. In a Worker's compensation action, the concept of "fault" by the employer doesn't exist—the question being whether the person was injured at work, and the extent of their injuries. In a Social security claim, the question is whether the person is disabled. Again, no fault.

In a civil suit for damages, however, determining fault is always an issue. It is the liability leg of the three-legged stool. In the perfect model of what was intended, if the defendant is determined not at fault, then the defendant must never have to pay. Whether it is you, Wal-Mart, whoever.

Obviously we do not have a perfect model—it is in tension with economics. Take the situation of a person falling at your house. Insurance companies are well-aware there is a certain likelihood that person will initiate a suit. (People range along a spectrum from suing at the drop of a hat to people who would never sue.) They are also aware the vast majority of injuries from a slip-and-fall are minor: a cut requiring stitches or a sprained ankle. Therefore, many insurance polices include a provision that the first $1,000 of medical bills will by paid by the insurance.

Certainly the motivating factor is litigation, but this is primarily an economic decision on the part of the insurance company. They understand by the time we weed out those who won't sue, and those who receive $1000 worth of medical treatment, the cost of such payment is far less than refusing to pay anything. Simply an economic decision motivated by our system of litigation.

People are unaware the pervasive and prevailing effect insurance has on litigation. Let me give you two examples, both from Michigan. (And I should note, I am only licensed in Michigan. Each state is different regarding their laws, and you should NEVER assume my advice is applicable to your state. Unless you are in Michigan. *grin*)

The insurance companies lobbied for a law that says your own automobile insurance MUST pay for all medical bills arising out of an automobile accident regardless of fault. Even if you are stupid enough to smash yourself into a tree, and receive a significant head injury requiring years of rehabilitation—the insurance company would have to pay for it.

Why would they agree to such a thing? Because the law also states the insurance company does not have to pay for pain-and-suffering unless your injuries reach a certain level. Simply put, the cost/benefit of agreeing to pay for medical bills instead of pain-and-suffering was so high, the insurance company desired it.

In Michigan, if you are in a car accident—not your fault—and receive a broken arm; you will get your medical bills paid and lost wages and that is it. No "pain and suffering." No million dollar verdict.

Now that the insurance companies have that in place, they are attempting to convince John Q. Public that the costs of paying medical bills for life is driving up automobile insurance, and they are lobbying to reduce that! Clever, really.

The second example is medical malpractice. The insurance companies said they have to charge doctors so much, because of these huge verdicts. Doctors stopped practicing because of insurance costs. What to do? Again, convince John Q. Public that what we need, to protect our doctors, was a "cap" or "limit" on these huge verdicts. Makes sense, right? Insurance rates could go down, doctors can afford to practice, and life returns back to normal. The law passed.

(You could almost HEAR the citizens say, "Take that, you McDonald's-coffee-spillers wanna be. No high verdict in Michigan for ya!")

But think about it. Now, if some doctor or hospital does something terribly wrong, and you are horribly injured for life—you are the person who suffers from this law! Not too long ago there was a mutli-million dollar verdict in favor of the plaintiff. Reduced to $350,000 because of the cap. The ONE person we would want to protect (those hurt the worse) is the ONE person who can no longer recover!

What the insurance company failed to tell the public was that it was the $100,000 cases, the $75,000 cases, all adding up, which continue on. But instead of ever being hit for a big number, the company can hold up the cap as a shield, and not have to pay. Amazing.

Finally, you accurately state that if the cost of defending a case exceeds the amount of damages, it is economically sound to pay the damages. On a single case basis, this is correct, but due to the number of cases defended by an insurance company, or large companies—this does not always work out.

Imagine I was going to sue you, The Barefoot Bum, for making slanderous statements about me on your blog. I wanted $100 for my crushed feelings. You figure out it will cost you $1,000 to defend the matter. Removing principle from the equation—on a solely economic basis you would be wiser to pay me off. Stupid to pay $1,000 to save $100.

Yet there is also the concern (again ignoring principle) that if you pay me $100, all those other bloggers you have written viciously about, will come forward and sue as well. Now you may have 10, or 20 or 100 people all clamoring to come to court. At this point, even on an economic scale, you might consider defending my case and spending the $1000 as a deterrent and precedent to those other possible 10, 20 or 100 potential cases.

If people hear, "DagoodS lost his slander suit against The Barefoot Bum" they will be less inclined to initiate their own.

Using our Wal-Mart situation, regardless of how much Mr. Grubb is requesting, the store may choose to defend it more out of concerns of all the other potential Mr. Grubb's out there. Again, economics has a large impact within our legal system. Ideally, it should be case-by-case basis. Realistically, it is not.

The best example are the cigarette cases. Why the cigarette companies defended them so vigorously. Not because of the one case of one person with lung cancer, in which a settlement may have been feasible. Rather because of all those potential smokers out there, who if one person hit, then there would be another and another and another…

To be honest, it should shock my conscience that Wal-Mart should have to pay for something it did not do wrong. It is not how our system is supposed to work. However, I am equally aware that the Wal-Marts and General Motors and Insurance companies have no conscience. They are lobbying and litigating as hard as they can—not for concern over the consumer—but for their bottom line. They have no intention of "doing the right thing." Wal-Mart is not stepping forward and saying "You know what? In Mr. Grubb's case we didn't do anything wrong. However in Mr. Smith's case we did, and we paid appropriately. In Mrs. Jones' case we are wrong and will pay appropriately."

Nope, they fight them all. McDonald's (as you know) had claim after claim after claim in which a person was burned with hot coffee. When Ms. Liebeck wanted to settle for $20,000 did McDonalds develop a conscience and pay up? Nope—it fought it.

After seeing too many cases to count in such a nature, my conscience has become pretty numb to the Wal-Mart's of the world paying for something they didn't do wrong. They haven't paid on so many in which they DID do something wrong, it is hard to generate up sympathy any more.

DagoodS is a practicing lawyer and the proprietor of the most excellent blog, Thoughts from a Sandwich, and in grave danger of becoming a regular contributor to The Barefoot Bum.

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