A white paper on the US tort system highlights the high cost and continuing deterioration of our tort system (see here):
The American legal system remains the most expensive civil justice system in the world, costing more than double that of other industrialized nations. It is also unpredictable and, by many measures, unfair.
The study offers two remedies for corporations to reduce their exposure: First, tort reform and, second, larger liability insurance limits. The study summarizes the current litigation environment and the impact of “tort abuse,” and then discusses the prospects for tort reform (not likely) and suggests using insurance to reduce risk. (AIG’s name is on it – sounds self-serving.)
The study cites the landmark decision of Campbell v State Farm (2003) which effectively limited punitive damages to a maximum ratio of 9 to 1 of compensatory damages (the “single-digit test”). However, the California Supreme Court has just issued two rulings which may have the effect of removing the single-digit test (see here and here). One lawyer's (biased) assessment:
These rulings will reverberate across the country. They blow the doors off of the idea dearly held by insurance companies and large corporations that punitive damages must be confined to a small multiplier of compensatory damages…
I read the two California Supreme Court cases, and they aren’t nearly what some people are cracking them up to be. The plaintiff lost one case when the court cut the punitives from $1.7 million to $50,000. In the other case, the court simply remanded the case to a lower court to consider whether to raise the punitive damages award from a multiplier of three to something higher. Hardly shocking outcomes that will blow the doors off.
In fact, I read an AP story which quotes an attorney for one of the plaintiffs as saying that “Although the Supreme Court has said you might have a higher multiplier, the practicality of today’s decision is you’re going to have a bright-line test, that a single-digit multiplier of nine or 10 to one.” In other words, someone on plaintiff’s side doesn’t seem to see the court lifting any ceiling.
See here for a different slant on this story.