GOP majority should seize opportunity to reform legal system

Originally published in The Evansville Courier

The recent upheaval in the political landscape leading to the Re-publican takeover of Congress has created unexpected opportunities for overdue change in crucial areas.

The heralded "Contract With America" provides the blueprint that the Newt Gingrich-led House will follow in this new era of re-form. While some of the big-ticket items in the new Republican agenda, such as the balanced-budget amendment, welfare reform and term limits, are capturing the headlines, the ninth point - the call for legal reform - appears to have been relegated to the back-ground, receiving little of the attention this critical issue deserves.

A brief review of some relevant statistics tells why this golden opportunity for common-sense legal reform should not be squandered.

To begin with, there are roughly 600,000 licensed lawyers in the United States from whom emerge 18 million new lawsuits each year and countless more that are settled out of court.

What is the cost of all this to the U.S. economy? In 1991 (based on data from the latest Tillinghast study and the Hudson Institute), total American tort costs were $132 billion, or 2.3 percent of gross domestic product.

In Japan, tort costs represented 01 percent of gross domestic product, and in preunification Germany, 1.2 percent. As a percentage of gross domestic product, U.S. tort costs are approximately double those of an average of our competitors.

Between 1933 and 1991, tort costs increased by a factor of 400, whereas gross domestic product rose by only a factor of 100. Tort costs grew in line with the economy until the late 1940s, when the two figures began to diverge dramatically.

Over the last few decades, tort costs have grown at an average annual rate of 12 percent, in comparison with the gross domestic product, at 7.5 percent, and inflation at 3 percent to 4 percent.

In a 1987 study of more than 24,000 jury trials, the average award for punitive damages from 1965-1969 was $43,000, compared with $729,000 (inflation-adjusted dollars) in 1980-1984.

Although impossible to measure precisely, the indirect costs may be at least as high as the direct costs (placing the annual "tort tax" at $265 billion).

There are only two plausible explanations for the runaway costs of our tort system: either our nation's companies and physicians have grown hopelessly incompetent and negligent, or our plain-tiffs and their attorneys have grown gleefully avaricious in seeking outrageous settlements.

Plaintiffs attorneys and consumer groups will claim that they are protecting their clients or the public, casting themselves as champions of the injured and weak against big government, big business or the bad doctor.

The reasonable question to ask is: Who protects us from the predator attorney? Many honest Americans and legitimate businesses have come to fear their legal system and go to great lengths and expense to protect themselves from it.

What are the costs of defending against a lawsuit - even a frivolous one - or settling out of court? One study estimated that the aver-age cost to a company to "win" a case was $700,000 and 1,000 hours of lost management time.

What are the costs to the aver-age consumer when the tort "tax" is factored into every product and service they purchase?

How is American competitiveness and innovativeness affected when the tort system's direct costs impose a burden more than double that of our foreign competitors?

What is the impact on a small rural community when its family doctor stops delivering babies be-cause of the fear of being sued?

As hard as the plaintiffs bar and consumer groups try to frame the argument as some great moral crusade they wage on behalf of the little guy against entrenched man- eyed interests, the reality is that the inconsistency of our tort system is a middle-class issue that adversely affects the vast majority of Americans.

And the injured party usually receives less than 40 percent of the settlement dollar, the rest goes to pay legal and court fees. Trial lawyers - not the little guy - are the primary beneficiaries of our tort system.

Recommendations for reform include caps on non-economic damages; applying the English rule whereby losers pay the winners' costs; abolishing "joint and several liability" and the "collateral source" rule; a sliding scale of attorney's contingency fees; review panels; or even the creation of an administrative agency to deter- mine the merits of a case and effect prompt compensation to the injured based on a national standardized schedule that estimates injury-related costs - bypassing lawyers and courts altogether.

The GOP majority should look carefully at legal reform and recognize the opportunity for ending an inefficient and corrupted tort system that holds the American public hostage and leaves many "defendants" feeling more like victims.

Richard Moss is a Jasper, Inc., physician.