Litigation epidemic: Policy holders pay for those lawsuits

Walter Olsen, Yale graduate, author, lecturer and senior fellow at the Manhattan Institute, spoke recently at a seminar at Hillsdale College in Michigan. The subject was the relentless escalation of litigation in the United States.

The average cost of liability insurance in this country today comes to more than $2,800 per year for a family of four. The share of America’s gross national product devoted to litigation has tripled in the past 50 years — two to three times greater than in other industrial democracies, according to Olsen.

Many of the cases seem ludicrous. In Framingham, Mass., a thief broke into a private parking lot, sped off in a vehicle and crashed. The family of the thief sued the parking lot owner for “negligently making it too easy to steal a car from the lot.”

The Union Pacific railroad was sued by a California man who claimed the engineer and conductor failed to sound the train’s horn before striking him. The man was passed out drunk on the railroad when the accident occurred, and the engineer and conductor said that as soon as they saw the man, they were too busy trying to apply the emergency brakes.

In New York, a subway train struck a woman who lay down on the tracks as the train approached. Police said she was trying to commit suicide. But a New York jury awarded her $14.1 million in damages.

While some of the suits are almost laughable, the problem is not funny to the medical profession and to those who need the services of physicians. The soaring cost of malpractice insurance has driven many doctors in high risk fields such as obstetrics and neurosurgery out of business.

A Harvard University study showed that in most medical malpractice suits, “experienced reviewers could not identify any negligence,” according to Olsen.

But even when those being sued win the cases, the costs in legal fees and lost time can be enormous.

Olsen suggests a return to the “loser pays” principle observed in most countries and which he says was observed in earlier years in this country. Under that system, the party bringing the suit is forced to compensate the defendant for losses suffered in defending himself against the action.

But today, the trend decidedly is toward encouraging more suits. What once was regarded as “ambulance-chasing” is now accepted as a respected pursuit of business. And certainly a good case can be made for reaching out to people who have legitimate needs for compensation.

Juries have an important role. At least in some cases, there appear to be awards of incongruously huge sums in “damages,” perhaps under the assumption that the money comes from the “big insurance companies.”

The “big insurance companies,” of course, have to extract that money from their policy holders — people just like those jurors.

Published in Editorials on April 8, 2004 12:49 PM