Who is Really Benefiting from Tort Reform and Damage Caps?

If you take the media reports at face value, all attorneys are corrupt and only looking to make a
quick buck by filing as many frivolous personal injury and medical malpractice lawsuits as
possible and litigating them through trial to win exorbitant jury awards which causes everyone’s
insurance costs to go up. The solution currently in place for this “problem” is tort reform
legislation, but who stands to benefit from the legislation and who will be negatively affected by
it?

A lot of folks don’t know about the existence and truth about existing damage caps and, here’s
the kicker, the government doesn’t want you to find out. In both Oregon and Washington, juries
are not allowed to be informed of the damage caps and end up awarding whatever amounts they
think are fair. What’s with all the cloak and dagger? If these limits were put into place to look
out for the public’s pocketbook and ensure that their costs won’t soar unnecessarily, why doesn’t
the government want you to know about their protective measures being practiced? It’s for your
ultimate benefit that these caps exist, after all.

Let’s pick this all apart a bit.

Those No-Good Attorneys!

Attorneys are required to follow ethical rules laid out by their state’s bar association. One of
those rules is that attorneys are not allowed to file frivolous lawsuits – if they do so, they face
potential reprimands, sanctions and/or disbarment. If there are no unethical attorneys, there can
be no frivolous lawsuits, which is idealistic and, well, untrue.

The scenario:

Let’s say an unethical attorney (“UA”) is willing to file a frivolous lawsuit once the client signs a
contingency fee agreement which states UA will be paid a percentage of any amounts recovered
– the further along in the case, the larger the percentage. Perhaps UA attempts to settle the
matter but fails to do so and, ultimately, files suit. UA goes through the long process of
discovery, not to mention potential interim hearings on motions from the adverse party which
could dismiss the case outright with no recovery. UA manages to jump all of these hurdles to
prepare the case and take it through trial. Thus far, there has been an atrocious amount of time
spent in working up the case, not to mention the likelihood that he’s also fronted all the out of
pocket costs (e.g., copies of medical records, filing fees, deposition fees, expert fees, etc.) to
further the client’s matter, so he’s definitely got some skin in the game and hasn’t even been paid
one slim dime yet. However, the case now lies in the hands of the jury who are notoriously
impossible to read or second guess. Their verdict comes down in the client’s favor and they
award lots of damages. Assuming the adverse party doesn’t appeal, UA now needs to collect the
award and take his cut – and it’s only taken how many years to reach this point?

The problem with the scenario above is that the public believes it – partially because of attorney
stereotypes (they want to believe the worst about attorneys) and partially out of ignorance
concerning how our legal system works. Our current legal system is slow and clunky and only
getting slower and clunkier over time. In addition, the scenario makes a lot of assumptions that
likely wouldn’t actually occur. Would a frivolous lawsuit make it to trial to begin with? Not
terribly likely. And if it did, would a jury believe the client’s claims and make a huge award?
Again, not likely.

For the sake of argument, let’s assume our scenario above has happened as laid out and follow it
through a bit – but first, a little education on which types of awards are allowed, which aren’t and
what caps are in place.

Awards for Everyone – or, Not?

Damages can be categorized in one of three areas:

1. Economic (monetary losses);

2. Noneconomic (non-monetary losses that aren’t specifically quantifiable); and,
3. Punitive (an amount awarded as punishment).

Now that you understand the categories, let’s discuss some specifics. Each state’s laws vary for
the three types of damages, but we’ll only cover the basics for Oregon and Washington here.

First up is Washington state because it’s the most straightforward:

Punitive damages are not allowed.

There are no caps on economic damages in Washington state.

While Washington state wants you to believe there are no tort caps for noneconomic damages,
RCW 4.56.210 (2) and (3) state:

(2) In no action seeking damages for personal injury or death

may a claimant recover a judgment for noneconomic
damages exceeding an amount determined by multiplying
0.43 by the average annual wage and by the life expectancy
of the person incurring noneconomic damages, as the life
expectancy is determined by the life expectancy tables
adopted by the insurance commissioner. For purposes of
determining the maximum amount allowable for
noneconomic damages, a claimant's life expectancy shall
not be less than fifteen years. The limitation contained in
this subsection applies to all claims for noneconomic
damages made by a claimant who incurred bodily injury.
Claims for loss of consortium, loss of society and
companionship, destruction of the parent-child relationship,
and all other derivative claims asserted by persons who did
not sustain bodily injury are to be included within the
 limitation on claims for noneconomic damages arising from
the same bodily injury.

(3) If a case is tried to a jury, the jury shall not be informed of

the limitation contained in subsection (2) of this section.

(Emphasis added.)

Now moving on to Oregon:

Oregon doesn’t have any limitations on economic damages.

Noneconomic damages are capped at $500,000.00 according to ORS 31.710 (1), but two recent
Oregon appeals cases have found the cap unconstitutional (see the specific cases here and here).
ORS 31.710 goes on to state in section (4) that “[t]he jury shall not be advised of the limitation
set forth in this section.” (Emphasis added.) Assuming a jury awards above the cap, what
happens with the excess? The judge will simply reduce the verdict to $500,000.00 before
entering the judgment. Easy peasy.

Oregon technically allows punitive damages per ORS 31.725; however, there’s a lot of legal red
tape to cut through and it’s understood that many counties reject (at least certain types of) claims
for punitive damages as a matter of course. Assuming the client’s case does receive an award of
punitive damages, the client will only be allowed to recover 30% as outlined in ORS 31.735, and
the client’s attorney is limited to collecting only 20% of the client’s portion of the punitive
damages. What happens to the other 70% of the punitive award? The Attorney General gets it
and deposits it in various funds, which seems…fair?

Because we’re having such fun pulling back the curtain on the wizard, let’s add another layer of
confusion! If the client’s claim is against a public body, it currently falls under the Oregon Tort
Claims Act which has specific limitations depending on what the claim is as laid out here.

This Problem Is Out of Hand!

Here in Multnomah County (which includes Portland, Oregon), the amount of civil cases that
have proceeded through trial has decreased 38.96% to only 94 cases compared to a high of 169
cases in 2002. To put this number in perspective, there were a total of 27,898 civil cases filed in
2017, of which only 3,651 (or 13.09%) were torts and 0.34% of the entire total were tried.
Interestingly, Multnomah County states there was a 5.6% increase in civil case filings from
2016.

The argument for tort caps is that costs are passed along to the consumer for settling and/or
paying out claims for frivolous lawsuits which hurts everyone in the end. This argument is
disingenuous. Do you really believe that insurance companies will only raise the cost to you
based on claims or awards they’ve had to pay out? If you believe that, I’ve got some swamp
land to sell you. What about those folks who have legitimate tort claims for losses in excess of
the caps? These are the true victims, unable to ever be made whole because the American
consumer has been led to believe attorneys and their clients are taking advantage of them and the
system.

Do unethical attorneys exist? Absolutely, but they are not as prevalent as the stereotype may
have you think. Most bar associations’ ethical committees make it their primary duty to weed
these folks out of the profession. The attorneys that remain ethically unblemished in the
profession take the brunt of the public’s outcry based on the few bad apples in the bunch.
Generally speaking, most tort and medical malpractice claims brought are legitimate and the
plaintiffs are deserving of whatever award the jury sees fit.

© 3/23/2018 Heather M. Carr of Hunt & Associates, P.C. All rights reserved.