Justinian Lane

Tort Reform is a Euphemism For Corporate Welfare

Walter Olson, in an attack against a trial lawyer, inadvertantly disclosed something about tort "reform" that many prefer to keep secret: That tort "reform" shifts costs from corporations and their insurers to the taxpayers.  The quote below sums it up:

"We didn't say we were suing nobody," Lawrence said. "All we wanted was the insurance company to pay for my son's medical bills. That's all we wanted.

"We don't want no $10 million. We're living fine. Whatever the insurance company doesn't pay, Medicaid pays. We don't need a lawsuit. Now, we've got all these people against us and it's not fair because it's not true."  (Emphasis added.)

Source: Overlawyered: Mom: I never authorized lawyer to sue school over football injury

And who pays for Medicaid?  You do, I do, and so does every other taxpayer.  There is no such thing as a free lunch; regardless of whatever laws are passed in the name of reform, someone will have to pay for the medical bills of injured people.  The question is who should pay for those bills.

Supporters of the civil justice system believe that those who caused the injuries should pay, or their insurers should.  Corporate lobbyists would prefer a system where taxpayers pay the bills for the injuries caused by their employers.  And in the spirit of Orwell, they push for such a system by claiming there's a "tort tax" that affects consumers.

When Medicaid, Medicare, or another governmental program pays for an injured person's medical bills, it costs the taxpayers.  When private health insurers pay the bills, it costs the members of that health plan in the form of higher premiums.  And if no one can afford to pay the bills, then medical providers raise the prices everyone else pays; that's why it's $10 bucks for an aspirin at a hospital.

Each successive "reform" that makes it more difficult to bring a lawsuit makes it more likely that taxpayers will end up buying a "free lunch" for the corporation who caused the injuries in the first place.  Why should taxpayers be forced to pay for the damages caused by a corporation's negligence?

Cross-posted to Corpreform

Justinian Lane: Author Bio | Other Posts
Posted at 11:01 AM, May 03, 2007 in Tort "Tax"
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When I looked into this case, I found that the injured person suffered a spinal cord incident from a hit while playing football. This is a known risk. The question then is who is to pay? The attorney if correct named numerous individuals and organizations. This is a perfect example of something bad happening and therefore money must be obtained from somebody else. Do the defendands have any responsibilty? Does it even matter? This is a classic case of what reformers are looking for and will argue that those with no responsibilty are being sued for large amounts over an act of god, known risks of activities or ones misfortune. Not only will we pay in tax dollars from medicaid, but everyone else will pay, espicially if one can be found to hit with "J/S liability". These cases fuel the reform movement, it is better to condem cases such as this than it is to deny them. We are our own worse enemy.

Posted by: Chris | May 3, 2007 10:21 PM

Justinian: I know that this is a prepackaged argument here at Tortdeform, so you may not have noticed that there's no "corporation." This lawyer is trying to sue public schools. Who do you think pays when schools get sued? (I'll give you a hint: the word starts with "t" and ends with "axpayers.")

Posted by: David Nieporent | May 3, 2007 11:59 PM

Hmmm.... the words "insurance company" imply to me that the school had liability insurance from a corporation and not the taxpayers. If taxpayers are forced to pay anything in this case, it will be because a niggardly insurer refused to pay for an injured child's medical bills.

Why don't you try and rebut this "prepackaged argument" and explain to me why it's OK for taxpayers to pick up the tab for injuries caused by defective products, for example? Or why health insurers should have to pass those costs along in the form of higher premiums to the rest of their members?

Here in Michigan, Medicaid is forced to pay for any and all injuries caused by defective drugs. Is it good public policy to shift liability costs from the manufacturer to the taxpayers?

Posted by: Justinian Lane | May 4, 2007 10:42 AM

For what its worth, I would change the racial slur in the previous comment. (that is the kind of statement that gets one sued)

Posted by: Chris | May 4, 2007 11:25 AM

The government is paying for healthcare? Aren't you advocating on behalf of a universal health care system? That would be a tax burden too, right?

The fact is that Liability costs will always be passed on to the is every other cost associated with doing business. The price of goods sold will always reflect the cost of insurance premiums.

Passing the cost along to th taxpayers/aggregate consuming market is the most efficient means of compensating for loss, since each member pays a small amount and in exchange, should have access to the courts if they are ever the unfortunate victims of negligence.

That's the real problem with most proposed tort reform (as opposed to who bears the cost-consumers and or taxpayers will always bear the cost)) It's who should bear the wants to take the costs of liability (i.e., the risk that the enterprise might injure some one and be forced to pay) out of doing business. It's seeking a competitive advantage againt's it's own customers, not the competition.
the next step would be to limit any potential liability to employees, since that drives the cost of buiness up as well. Reformers will want caps on damages for harassment, lost wages, wrong ful terminations etc., etc.,

At overlawyered...they often speak of people wanting to sue for every dissapointment; but at the same time they advocate for limitations on liability for corporations that KNOWINGLY TAKE THE RISK OF DOING BUSINESS; often business that is inherently risky.

Posted by: John | May 4, 2007 12:47 PM

"Hmmm.... the words "insurance company" imply to me that the school had liability insurance from a corporation and not the taxpayers. If taxpayers are forced to pay anything in this case, it will be because a niggardly insurer refused to pay for an injured child's medical bills."

Because, as we all know, liability insurance is free and the taxpayers don't have to pay anything to buy it in the first place, and never have to pay anything to renew the policy even if there are lots of claims against it.

Posted by: Elliot | May 4, 2007 2:48 PM


Although there is controversy around the use of the word you refer to because of its similarity to a racial slur, it is a different word with a different origin.

Posted by: Cyrus Dugger | May 4, 2007 3:22 PM

You are right on the origins of the word, I stand corrected.

Posted by: Chris | May 4, 2007 6:07 PM

Ah, Justin, I forgot. There's an insurance company. That changes everything. When they pay out, they don't raise premiums. That's because insurance companies have printing pressess where they make their own money. They keep them in the room with the golden egg laying goose and magical chocolate river.

And what "defective products"? This was someone who got hurt playing football.

Nobody says that taxpayers should pay for people injured by defective products. But just because someone got hurt doesn't make the product "defective." If the product truly is defective, the manufacturer should pay. It should pay the medical bills -- not make the injured person rich.

Posted by: David Nieporent | May 4, 2007 7:18 PM

"Nobody says that taxpayers should pay for people injured by defective products."

The problem is many of your "reformer" cohorts support legislation that make it impossible for an individual to prove a product was defective. The FDA preemption debate, for example.

"Reformers" also advocate legislative policies that will reduce the number of legitimate lawsuits by erecting hurdles to brining suit or limiting the financial incentives of attorneys to take the cases. Eric recently posted about how difficult it is for New York residents to bring a malpractice case because of the financial difficulties facing a plaintiff's attorney.

Insurance companies don't print money. But they do spend a lot of money influencing legislators to pass laws that will reduce the amount of legitimate claims insurers have to pay. Every complaint levied against trial lawyers - greed, exercising undue influence on legislators, concern more about profit than their client - also applies to insurance companies. When they lobby for legislation, they do so not to benefit the public but to benefit their shareholders.

"When they pay out, they don't raise premiums."

Insurers are in the business of paying claims. If they don't want to pay claims, they shouldn't be in the insurance business. Period.

Posted by: Justinian Lane | May 5, 2007 12:09 AM