From the WSJ Opinion Archives
CROSS COUNTRY
Jackson Action
In Mississippi, tort reform works.
Legislative battles over tort reform are being waged in statehouses across the country. Congress, too, is fighting out the issue in the form of proposed legislation to cap medical malpractice damage awards and to reform asbestosis litigation. Always hotly debated in such contests is whether tort reform accomplishes its purported goals. Does it make the legal system more predictable and more credible? Does it positively affect insurance costs and availability? Does it reduce litigation expenditures? More broadly, does it improve the economic well-being of the citizens?
In 2004, a long hard battle in the Mississippi Legislature over a comprehensive Tort Reform Bill came to a close, during which the same questions arose. Opponents claimed that the bill was unnecessary, and that, even if it passed, it would not make a difference. Still, we were able to get it through. In many respects, the bill is considered model legislation. Among other provisions, it included venue reform (so trial lawyers cannot shop around for favorable courts) and caps on subjective noneconomic damages (such as pain and suffering). Now, a year has passed since the legislation took effect, and the Mississippi experience is instructive. Tort reform works.
Prior to the legislation, Mississippi was known as the "jackpot justice capital of America." The American Tort Reform Association had labeled certain jurisdictions "judicial hellholes." A survey of more than 1,200 senior in-house counsels for the U.S. Chamber Commerce ranked Mississippi 50th in virtually every category of judicial system nationwide. Insurance companies were fleeing the state. Others were refusing to write new policies. The medical field was particularly strained: Liability insurance was in many cases unaffordable, and in some cases unavailable.
One year later, the story is very different. Mass Mutual Insurance Group, St. Paul Travelers, World Insurance Co. and Equitable Life Insurance Co. are returning to Mississippi. State Farm Insurance eased its growth restrictions for homeowners' insurance and lowered its rates on property insurance.
The Medical Assurance Company of Mississippi, which writes 60% of the medical malpractice coverage for doctors in the state, had raised its rates 20% the year prior to the tort reform legislation. After its passage, MACM did not raise its rates at all. "Those people who said tort reform would not work and actively fought any civil justice reform," Mississippi Insurance Commissioner George Dale said. "I think this indicates they were wrong." MACM also recently announced an end to its moratorium on new business; it also just declared it will cut its rates for 2006.
Insurance was becoming less available and less affordable prior to the passage of the tort reform legislation. Now, the opposite is true. Some plaintiff lawyers and some consumer groups still contend that tort reform doesn't work--but it does not take a rocket scientist to understand that when liability exposure is made predictable and governed by reasonable rules, risk can be better assessed, and insurance companies are more likely to offer coverage.
Gov. Haley Barbour attributes the successful recruitment of new business to Mississippi to the lower cost of doing business in the state. Texatron has invested $35 million and Kingsford Charcoal $20 million; we have coaxed back Winchester Ammunition and its $3.5 million payroll, as well FedEx Ground, as part of a $1.8 billion expansion.
Our reform package also virtually eliminated the mass-tort industry in Mississippi. This change came about not only because the legislation provided that venues for lawsuits must be established independently for each plaintiff, but also because Mississippi Supreme Court decisions reinstated the traditional rules of joinder of plaintiffs. These two changes went hand in hand, since the process of passing tort reform (which lasted four years) raised public awareness of the problem, which in turn affected judicial elections. This has provided for a more balanced judiciary.
As a result of these procedural changes, pending mass-tort cases are being split up. The cases of out-of-state plaintiffs are being dismissed, and the cases of in-state plaintiffs are being transferred to the proper venues for trial. Lawsuits in Mississippi are returning to what they are supposed to be--and used to be--about: one plaintiff, or a very small group of plaintiffs, suing a defendant, or a very small group of defendants, for a single cause of action. Common sense has made a comeback.
Not surprisingly, the demise of mass-tort litigation has resulted in a decrease in litigation costs. The CEO of one Mississippi company recently told me that his company's legal bills were reduced by $70,000 a month as a result of the reform. Litigation expense does not produce value for most members of our society. It is merely a transaction cost in the transfer of wealth to compensate injured persons. To be justified, the transfer process must be fair.
Mississippi's mass-tort system was anything but fair, and in many cases it resulted in patently unjustified awards. And people had lost confidence in getting a fair hearing at the trial court level. There was no confidence that the appellate courts would correct abuses. In essence, there was total unpredictability. The sky was the limit on damages. There was even a perception that fundamentals of the rule of law were being threatened.
Since the passage of tort reform and the changes implemented by judicial decisions, both perception and reality have changed. We have begun to restore credibility to Mississippi courts in the mind of the public and business, and have thus restored trust to government in Mississippi in general.
Since only a year has passed, the long-term consequences of tort reform cannot be known. There are thousands of cases in the system still governed by the old rules. There is enough information, however, to state unequivocally that tort reform has made the Mississippi legal environment more fair, more predictable and less expensive. For now, that is more than enough.
Mr. Ross is a Mississippi state senator and chairman of the senate judiciary A committee.
