There is considerable debate going on regarding the causes of the crisis in general liability insurance that has resulted in limitations on availability, and other amount of coverage even if available, as well as substantial increases in rates for risks that are underwritten.

Many attribute it to an increase in the number of claims and particularly to the size of awards as they lobby for tort reform. Others hold that there is no substantial evidence of such an increase in either the number of claims filed in court or in the size of the awards made after trial of such claims.In view of the nationwide effort by the commercial liability insurance carriers to obtain legislative reform of the tort judicial system and their success in a majority of the states whose legislatures met in 1986, it is important to examine the facts in order to determine the merits of the position taken by the commercial liability insurance industry.

Unfortunately, the facts are not easy to come by since the insurance industry does not assemble facts in sufficient detail to supply an undisputed answer to the questions raised. But some facts are being gathered and new legislation in several states will require more adequate statistical reporting in the future.

The insurance industry's position is perhaps best advanced by the Tort Policy Working Group created last year by President Reagan's Domestic Policy Council to study the liability insurance crisis. In testimony before the House Banking Subcommittee on Economic Stabilization early in August, Richard K. Willard, assistant attorney general, told the panel that many of the insurance problems "were short-term in nature" particularly availability and that additional government regulation at the federal level would not provide a long-term solution "without substantial reforms of the tort law." He identified the areas where reform is needed as (1) the movement toward a system of no-fault liability; (2) undermining the theory of contributory negligence; (3) the explosive growth in the size and frequency of damage awards especially for non-economic damages; and (4) the high cost of suits and contingent fees for attorneys which use up two-thirds of the dollars paid by insurance carriers. Underlying these problems is the "tremendous uncertainty and unpredictability of tort liability under the current legal regime," according to the assistant attorney general.

A contrary opinion was expressed at the same hearing by the chairman of Jury Verdict Research Inc., Philip J. Hermann. He stated that while jury verdicts have been steadily rising, his research does not support any claim of ''recently skyrocketing verdict awards." Mr. Hermann's research indicated that the increase in jury verdicts was in proportion to both the rise in the Consumer Price Index and in the increase in medical care costs.

Another witness at the hearings, Robert T. Roper, a member of the court statistics project of the National Center for State Courts, reported that a review of tort cases in 13 states, including New York, California and Ohio, revealed a 9 percent increase in tort filings in the seven year period 1978-1984 with a population increase of 8 percent in the same period. "In our

interpretation this does not qualify as a tort explosion," Mr. Roper testified.

A recent study by the American Bar Association's Foundation research project examined jury verdicts in tort cases involving punitive damages, which is a major target of civil tort reform efforts. The study showed 1) "punitive damages are not routine and 2) they are not, typically, given in amounts that boggle the mind." In the 32 areas studied (including large cities in California, New York, Illinois and Texas) the percentage of verdicts with money awards that included punitive damages ranged from 0 percent in four areas to 21.6 percent in Atlanta. In two-thirds of the areas studied, less than 10 percent of the awards included punitive damages. Four areas had percentages higher than 10 percent. Interestingly enough the jurisdictions having the three largest cities in the country showed relatively low percentages: 1.6 percent in New York City: 2.2 percent in Cook County, Ill.; and 8.6 percent in Los Angeles County, Calif.

The study disclosed another interesting fact. A detailed analysis was made in seven jurisdictions (including the large cities: Chicago, New York, Los Angeles, San Diego, Atlanta, Houston and Phoenix) regarding the type of action where punitive damages were awarded. Neither product liability nor medical malpractice, about which we read so much, were involved in a large proportion of the reported verdicts in any of the jurisdictions studied.

Product liability cases represented less than 5 percent of all reported verdicts in all jurisdictions except Los Angeles County where the percentage was 9.6 percent. Medical malpractice accounted for less than 10 percent in all jurisdictions except Los Angeles County where the percentage was 10.9 percent and New York City where the percentage was 16.1 percent. The cases where punitive damages were more frequent involved personal violence, fraud, false arrest and insurance bad faith.

As to the amount of recoveries, the study used median awards rather than

average awards since it was found that averaging distorted the results. For example, in Cook County (Chicago) the average award was $137,350, but 87.7 percent of the cases had awards lower than the average. The median award (where half the number of cases had higher awards and half had lower awards) in Cook County was $8,800. The study showed that median awards ranged

from $8,800 to $100,000 (in New York City). Only New York City and Los Angeles County (with $69,000) had median awards over $50,000. Not all courts in all jurisdictions were covered. Lower courts where jurisdiction is limited and where settlements without a verdict are more common, were not covered in the study. The study is on-going and thus the figures reported are preliminary. But they are significant. As the report stated; "much discussion, of course, has been based on the highly visible but highly unusual mega-cases rather than on the more typical cases. Consequently, that discussion has been somewhat distorted, and we should be skeptical of the demands for sweeping reforms emanating from it."

So the position taken by the commercial liability insurance industry and of the Tort Policy Working Group that there has been an explosion in the number and size of tort awards is at least debatable. The Congress and the state regulators need considerable more actual statistical data on awards resulting from tort actions before they can with any reasonable degree of certainty conclude that the judicial system needs substantial reform. It may well prove to be a case where the commercial liability insurance industry is seizing upon an opportu nity to limit its liability in areas where it has sustained some substantial losses.

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