There is in this country a very serious debate raging with respect to the current system of civil justice and the effects of that system on liability insurers and those who must purchase liability insurance products. Many observers of events over the past year have concluded that his great discussion is nothing more than a debate between lawyers and insurance companies. That is too bad.
Certainly, insurers and trial lawyers have been motivating forces behind the current debate. Our industry has mounted a very specific campaign to put facts before the U.S. public about the current status of the liability insurance marketplace and the costs associated with the civil justice system, which are affecting affordability and availability of liability coverages.Trial lawyers, who receive a substantial share of the dollars that flow through the current system, are understandably fighting to maintain the status quo. Both sides will continue to participate in this debate, but neither should win. Society must win.
The reform that insurers know must come to the civil justice system need not deny legitimate benefits to anybody. We seek, instead, a more equitable and more efficient distribution of those benefits that society must pay. Some trade-offs will be necessary to achieve that goal.
If we as society have decided that we want to compensate all accident victims, and that seems to be the case, then let's find a more efficient way to do it.
Under the present system, victims often wait years before being compensated, about half of them get no compensation at all, some probably get too little, and some come away with a result not unlike the winning of a big lottery. Worst of all, victims as a group only get about one-third to one-half the cost of the system; the balance goes to feed the system itself, most of that for lawyer's fees. It's hard to imagine a less efficient way to get money into the hands of victims.
The tort system was not designed to compensate victims; it was designed to hold wrongdoers responsible for their tortious acts. The liability insurance system that grew up around the tort system similarly was not designed to compensate victims; it was designed to defend and indemnify wrongdoers or alleged wrongdoers.
If compensating victims, rather than punishing wrongdoers, is really our societal goal, let's devise a system to do that. Then put punishment back into the criminal system where it probably belongs.
That new method that we should be seeking may be patterned after the workers' compensation system, or no-fault automobile insurance, or it may be something entirely new. It almost certainly must involve some trade-offs; the right to sue, for example, could be traded for more prompt and more certain benefits. In any event, the objective would be to get more of the dollars that we all pay into the system into the hands of victims and fewer of those
dollars allocated to the system itself and those who operate it.
It is going to take some hard work on the part of everyone concerned - not just insurers and lawyers - to realize an outcome that will benefit all of society. In the meantime, work needs to be done on the current civil justice system in those states where reform has not been realized before insurers can provide the capacity to take on all the liability risks that society seeks to transfer.
At least one part of our present civil justice system is very unstable and is delivering rapidly increasing awards for serious injuries, and for all injuries in some such areas as products liability, medical malpractice, municipal street hazards, work place accidents and school accidents. This instability has rendered some risks virtually uninsurable.
That fact was brought home to the Utica National companies when we concluded in 1984 that the companies could no longer participate in the marketplace for municipal liability insurance. That conclusion was reached after a four-year period in which incurred losses for that business outdistanced premiums over two to one.
And, the civil justice system had changed so much that we simply did not know how to set prices for municipal liability exposures. We had lost our actuarial ability to predict future losses. We determined that our companies should not be willing to underwrite certain loss and pass that loss on to other customers. Thus, we withdrew from the municipal liability market in New York and all other jurisdictions.
Something needs to be done to repair the current civil justice system until we can develop a new method to compensate those injured through the fault of others. Specifically, tort reform is needed that will put caps on jury awards for "non-economic loss," eliminate the joint-and several doctrine, modify the current attorney contingency fee provision and provide recognition during trial proceedings of collateral source payments that a plaintiff has received or will receive.
Some state legislatures during 1986 have produced tort reforms of varying degrees. Insurers have begun to compete in the marketplace in those jurisdictions where substantive tort reform occurred. The debate will continue into 1987 sessions in jurisdictions where reform has not been realized, and insurers will be at odds with attorneys on the issue for those reasons already cited.
In the end, however, it will be up to all the citizens of this country to make the hard choices needed to settle this issue: choices that must be made to assure that whatever system of civil justice evolves from this national debate will meet ultimate social, economic and humanitarian goals.