Tort reform is a hot issue these days. It was a hot issue yesterday, and it will be a hot issue tomorrow. It seems to have manifested itself in the medical malpractice area, but could probably use some restraints in all areas of tort liability.
That will never happen. The most basic reason for this is that the special interests groups are trying to get the federal government to mandate controls on tort liability. But insurance is controlled by the states.
This issue has been batted around for over 100 years, and always ends up back in the hands of the states, for better or for worse:
In 1869, in Paul v. Virginia, the U.S. Supreme Court ruled that insurance was not interstate commerce and therefore was not subject to federal regulation.
In 1890, the Sherman Antitrust Act forbade insurance companies from banding together and colluding to fix prices. This act is still in effect today.
In 1944, the South-Eastern Underwriters Association (SEUA) decision effectively gave the right to regulate insurance to the federal government after it rendered the decision that the SEUA had conspired to control 90 percent of the insurance business in six states.
Congress passed the McCarran-Ferguson Act in 1945, which restored state regulation of insurance less than one year after the SEUA decision.
It’s fairly obvious that insurance regulation is going to continue to be controlled by the states, and this right has been fiercely protected throughout U.S. history. So, although you will find pockets of state legislation that restrict the awards in tort liability cases, this issue will never get up enough steam to become a federal mandate and will probably be struck down as unconstitutional in deference to states’ rights.
This is not the primary reason, though. The real underlying reason is …
Lawyers!
It’s so obvious, isn’t it? A lawyer sues another party because of their negligence. What does the other party do? They hire a lawyer. Either the other party or its insurance carrier needs legal representation to represent its interests in this action. If the complaining party settles or wins the case, the plaintiff attorney profits. If the defendant wins or loses, the attorney for the defense profits.
If tort reform is passed, who stands to lose the most?
Lawyers!
And most of the folks in Congress, before they became representatives, were …
Lawyers!
Enough said. If all the lawyers are against tort reform, and it would be struck down even were it enacted, it will never happen.
From Hide! Here Comes the Insurance Guy Copyright 2006 Richard G. Vassar All Rights Reserved
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