This is a bit off topic for my current practice, but is still something I feel strongly about, so why not. It’s not as though I’m short on space.

Damage caps. Damage caps are limits, arbitrarily selected by state legislatures, on the amount of money that a person can collect from someone who injures him or her. For instance, in Colorado, the most a person can receive for pain and suffering is $468,010. Perhaps that sounds like a lot of money, but it depends on the circumstances. What if you’re a child who has suffered a disfiguring injury that will cause you pain for the next 60 or 70 years? Other states have caps too, some imposing general dollar limits for all injuries and some effectively immunizing entire industries.

The most perverse part of damage caps is that the people they are most likely to impact are those who have suffered the most serious injuries. Why do this? The underlying theory is that there’s a lawsuit explosion, caused by easy money available to any person willing to exaggerate an injury and hire a lawyer.

The reality, however, is that there has been no major increase in personal injury litigation. The commonly held belief that there has been is likely the result, at least in part, of a sophisticated media and lobbying campaign by the powerful interests who benefit most from caps. That campaign was recently the subject of a brilliant post over at thepoptort.com, which exposes what is actually a long running pattern of insurance companies successfully deflecting blame for skyrocketing insurance rates from themselves to people daring to exercise their constitutional right to a jury trial to attempt to recover for an injury. Specifically:

… it turns out that there never was a “litigation explosion.”  After insurers abandoned the medical and product manufacturer lines, the federal government decided to review the situation and not simply accept the insurer’s assertions that litigation was “exploding.”  An inter agency working group was formed under then Federal Insurance Administrator J. Robert Hunter, to look into the crisis and to report back specifically as to whether a claimed “explosion” of medical malpractice claims was causing the huge and sudden jump in premiums that doctors were experiencing.

Hunter’s research immediately found that data was not available to answer this question.  Insurers did not have such data.  Therefore, working with the National Association of Insurance Commissioners (NAIC), they undertook a closed-claim study.  The closed claim study revealed that there was no “explosion” of claims and that there was no justification for the insurer actions.

How insurance companies have managed to pull this sleight of hand over and over again for decades is something of a mystery to me. Could there really be a large natural well of sympathy for insurance companies? Probably not. The story that those companies are peddling, however, has the benefit of being intuitively appealing and easy to understand. Most peoples’ knowledge about the US legal system is likely based on the outlier cases that make the news, the cases in which a plaintiff is supposedly awarded millions for injuries that she suffered as a result of spilling her own coffee on herself (the public perception about the McDonald’s coffee case bears almost no resemblance to reality, but that’s a subject for another post).

Turning the shocked disbelief that people feel when they hear about cases like those into animosity for the supposedly undeserving plaintiffs likely doesn’t take much of a push. Meanwhile, the real explanation about why insurance rates are going up for certain industries in certain locations and not others is likely a complex one. And the people who would most benefit from that explanation being publicized aren’t organized and aren’t financially consolidated. And so the lie lives on. At some point, however, the truth has to prevail, doesn’t it? We can hope.