Since the Legislature enacted tort reform legislation in 1995, little has been done on the liability front. The 1995 successes left the Legislature with the understandable perception that it had fixed the worst abuses in the system and could move on to something else.
Unfortunately, while there have been notable improvements, the liability system is once again spinning out of control. Perhaps the most serious liability issue confronting the Texas business community today is actually a blast from the past: asbestos litigation.
This may come as a surprise, as asbestos litigation was once thought to be on the wane and asbestos manufacturers have been driven into bankruptcy. In fact, asbestos litigation is exploding in Texas.
The extent of the problem is unimaginable. As many as 200,000 asbestos claims are currently pending in Texas courts, a number that has doubled since the mid-1990's. Analysts expect another 500,000 to 1 million claims to be filed in the next 20 years.
The targets are not the manufacturers or sellers of the product but the facilities that installed asbestos insulation when it was the state-of-the-art material for fire protection, the contractors who installed it, any product maker who may have used asbestos-containing compounds in a product (e.g., brake linings in automobiles), and any suppliers of asbestos-containing materials. Potential liability for these claims is variously placed at between $50 and $200 billion.
One would think that these claimants suffered from serious illnesses, such as mesothelioma, cancer, or asbestosis. But nothing in asbestos litigation is as you might expect.
Up to 90 percent of asbestos exposure claims are made by people with no impairment or medical diagnosis of an asbestos-related illness. Most of these claimants allege merely that they were exposed to asbestos and are afraid of developing an illness in the future.
Part of this phenomenon is driven by the necessity of filing a claim to toll the statute of limitations, but much is driven by the perverse incentives of the asbestos litigation lottery itself: the use of a small handful of legitimately ill claimants to compel mega-settlements that benefit plaintiff's lawyers and their unimpaired clients.
The end result of this lottery is a diminishing pot of money to pay a swelling volume of claims, most of which involve no verifiable medical impairment. If the current trend continues, claimants who are truly ill with a serious asbestos-related illness will be unable to recover at all or will be severely limited in the amount of compensation, while a growing number of major businesses will face insolvency.
If these major employers are taken down by asbestos litigation, it is only a matter of time before their suppliers and other service providers, most of which are mid-sized or small businesses, follow. The final toll on employees, pension funds, the financial markets, and consumers could be catastrophic.
So what is to be done? The Texas Civil Justice League, in conjunction with a number of other business associations, has organized the Texas Asbestos Consumers Coalition to advocate asbestos litigation reform in the 2003 legislative session. Some of the objectives of the coalition:
Sever all claims involving claimants with actual asbestos-related illnesses from those of unimpaired claimants and assure that those claimants are adequately compensated before any other claims are considered.
Assure that the percentage of responsibility of all responsible parties in an asbestos-related claim is fairly allocated and that all settlements are properly credited to parties in litigation.
Stop forum shopping in mass asbestos litigation.
Remand all claims involving asbestos exposure in another state to the state in which the exposure occurred.
Prohibit multiple awards of punitive damages in asbestos cases.
While asbestos litigation reform is the top issue for the League, there are a number of other pressing tort issues. Medical liability and class action reform top the list.
With regard to medical liability reform, if a stable, predictable medical liability insurance market is the goal, then hard caps on non-economic damages, as California enacted in the mid-1970's (and Texas tried to do before it was stopped by the activist Supreme Court of the 1980's), are the ultimate solution to the problem and must be part of the legislation enacted in response to the current crisis.
Class action reform is likewise fundamental to eliminating abuses in the current system. We must allow the Supreme Court to review directly class certification orders to assure that the due process rights of both class claimants and defendants are protected. We must also require claimants to exhaust their administrative remedies before proceeding to the courthouse. If a low-cost regulatory remedy is available, it ought to be tried before millions of dollars in attorneys' fees and court costs are incurred.
The League believes the legislative climate will be right for significant new reforms next year.
The plate has certainly gotten very full since 1995.
Ralph Wayne and George Scott Christian are the president and general counsel, respectively, of the Texas Civil Justice League, the largest state tort reform association in the nation.