Thursday, December 23, 2004

Tort Reform, part 1

Nation's Largest Medical Malpractice Insurer Declares Caps on Damages Don't Work.
Bush's medical tort reform has already failed in Texas.

Myths about America's 'litigious' society, debunked.

Whose interests are being served here?

(Robert Nordelli, CEO of Home Depot) ...was one of several Republican donors at the conference. The Center for Responsive Politics, a non-partisan group that tracks campaign spenders, found that conference participants donated nearly $195,000 to various Republican candidates or causes in recent years, including $40,000 to Bush.

Since 1999, at least three customers and five workers have been killed in accidents in the stores.
In 2002, the number of Occupational Safety & Health Administration violations at Home Depot jumped 45 percent over 2001.


Blogger Management said...

Nation's Largest Medical Malpractice Insurer Declares Caps on Damages Don't Work, Raises Docs' Premiums;
Smoking Gun Document Exposes Insurance Industry Lies
Santa Monica, CA -- The nation's largest medical malpractice insurer, GE Medical Protective, has admitted that medical malpractice caps on damage awards and other limitations on recoveries for injured patients will not lower physicians' premiums.

The insurer's revelation was made to the Texas Department of Insurance (TDI) in a regulatory filing obtained by FTCR. The revelation was contained in a document submitted by GE Medical Protective to explain why the insurer planned to raise physicians' premiums 19% a mere six months after Texas enacted caps on medical malpractice awards. In 2003, Texas lawmakers passed a $250,000 cap on non-economic damage compensation to victims of medical malpractice caps after Medical Protective and other insurers lobbied for the change.

According to the Medical Protective filing: "Non-economic damages are a small percentage of total losses paid. Capping non-economic damages will show loss savings of 1.0%." The company also notes that a provision in the Texas law allowing for periodic payments of awards would provide a savings of only 1.1%. The insurer did not even provide its doctors that relief and eventually imposed a rate hike on its physician policyholders.

Click here to download the Medical Protective document.

"When the largest malpractice insurer in the nation tells a regulator that caps on damages don't work, every legislator, regulator and voter in the nation should listen," said FTCR's Executive Director Douglas Heller. "Medical Protective's rate increase and this smoking gun document prove that the insurance industry cannot be trusted on the issue of malpractice caps."

Medical Protective and other supporters of medical malpractice caps have repeatedly argued that damage awards are the primary reason for skyrocketing medical malpractice premiums. For example, in a March 2004 report. GE Medical Protective stated that capping non-economic damages is a "critical element [of reform] because in recent years we have seen non-economic damages spiraling out of control." [from Health Care Crisis: Causes and Solutions]

The Texas rate increase and the actuarial data submitted by the company contradicting the oft-stated importance of caps should lead policymakers to look to insurance regulation, rather than malpractice caps, as a solution to high premiums, according to FTCR.

"While medical malpractice caps limit the rights of injured patients, they do not lower doctors' premiums. If lawmakers and physicians want to reduce costs, they should start fighting to reform insurance companies rather than restrict patients' rights," said Heller.

The nonpartisan FTCR pointed to the success of regulatory intervention in California in fighting planned medical malpractice rate hikes. Since 2003, the California Department of Insurance and FTCR have stopped $50 million in rate hikes proposed by the largest medical malpractice insurers, using Proposition 103, the state's insurance regulation law enacted by voters in 1988.

As in Texas, California has a $250,000 cap on damages (California's limits, however, have been in place since 1975). And, as in Texas, large California insurers have proposed major rate hikes on doctors in recent years despite the caps.

GE Medical Protective sought a 29.2% rate hike in California.

However, because of California's system of insurance regulation, FTCR was able to challenge the hike resulting in the company reducing its rate proposed increase by 60%. Unlike California's system, the Texas Insurance Commissioner, who disputed the need for Medical Protective's increase in that state, does not have the regulatory authority to block inappropriate insurance increases.

"In California, Texas and throughout the country, malpractice insurers like Medical Protective continue to push for higher premiums for doctors, regardless of whether or not the state has caps on damages. Insurance regulation, not caps, has been the only successful weapon in the battle against skyrocketing premiums," said Heller.

Not the First Industry Admission That Caps Fail

In 1986, after insurers and doctors lobbied for, and Florida lawmakers enacted, a cap on non-economic damages for medical malpractice claims, insurers Aetna and St. Paul increased doctors' premiums. The companies argued that, despite earlier promises, malpractice caps do not actually lead to savings for doctors, much in the manner of Medical Protective in its recent Texas filing.

According to a St. Paul Insurance company study provided to the Florida Department of Insurance at the time:

"The conclusion of the study is that the noneconomic cap of $450,000, joint and several liability on the noneconomic damages, and mandatory structured settlements on losses above $250,000 will produce little or no savings to the tort system as it pertains to medical malpractice."

"Time after time insurers present caps as the panacea for high insurance rates only to argue that caps actually have a negligible impact when it comes time to send doctors the bill," concluded Heller.

12:16 AM  
Blogger Management said...

Issue: Tort Reform
Debunk the myths, slice their arguments to shreds


Ask President Bush what his answer is to spiraling health care costs and the 43 million Americans who have no health insurance, and he'll give you two words: tort reform.

What does "tort reform" mean? Put simply, it means making it harder for people to sue one another, or making sure they can't recover very much money when they do sue. A "tort" is a wrongful act for which someone can recover damages, and tort reformers would like to exclude some kinds of acts from the definition.

The primary area of debate over tort reform is medical liability; tort reform advocates would like to limit non-economic damages (i.e. pain and suffering) in liability cases to figures like $250,000.

Although the Bush administration hasn't delivered on its promise of tort reform, they still argue that it is the cure for any number of ills. So let's examine the arguments.

Argument: Americans are absurdly litigious.
Response: In fact, most lawsuits are not individuals suing businesses. Most lawsuits are businesses suing other businesses. And the number of lawsuits is not exploding – it has been fairly flat for the last decade, even showing a slight decline.

Argument: What kind of system do we have when a woman who spills her coffee can sue for millions from McDonald's? Frivolous lawsuits are out of control.
Response: First, let's deal with the McDonald's story, since it's such a staple of the tort reformer's arsenal. Before that suit, McDonald's used to heat their coffee to over 180 degrees, just short of boiling. The 79-year-old woman in question got third-degree burns from the coffee, requiring skin grafts. She asked for the relatively modest sum of $20,000 from McDonald's. The corporation refused to settle. With no other options, she pursued the lawsuit and won. She was awarded $160,000 in compensatory damages. The jury also awarded $2.7 million in punitive damages, due to the fact that McDonald's policy was to heat their coffee to a level that was far too hot to drink and would cause severe burns if it came in contact with human skin, a fact of which they admitted they had been aware for more than ten years (hundreds of people had been burned by McDonald's coffee, and a number had filed suit before).

And what happens to truly frivolous lawsuits – like the one in which a woman sued McDonald's for making her fat? They get thrown out of court. When a jury comes up with an outrageously large judgment, it gets reduced on appeal. The system is easily able to handle it.

So the question is, does a frivolous lawsuit that will get thrown out of court anyway so offend you that you're willing to deny everyone the right to sue even when they have legitimate claims?

Argument: Jury awards have gone through the roof, and million-dollar awards are now the norm.
Response: The median jury award in 2002 (the latest year for which data are available) was $30,000. This represented a decline of 30% from the year before.

Argument: If juries didn't give such high awards in medical malpractice cases, malpractice insurance wouldn't be so high. So we need to cap jury awards in order to bring down insurance rates.
Response: Despite the recent dramatic increases in malpractice insurance rates, payouts in lawsuits and settlements for medical malpractice have been relatively unchanged in inflation-adjusted dollars since the mid-1980s.

In an attempt to hold down insurance costs, many states have instituted caps on jury awards in medical malpractice cases. And what happened? Rates continued to rise.

So what explains the recent explosion in malpractice insurance costs? The insurance companies' fortunes in the stock and bond markets. Simply put, when the insurance companies lost money in the markets, they increased premiums they charge doctors in order to maintain their profits. Rates have skyrocketed in the last few years because low interest rates in the bond market and the stock market's fall in 2001 reduced insurance company profits; they raised their rates in response.

The best way to bring down malpractice costs may be to weed out bad doctors. A study by Public Citizen revealed that 5% of doctors were responsible for 54% of all malpractice payouts. But only 7.6% of these dangerous doctors were ever disciplined by their states' medical boards. If doctors were willing to crack down on the incompetents in their own ranks – including revoking the licenses of the worst offenders – malpractice costs would decline dramatically.

Wrapping up

One good way to argue against tort reform, particularly when it comes to things like product liability, is to put it in terms of whom you can trust. Tort reform advocates are essentially saying that you can't trust juries made up of ordinary citizens, so instead we should simply trust corporations not to make products that harm people, or doctors not to make mistakes that can ruin people's lives. If something bad happens to you, tough luck.

The jury system is one of the cornerstones of American democracy. Among other things, it ensures that people are accountable for their actions. And the decisions are meted out not by the powerful but by regular citizens. Didn't George W. Bush go around the country claiming, "I trust the people"? But here's a funny story: in 1999, Bush's daughter Jenna was involved in a fender-bender with someone driving an Enterprise rental car. Because the other driver had a suspended license, Bush sued Enterprise.

5:37 PM  
Blogger Management said...

Risky Business: Home Depot
Accidents claim lives of Home Depot shoppers
Jim Lovel
Staff Writer

Mary Margaret Penturff and her daughter stopped by their local Home Depot in Santa Monica, Calif., on a Sunday afternoon in November 1999 to buy lattice for the patio of the new apartment they were sharing. Moments later, a 75-pound box of wood fell from a shelf 20 feet above the 79-year-old Penturff, leaving her bleeding on the floor with a fatal head wound.

Six months later, on a Sunday of a Memorial Day weekend, the Horner family went to church and a Disney movie before visiting their local Home Depot store in Twin Falls, Idaho, to shop for some things they needed for their new home. Five minutes later, more than 2,000 pounds of kitchen countertops fell about 10 feet from a forklift that was moving them, crushing their 3-year-old daughter, Janessa. She died four hours later at a local hospital.

Two months after that, Jerry Mead, 41, and his brother were shopping in a Home Depot store in Danbury, Conn., when they were hit by 2,000 pounds of falling landscaping timbers. Jerry Mead was killed and his brother was seriously injured.

Atlanta-based The Home Depot Inc. (NYSE: HD), the world's largest home improvement retailer and the second-largest retailer in the United States based on net sales, has expanded from 761 stores at the beginning of 1999 to more than 1,500 today.

Steve Rasak, the Los Angeles attorney that represented Penturff's survivors, says the warehouse concept that has fueled Home Depot's growth also makes the stores among the most dangerous.

"Shopping isn't an inherently dangerous activity," Rasak said. "How can these things happen unless the stores are inherently dangerous?"

For the company to achieve its goal of having everything a customer needs and providing it at a lower price than its competitors, it has relied on the savings and convenience provided by a warehouse design with its high shelves stacked with lumber and heavy merchandise, he said. Employees are trained to work safely in the warehouse environment but few customers entering the store are aware of the dangers, he said.

"They are creating canyons of death and injury and inviting customers to walk down them," Rasak said. "Home Depot is emphasizing profit over safety."

No comprehensive list of customers who have been killed or seriously injured in Home Depot stores is publicly available and the company refuses to discuss it.

"I can tell you that safety is a huge priority for us," said Steve Mills, senior director of safety for Home Depot. "We're working hard on it every day."

The federal Occupational Safety and Health Administration monitors employee safety, but doesn't investigate or record customer injuries and deaths. OSHA has recorded nine worker deaths in the past four years at Home Depot stores. Those deaths include Home Depot employees and contractors working at Home Depot stores.

Mills declined to discuss customer deaths or the circumstances surrounding them. He also declined to discuss specific changes the company made as a direct response to the deaths.

Mills said the company wants to protect the privacy of its customers and associates, and some of the accidents involve litigation.

"There's no question that we have had some challenges with safety," Mills said.

However, Mills said, the company has initiated new safety procedures in the last several years. In 2001, the company began using netting to contain merchandise stored on high shelves inside the store. About 75 percent of the stores have installed some netting and the company plans to install it in the remainder of the stores, he said.

Every store has a safety inspection before and after closing and each store has a manager who monitors safety procedures during store hours, according to information provided by David Sandor, director of public relations for the company. Store safety teams also conduct weekly safety audits, Sandor said.

Arthur Blank, co-founder of Home Depot and CEO of the company at the time of the Penturff, Horner and Mead accidents, declined to be interviewed. Blank retired from the company in December 2000 and bought the Atlanta Falcons football team in February 2002.

Home Depot also won't publicly disclose the number of customer injuries that are reported in its stores. But Rasak said the claims totaled 185 a week in 1998. He obtained that number from Home Depot in 2000 during his lawsuit against the company, one of the few cases that wasn't sealed by a confidentiality agreement prohibiting disclosure of such information. No later figure is available, but Home Depot has almost doubled its number of stores since then.

Penturff's two daughters received a total of $900,000 in a settlement with Home Depot. They refused to accept the confidentiality agreement despite the potential to use it to negotiate a bigger settlement, Rasak said.

"They didn't care about the money," he said. "They wanted the public to know how dangerous these stores are. They don't want anybody else to go through what they've been through."

Since the accident, Penturff's daughters, Rebecca Hamilton and Maggie Harrison, recounted the accident during hearings by the California legislature about safety in warehouse stores. Rasak has consulted with dozens of attorneys with cases against Home Depot.

"There should be federal legislation," said Hamilton, who witnessed her mother's death and says she has been receiving counseling since then. "These stores are very dangerous places."
'The most dangerous store in America'

Scott Callahan, a Houston attorney, has successfully sued Home Depot about 50 times over injuries in the stores, he said. Since his first case in 1999, lawsuits against the company now comprise about one-half of his law practice.

"Home Depot has the worst track record in the nation," Callahan said. "It's probably the most dangerous store in America."

He often sues the company over the same types of accidents, mostly caused by falling merchandise and often involving the use of a forklift. He has seen remarkably little change in the way the company operates the stores despite a growing number of lawsuits, he said.

"They keep me busy," he said. "I keep thinking that I'm going to force them to make some changes."

There are no federal regulations that control how Home Depot and other warehouse retailers protect their customers.

Julie Horner-Cunningham, the mother of the late Janessa Horner, wants to see that change. In April 2001, she testified before the California Seismic Safety Commission in support of a proposed law to regulate how warehouse stores secure objects on high shelves and operate forklifts when customers are in the stores. She also has written letters urging other states to consider laws to protect customers in the stores.

California is the only state in the nation to pass a law requiring warehouse stores to improve safety for customers. The law, which was passed in 2001 and became effective last July, requires the warehouse stores to use safety devices on shelves more than 12 feet tall, establishes safety zones around areas where forklifts are being used, and requires stores to report all injuries that require hospitalization, including emergency room visits, and deaths to state regulators.

Mills said Home Depot supported the law and all the company's stores in California are in compliance with the new standards.

Horner-Cunningham said she first thought the death of her daughter was a "freak accident." But, after hiring attorney Breck Seiniger of Boise, Idaho, to represent her, she learned that accidents are common in the stores, she said.

"My daughter's life could have been spared if someone had stood up against those stores years ago," she said.

She followed the store's safety rules that day in the Home Depot store, which had just opened two months earlier, she said. She and her family stood outside the barrier set up around where the forklift was operating. Her youngest daughter, 21-month-old Hannah, was riding in the shopping cart and Janessa was standing beside her. They watched the employee remove a pallet containing 23 kitchen countertops, each weighing more than 100 pounds, from an overhead shelf. They stood frozen in fear as they saw the stack shift and begin spilling onto the floor about 20 feet in front of them, she said.

The countertops splintered and large fragments of broken lumber scattered around the area. Horner-Cunningham pushed the cart carrying her youngest daughter away from the lumber that was "flying through the air end over end." As she turned to grab Janessa and move her away from the danger, two large pieces of splintered lumber hit Janessa and "crushed her into the concrete floor," the mother said.

"I grabbed her bruised little body and screamed 'Janessa,' realizing she was unconscious," Horner-Cunningham said. "I laid her down on the floor, too scared to check for a pulse or breathing. She was already bruised all over her body, her face, and one eye [was] swollen purple. Everyone in the store kept reassuring me that she was going to be OK but I knew that she wasn't."

The lumber that hit Janessa split a main blood vessel in her brain and broke bones throughout her body. She was disconnected from life-support machines several hours later. Her parents donated her organs, except her heart: It was too damaged from the accident to salvage.

Horner-Cunningham can't reveal the terms or amount of her settlement with the company because of a confidentiality agreement. She built a Web site as memorial for her daughter that includes the story of the accident (
A 'big box' problem

Richard Silverman, an industrial engineer and consultant who evaluates safety in stores, warehouses and factories, has reviewed injuries in six separate lawsuits against Home Depot. He has found problems with the company's procedures in each case.

"There are hazards in Home Depot stores that the company doesn't address," Silverman said. "There is nothing in place to protect the customer."

The problem isn't limited to Home Depot, Silverman said. He sees similar problems in other warehouse and "big box" stores that store merchandise on high shelves within the stores. Most of the companies give adequate training on warehouse safety and provide appropriate safety equipment to their employees but fail to do things that could protect customers.

The companies could reduce the danger to customers if employee training included more emphasis on protecting customers, he said.

"If it is done properly, nothing is going to happen [to customers]," he said.

The problems have prompted some attorneys to join the crusade to improve safety in the stores. Callahan wrote an article about the problem for a law trade journal last summer. Seiniger sponsors a Web site as a forum for people to share information about Home Depot litigation. Rasak has forwarded information and legal briefs from his lawsuit to the Association of Trial Lawyers of America to be used by other attorneys.

Callahan titled his article "Shop Until You're Dropped." Seineger titled his "The Practices that Killed Off the Competition are Killing Off Consumers." Both men cite the need for government regulations to protect customers.

"Unwary customers entering these stores are being exposed to the same dangers inherent in industrial warehouses," Callahan wrote.

"It is unlikely that warehouse stores will eliminate, or seriously curtail, the practice of 'high stacking' or the use of lift equipment during hours in which the stores are open to the public," Seiniger wrote. "The corrective action that is needed in this industry would severely reduce the competitive advantage that warehouse stores gain through reducing handling costs and more efficient use of store space."

Home Depot hasn't done the things that would make the stores safer because of that competitive advantage, Rasak said. Most of the changes would cost the company millions, from hiring more employees to modifying the racks in the stores. He is convinced that the company has made a management decision that it is cheaper to pay claims to injured customers than pay for the changes.

"Management still hasn't got the message," Rasak said. "This is a company that isn't concerned about customer safety."

Home Depot's Mills denies that charge.

"We don't look at it as a money concern at all," Mills said. "What we're looking at here is driving the best program and really living within the values of our organization."

Rasak said he doesn't believe Home Depot will make substantial changes until the company is forced to do it, either by legislation or by the cost of lawsuits becoming more expensive than the cost of additional safety measures.

"It will probably take a huge jury award that will be big enough to affect their profits," he said. "That's all they understand."

5:57 PM  

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