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Mann, Scott --- "Tort law reform" [2003] AltLawJl 68; (2003) 28(5) Alternative Law Journal 216

Tort law reform

Scott Mann[*]


Serious problems with the current system of tort law cannot be easily dismissed.

Public attacks on the common law of torts, on the rules and procedures governing lawsuits seeking justice for wrongful injuries, have centred on an alleged explosion of litigation in recent years.

Corporations, public authorities and professional groups have supposedly been victims of an increasing number of fraudulent and unreasonable claims, often resulting in excessive payments to 'victims'. This has massively increased insurance premiums and threatened jobs, investment and provision of basic public services. The administration costs of the system have skyrocketed, with greedy lawyers appropriating funds intended to compensate victims.

Proposed solutions have centred upon capping compensation payments and reducing victims' rights to legal redress through imposing increasingly restrictive requirements of culpability and forcing consumers to settle their disputes through binding forms of arbitration, rather than through the court system.

Defenders of the current system deny the existence of a litigation 'explosion' and point out that these attacks and reform proposals have been largely orchestrated and promulgated by big business interests concerned only with their own bottom line.

They defend the use of the courts to uphold individual rights to adequate financial compensation for injury or loss of income caused by others' wilful or negligent action. Justice and equality demand that harm-doers not be allowed to benefit at their victim's expense.[1] The system is further justified through its empowerment of individuals to protect their rights and through the deterrent effect of financial sanctions (including exemplary damages) in reducing such harm in the future.

Only individual assessments of the kind applied at common law take into account the special circumstances of the particular plaintiff to provide fully appropriate compensation. In contrast to other possible mechanisms of compensation, courts respond to the needs of the individual rather than to external political pressures.

Tort law is also said to 'provide substantial societal benefits beyond the effects of damage awards' through 'national public disclosure of misdeeds, cover-ups and crimes' by big corporations. Nader and Smith refer to tort litigation in the USA providing access to secret documents revealing 'the cynical and deceitful behaviour' of manufacturers of tobacco products, asbestos, dangerous motor vehicles and other dangerous products. 'These ... disclosures ... have helped shape public debate and spurred federal safety agencies, investigators and the US Congress to act.'[2]

Nader, Smith and other such defenders of the current system provide substantial evidence to support their claims of corporate subversion of public debate, of the absence of any real 'litigation explosion' in the USA or in Australia, and of the unfairness and inadequacy of the proposed reforms. But there remain very serious problems with the current system of tort law itself which cannot be so readily dismissed and which are discussed and sidelined by current public debates.

Failure of compensation and deterrence

More enlightened critics have long argued that the tort system, and particularly the law of negligence, is antithetical to a genuinely egalitarian distribution of benefits and burdens throughout society and to genuine accountability for corporate wrongdoing.

Capitalist market relations integrally involve individuals and organisations benefiting at others' expense through unequal exchange and competition in ways not touched by that system. There is substantial empirical evidence that the system fails even to achieve the compensation and deterrence goals of its liberal supporters.

In some areas professional groups have been left to formulate their own standards of care for purposes of tort law, without reference to external inputs or oversight. In the medical area, for a long time, the Bolam test -exempting practitioners from liability in negligence if they have 'acted in accordance with a practice accepted as proper by a responsible body of medical men' -effectively allowed individual practitioners to set their own standards, making it difficult for victims to pursue effective tort litigation.

A second major problem is the lack of legal and scientific knowledge on the part of victims of negligent action. In the medical area many such victims do not realise that they have suffered injury in the course of their treatment or do not attribute such injury to the negligence of doctors or pharmaceutical corporations. With professional groups closing ranks to protect their own, it is often difficult for victims to find expert testimony in their favour.

Dewees, Duff and Trebilcock estimate that currently, in the USA, 'only about one in eight victims [of medical negligence] initiates a claim and only one in sixteen …,receives any payment'.[3] Similarly in Australia, 'only a small number of the original pool of potential claims make it to court'.[4]

The costs of the tort system in this area 'include not only the cost of legal services, of administering the court system and of parties and witnesses time, but also of defensive medicine engaged in not primarily for its therapeutic qualities but as a liability reduction strategy' (possibly $40 billion per year in the US).[5]

Some such defensive practices could have benefits to 'patients. But to the extent that money is indeed 'wasted' without health benefits, this is money not available to reduce errors and accidents or better compensate victims.

While 'most negligently injured [road accident] victims.... file claims',[6] tort compensation is generally a fraction of economic losses for serious injuries and is unavailable for the 35% of accident victims whose injuries are not attributable to another driver. We might argue that such injuries are attributable to production and marketing of inherently dangerous vehicles but the law does not see it this way.

The evidence suggests that only a tiny percentage of victims of product-related injuries take legal action. Data from US asbestos claims shows that 'the average total compensation per closed claim was $60,000 and that after deducting plaintiffs' legal fees and other expenses net compensation received by plaintiffs averaged $35,000 or 37% of total expenditures by defendants and their insurers'. As Dewees et al argue, 'this amount likely reflects a tendency to under-compensate fatal injuries and under-compensate for economic losses in the case of serious injuries'.[7]

Air and water pollution causing increased rates of particular diseases 'rarely gives rise to litigation'.[8] Because of difficulties in establishing a direct he of causation from specific discharges to specific injuries, polluters escape liability, despite causing harm on a large scale.

Tort action is futile if the defendant lacks the resources or insurance to allow them to pay compensation. The pattern of third party liability insurance effectively delimits the scope of tort claims. The system comes under massive strain when crime, greed and incompetence in the insurance industry lead to failure in coverage and increasing premiums.

The resources available to the majority of victims -of medical malpractice, sale of dangerous products, and pollution by big corporations-to mount tort actions are effectively zero. Given the huge costs of htigat10n at a time of increasing inequality of wealth and income and reduced legal aid funding, victims are reliant on the vagaries of very limited pro bono legal support or the promise of easy money to no-win no-fee lawyers.

The resources available to bigger corporate perpetrators to defend -and discourage -such actions (or string out proceedings to bankrupt opponents) are virtually unlimited (and can often be written off to tax or passed on to consumers or shareholders). And this is particularly relevant in light of the scientific complications involved in establishing the facts in many such cases.

It is true that some medical expenses of accidents and injuries are borne in part by public health systems, employers' strict liability for work injuries and private health insurance funds. Some individuals receive sick pay and/or social welfare benefits for periods off work. The vast majority of actions started by the issue of a writ are actually settled out of court.

But there are problems with the limited and 'patchwork' structure of compensation systems. As Dewees et al argue, 'the plethora of ... systems leads to co-ordination problems, giving rise to both over and under compensat10n [with] very significant and systematic gaps in compensation coverage... eg about 18% of the US population [had] no private insurance for medical costs [in 1996] -about 35 million people'.[9] As Abel points out, 'tort ages are far more generous than workers compensation payments, crime compensation schemes or veterans benefits. Victims of the last 3 categories are more likely to be manual workers, poor individuals or members of racial minorities.' [10]

Tort damages themselves perpetuate inequality insofar as those with greater wealth, higher wages (or earning potential), greater 'reputation', better health and longer lifespan (by virtue of social privilege) receive correspondingly higher payments. As Abel notes, the poor, as more likely victims of crime, are also likely to be victimised by tortfeasors who cannot or will not pay compensation.[11]

There is no guarantee that plaintiffs' interests are well-served in out-of-court settlements. And such settlements deprive society of the public disclosure of misdeeds.

Continuing high levels of accidents and injuries (40,000 injuries needing hospitalisation and 8000 'accidental' deaths in Australia each year)[12] testify to the failure of the system as a deterrent mechanism.

The Harvard Medical Practice Study carried out in New York in the 1980s concluded that 1% of hospitalised patients suffered an 'adverse event' attributable to negligence, with 'medical injury accounting for more deaths than all other accident types combined'. In Australia, the QAHCS study of 1995 found 16.6% of hospital admissions associated with unintended injuries or complications 'caused by health care management'; 51.2% of these 'adverse effects' were said to be 'highly preventable' and 69.6% caused death. [13]

In addition to the obstacles to action in this area there are major deterrence problems even with 'successful' litigation. As Abel notes, tort law 'consistently violates the basic principle of proportionality between the wrongfulness of defendants' conduct and the magnitude of the penalty imposed. Because punishment is a function of the harm caused, it is either too severe or too lenient. It is too severe where momentary inadvertence results in a catastrophic injury ... too lenient where egregiously unsafe conduct happens to cause little or no injury by chance or through the intervention of others.' [14]

The wealthy and the powerful can find it cheaper to pay the tort costs of harming other people rather than taking action to prevent such harm in the first place. They can pay to avoid court action (through intimidation and out of court settlements) to reduce costs and maintain their 'good name'. They can afford comprehensive insurance to protect themselves from the consequences of their actions.

Issues of radical resource imbalance between different class groups and the problems of establishing causation in pollution and toxic product litigation undermine the deterrent effects of tort law in relation to much corporate wrongdoing. We have noted the very low level of claims and even lower level of successful claims compared to the actual negligent injury rate in the medical area. Dewees et al observe that 'quantum rules under-deter medical injuries causing death ... and ... the ability of many defendants to pass on liability costs to patients and/or health insurers further weakens the deterrent incentives brought to bear upon individual physicians'. [15]

An improved system

It would be possible to create a more egalitarian and effective system of compensation and deterrence. This would include comprehensive public legal education and public legal services with equal access of all to high quality legal advice and representation at no direct cost or minimum cost (paid for by taxes or by a progressive levy on income or assets). The former would overcome problems of victims who fail to take action through ignorance. As Abel says, 'all victims must be encouraged strongly to claim, by lawyers, the legal system, cultural norms and support groups'.[16] The latter would address problems of victims who fail to take action through lack of resources and fear of legal costs.

The vast imbalance of power and resources between big corporations (and government departments) on the one side and individual workers on the other could be addressed through denying the former the opportunity for any legal spending beyond that provided to the latter by the public system, or by ensuring that the former provide the latter with funding to match their own extra spending.

Similarly, compensation should be the same for all - aiming to provide decent living conditions -with no extra payments for private wealth lost or higher income forgone. Or those on lower incomes should be compensated by higher payments and those with private wealth left to look after themselves. As Abel says, 'those who enjoy the privileges of wealth and income should bear the burdens ofloss and loss insurance'.[17]

There would be broad community input into assessment of proper standards of care for particular professions. A responsible judiciary should take an active role in ongoing determination of the rationality, morality and competence of particular professional practises, with a strong emphasis on rights of properly informed choice in all areas.

Causation problems could be addressed, in part, by extending something like the market share principle to the likelihood of defendant's culpability in particular cases of injury. Thus, it should not be necessary to prove a direct causal link between, for example, this discharge and this victim's illness. Rather, the victim should be compensated in proportion to the increased risk created for the affected population by the discharge in question. [18]

All those who benefit from activities potentially exposing others to risk of harm must maintain insurance cover sufficient for effective compensation of victims. Payment by those found liable should be proportional both to the seriousness of the offence and the perpetrators' ability to pay (as measured by asset values) - with extra payments (beyond victims' compensation) going to fund public legal and other welfare provisions.

The criminal law should take a much more active role in prosecuting risky and dangerous behaviours likely to produce accidents and injuries (particularly in areas of work safety, dangerous products and pollution). Criminal and civil proceedings could be combined in cases of actual injury with civil standards of proof applied in cases of serious corporate crime (to facilitate prosecution and deterrence).

Strong measures would be instituted to prevent corporate perpetrators avoiding big payouts for criminal actions, not covered by insurance, through strategic bankruptcies following- transfer of resources to other companies or individuals (or drawing out the legal process to demoralise or bankrupt 'opponents'). From the start of legal action, assets of companies, subsidiaries, directors and their relatives (at least to the value of damages claimed or likely to be claimed) must be effectively frozen.

Out of court settlements should be banned, in order to prevent powerful offenders from manipulating and pressuring victims and avoiding public scrutiny of their wrongdoing. Broad and detailed public disclosure of such actions should become a central feature of tort actions. As Abel argues, tortfeasors must be made to fully acknowledge the extent and nature of their wrongdoing and apologise to their victims.[19]

No-fault schemes

Such a system would still absorb substantial resources in preparing and running cases which could be better used compensating victims and reducing the likelihood of injuries in the future through means other than deterrence. It would deal only with injuries which can be proved to be causal consequences of others' negligent action, thereby neglecting the substantial number which cannot.

Comprehensive state-funded no-fault compensation schemes for accident and injury address these points. As Dewees et al argue, such schemes in New Zealand and Sweden 'provide compensation [for road and medical injuries] faster, more effectively and more widely' than the tort system, 'with cost savings of 10% to 24%'.[20]

These sorts of systems (including Australian state and territory compensation schemes for workplace injuries) have been quite rightly criticised on grounds of inadequate payments (compared to tort systems), failure of deterrence (with the public rather than perpetrators paying for compensation), and failure to address disability and loss of income not attributable to accident and injury.

It is true that other public welfare systems exist in some jurisdictions to address some of these other causes of income loss. But in light of the inadequacy of such systems, Sugarman and others call for broad compensation schemes focused on all who lack income through unemployment, regardless of causation.

Sugarman proposes, 'mandatory short term sick leave ... up to 6 months, payable regardless of whether the disability is work-related', substantial expansion ofthe social security system to provide ongoing payments of two-thirds of pre-tax income up to twice the national average wage for the disabled and the long-term unemployed, financed through a payroll tax. 'Employers would be required to provide enriched health care programs, including rehabilitation costs to employees and their families, while other individuals would receive similar benefits financed through general tax revenues. '[21]

Such proposals for general expansion of social welfare benefits have been criticised on grounds of cost and 'moral hazard', as well as failure of deterrence. It is suggested that workers would 'abuse' a system with high levels of income protection for all those unemployed. Sugarman responds by setting benefits at a lower level for the healthy unemployed than for the disabled. But it would also be possible to provide a genuine living wage for all unemployed people, with higher payments to all workers.

It is big corporations that have the greatest potential for inflicting large-scale harm through inadequate health and safety in the workplace, mass marketing and sale of dangerous products and significant discharge of toxins. It is the monopoly power of these corporations that puts increased pressure on smaller businesses to cut comers in these areas also.

It is representatives of the big oil and car companies who have done most to develop and maintain an inherently dangerous car-based transport system through pressure on consumers and governments to prevent the development of safer, more efficient public transport alternatives. It is these people and the politicians they fund who continue to benefit from such a system, with working and middle class people forced into regular use of dangerous vehicles by the demands of employment and daily living.

Similarly, a deeper consideration of medical negligence identifies the central role of medical entrepreneurs, corporate executives, lawyers and accountants of private medical and pharmaceutical corporations and their political representatives who have worked to prevent the development of comprehensive, efficient, accessible and accountable public health systems. The pursuit of profit ensures the expansion of wasteful, luxury, private health care, with public systems starved of funds and allowed to disintegrate, with continued marketing of dangerous and ineffective medical products on a vast scale.

The mass of working people, as principal victims of corporate power, currently sustain welfare provisions through income and consumption taxes. The wealthy minority who benefit from their suffering have ways to evade income taxation including use of family trusts and political pressure for reduced taxation of unearned income.

As executives, they avoid corporate taxation through use of tax havens, transfer pricing and special concessions from sympathetic or supine governments.

At the same time, deregulation, international mobility and increasing concentration of capital create increasing pressure for wage reductions. This undermines the tax base of governments reliant on taxing workers' wages and consumption, making it increasingly difficult to fund comprehensive welfare provisions.

On the other hand, contemporary productive investment creates the potential for massive extension of general social welfare.

We see here that the issue of no fault compensation or, more broadly, of decent social welfare provision, is very intimately bound up with the issue of rational organisation of production and radical tax reform, forcing the wealthy to pay their share. This, in tum, is bound up with the need for policies aiming to reverse current trends towards corporate deregulation and unrestricted movement of capital across borders, privatisation of public services and corporate concentration.

Prevention

The greatest need is to take steps, beyond the limited deterrence effects of punitive sanctions and victims' compensation, to prevent accidents and injuries. As Abel points out, 'money cannot really restore victims to their status quo before the accident ... reimbursement for the cost of medical treatment is hardly the same as never being injured ... money is a poor equivalent for non-pecuniary loss ...'[22]

Effective - democratic - regulation and control of production, with investment directed towards social welfare rather than profit, could allow for improved conditions of health and safety at work, and a move to safer, more efficient public transport systems. Properly funded and regulated public health systems could hugely reduce adverse medical reactions. Reduction in the political influence of private corporations could allow for much more effective legal protection of workers, consumers and the environment.

Such regulation must go beyond risk assessment based on quantitative laboratory and epidemiological evidence. Lack of strong positive evidence of long-term safety (or of social benefits exceeding costs) should be treated as grounds for outlawing emissions or sale of materials. The onus should be on those who wish to release any new product or by-product or continue to release anything whose safety has been seriously questioned (on grounds of possible serious or irreversible damage to people or the environment) to provide such positive evidence or cease production and clean up, with strong criminal prosecution for unauthorised release.[23]

Epidemiological and other evidence strongly suggests that those on lower incomes in societies with greater income disparities, particularly the unemployed, are much more susceptible to accident, injury and illness than those in less unequal societies, as a result of stress-induced immune depletion, and loss of social cohesion, trust and collaboration.[24]

The sorts of redistributive mechanisms considered earlier, with increased taxation of corporations and private wealth supporting expanded social welfare systems, along with government job creation, improved minimum wages and restricted executive salaries, could therefore be expected to significantly reduce accidents and injuries.

Granting all citizens sufficient income to satisfy basic subsistence needs would radically alter the balance of bargaining power between labour and capital through offering ordinary people a genuine alternative to paid employment. It would thereby allow such people to demand decent treatment, respect, empowerment and healthy conditions of work.


[*] Scott Mann teaches law at the University of Western Sydney.

email: s.mann@uws.edu.au

© 2003 Scott Mann (text)

© 2003 John Lynch (cartoon)

[1] Tony Honore, 'The Morality of Tort Law-Questions and Answers', in D Owen (ed) Philosophical Foundations of Tort Law (1995) 83-4.

[2] R Nader and W J Smith, No Contest (1996) 314.

[3] D Dewees, D Duff and M Trebilcock, Exploring the Domain of Accident Law; Taking the Facts Seriously (1996) 416-17.

[4] B Bennett, Law and Medicine (1997) 72.

[5] D Dewees et al, above n 3, 417.

[6] Ibid 415.

[7] Ibid 423.

[8] Ibid 419.

[9] Ibid 433.

[10] R L Abel, 'A Critique of Torts' in H Lunz and D Hambly, Torts; Cases and Commentary (4th ed, 1995) 102.

[11] Ibid 102.

[12] H Lunz and D Hambly, above n I 0, I.

[13] B Bennett, above n 4, 70.

[14] R L Abel, above n 10,100.

[15] D Dewees et al, above n 3, 416.

[16] R L Abel, above n 10, 105.

[17] Ibid 106.

[18] See S Mann, 'Science, corporations and the law', (2001) 26Alternative Law Journal 289.

[19] R L Abel, above n 10, 105.

[20] D Dewees et al, above n 3, 421-2.

[21] Ibid 434.

[22] R L Abel, above n 10,103.

[23] See A Deville and R Harding, Applying the Precautionary Principle (1997).

[24] See R G Wilkinson, Unhealthy Societies (1996).


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