ThePopTort

“Tort Reform” and the Symptoms of Insanity

Have you ever thought what might be an appropriate tag line for the so-called “tort reform” movement?  How about, “We Take Money from the Sick and Injured and Give it to Insurance Companies,” or maybe, “We Make Taxpayers Pay for What Corporations Do Wrong,” or how about, “We Tell Local Judges and Juries What To Do!”  I have another suggestion.  It’s based on that famous definition of insanity: “We Do The Same Thing Over And Over And Expect Different Results.” 

Like for example, take the McDonald’s coffee case portrayed in the award-winning film Hot Coffee, which we wrote about most recently here.  Some “tort reform” folks keep trying to re-argue it, presenting a case that the jury didn’t believe, a case that the judge and jury both rejected, and which led the judge, in refusing to grant a new trial in the case, to call McDonald's behavior “callous.”  (Like here, here.)  Soon I expect to start hearing them say the hospital pictures of Stella Liebeck’s third degree burns and skin grafts were photoshopped.  (As the film also notes, McDonald’s was selling coffee  as hot as a car radiator.  That’s right, a car radiator.  And by the way, the coffee being sold was as hot as a car radiator.  And also by the way, if you're over the age of 25, you may recall how flimsy those McDonald’s cups used to be.  You could stick a finger right through them and if the coffee was too hot, the cup could collapse in your lap.  Which is what happened to Stella.)

So now let’s move on to another insanity this week.  The insurance consulting firm Towers Watson is issuing, once again, their pretend “cost of the tort system” report.  They have tried this 15 times already.  We’re convinced that one day, they must truly believe that one of their reports will actually reflect “the costs of the tort system.” Not yet though.

Here’s what we said about them last year: 

One of Towers Watson’s favorite things is to speculate based on nothing.  Expect “significant increases” in tort costs next year, they say.  Last year, it predicted this increase based on rubbish like the likelihood of future inflation and President Obama’s federal judicial appointments, none of which came to pass.  Their own figures decreased.  You'd think that would be embarrassing enough to keep them from making more bogus predictions but it hasn't.  They're doing it again. 

No matter that the company itself admits that its figures have nothing to do with the costs of the legal system like jury verdicts, settlements, lawyers’ fees or any actual costs of what might generally be considered the “tort” system, or that it examines only insurance losses whether or not a lawsuit was even filed, (think “fender bender”) plus insurers’ “guess” (historically, widely overstated) of what future losses could be, plus all of the industry’s bloated overhead (salaries, bonuses, lobbying costs, jet planes etc.).  Plus, they cite themselves for much of the data, and don't disclose them. 

So in order to find any kind of “increase” this year (since actually the costs were down even by their own definition), they were forced to include predictions about the costs of the 2010 BP oil disaster - even though the court trial hasn’t even started.  Even the Gulf Coast Claims Facility has paid only about $6 billion of the $20 billion BP promised to pay victims.  And this is what’s giving rise to an 5.1%  increase in the cost of the entire U.S. tort system?  Just so Towers Watson can then scare Americans into believing they are somehow paying for this?  Wow, that is some good news for BP! 

Here’s exactly what Towers Watson says:

The April 2010 Deepwater Horizon drilling rig explosion and resulting oil spill in the Gulf of Mexico were the key drivers in the 5.1% increase in U.S. tort costs in 2010, according to the 2011 Update on U.S. Tort Cost Trends from global professional services company Towers Watson (NYSE, NASDAQ: TW). Absent the costs from that event, tort costs would have shown an overall decrease of 2.4% for the year, the findings indicated.

In total, the U.S. tort system cost $264.6 billion, which translates to $857 per person, versus $820 per person in 2009. Personal tort costs totaled $96.7 billion; commercial tort costs were $168 billion. The 2011 report analyzes U.S. tort costs from 1950 through 2010, with projections through 2013.

We’d like to recommending some counseling.  Call us.

Towers Watson’s Recycled “Tort Cost” Garbage

Funny story.  Years ago, an insurance consulting firm found itself a little niche –making up numbers about “tort system” costs, exaggerating them beyond all reason, and hyping them to create fear among public officials so everyone’s legal rights were cut.  No criticism, no matter how clear and repetitive, has ever deterred this company from issuing the same garbage, year after year. 

That insurance consulting firm is now called Towers Watson and recently, it issued its latest refuse of a report, alleging that the U.S. tort system cost $248.1 billion in 2009.  That, by the way, is a 2.7 percent drop from last year.  In fact over the last 19 years - 1991 to 2009 – their own highly-exaggerated figures show tort costs grew at only 3.3 percent per year, which is less than the GDP (4.6 percent). But you won’t see that emphasized anywhere.

To get a sense of the criticisms, see last year’s report from Americans for Insurance Reform, which we covered here.

One of Towers Watson’s favorite things is to speculate based on nothing.  Expect “significant increases” in tort costs next year, they say.  Last year, it predicted this increase based on rubbish like the likelihood of future inflation and President Obama’s federal judicial appointments, none of which came to pass.  Their own figures decreased.  You'd think that would be embarrasing enough to keep them from making more bogus predictions but it hasn't.  They're doing it again. 

No matter that the company itself admits that its figures have nothing to do with the costs of the legal system like jury verdicts, settlements, lawyers’ fees or any actual costs of what might generally be considered the “tort” system, or that it examines only insurance losses whether or not a lawsuit was even filed, (think “fender bender”) plus insurers’ “guess” (historically, widely overstated) of what future losses could be, plus all of the industry’s bloated overhead (salaries, bonuses, lobbying costs, jet planes etc.).  Plus, they cite themselves for much of the data, and don't disclose them. 

In other words, it’s a solid report.  Solid waste!