In 2009, a Putnam County resident was awarded more than $19 million from injuries sustained in an auto accident. Less than 3 percent of the award went to compensate the plaintiff for direct medical bills arising out of the accident. The remaining was for “non-economic” damages unrelated to actual injuries. While a higher-than-average judgment in our state, it represents a growing trend in our civil justice system. Larger and more frequent awards are handed down but plaintiffs are receiving less and less.
Nationwide, just 42 percent of a lawsuit award goes to the plaintiff, and less than half that is for actual injuries. The rest is eaten up by administrative and court costs, while plaintiffs’ attorneys pocket a significant portion for themselves. The Tennessee Center for Policy Research recently conducted a study into the potential impact various lawsuit reforms could have on our state’s economy. The study found that lawsuit abuse harms those directly involved, as well as every Tennessean, because of the system’s ripple effects on costs of insurance, goods and services and the ability to do business.
States that have lawsuit abuse reform have experienced tremendous economic improvements. Reforms are saving the average Texas family $1,078 a year, and businesses have invested nearly $2 billion in Mississippi. If Tennessee made similar reforms, the state could produce an additional $2.3 billion in the health-care, durable goods and retail trade industries.
This increased production could lead to as many as 30,000 new jobs across the state every single year. Without question, curbing lawsuits leads to job creation.
Reforms also could bring tremendous benefits to our health-care system. Rural doctors are more prevalent in states with reform. Currently, numerous counties in Tennessee — particularly, rural counties — suffer from a shortage of doctors. Forty-two counties lack an ob/gyn, which contributes to high infant mortality, while a staggering 47 counties do not have an emergency room physician. Lawsuit abuse reform could result in five or six counties finally obtaining the ER physician they desperately need, which could literally mean the difference between life and death.
Another costly problem that stems from lawsuit abuse is defensive medicine. Doctors routinely order unnecessary tests and procedures to prevent getting slapped with a lawsuit. Nationwide, defensive medicine costs $124 billion a year, consuming a whopping 8 percent of personal health-care costs and making health insurance unaffordable for millions. Simple reform measures could give 67,000 Tennesseans affordable health insurance.
Finally, lawsuit abuse reform offers a jump-start to our state’s economy. Tennesseans would reap the benefits of reform at a time when they need it most. Our uninsured neighbors, our friends living in doctor-less counties, and our small-business owners that provide quality jobs and goods should no longer be plagued by an unfair civil justice system. With our economy in dire straits, Tennessee needs more jobs, not more lawsuits.
Justin Owen is president of the Tennessee Center for Policy Research, a free-market think tank. TCPR just launched Focus577.org, a project to educate Tennesseans on the benefits of lawsuit abuse reform.