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HomeMy WebLinkAbout1986-05-06; City Council; 8606; June Ballot Proposition 51CIT OF CARLSBAD — AGEND BILL x" i(3 AR# <PC» & G> MTG. 5/6/86 DEPT. CM TITLE:JUNE BALLOT PROPOSITION 51: THE FAIR RESPONSIBILITY LAW (REFORM OF "DEEP POCKETS LAW") DEPT. HD.'=?~- CITY ATTY\]Go CITY MGR. 3^ oce Q_ O. zo o oo RECOMMENDED ACTION: Council review and consider taking a position on Proposition 51. If Council wishes to support Proposition 51, your action is to adopt Resolution No. &^3£— . ITEM EXPLANATION: The aim of Proposition 51 is to provide cities and the taxpayers with relief from the increasing incidence of "deep pocket" lawsuits, while ensuring accident victims are compensated for their actual out-of-pocket expenses. Under current law, if more than one defendant is involved in a lawsuit and any of the defendants is unable to pay, the remaining defendants must pay 100 percent of the judgement. In practice, that means cities, counties and other entities with substantial funds are increasingly being named in lawsuits where they may have little or no responsibility but are capable of paying the judgement. Proposition 51 would keep that rule in place for actual out-of pocket losses, such as medical costs and loss of income. But it would limit the payment of non-monetary judgements - such as pain and suffering - to only each defendant's degree of fault as determined by the court. The League of California Cities supports this proposition. FISCAL IMPACT: None. EXHIBITS: 1. Analysis of Proposition 51 from League of California Cities. 2. Resolution No. League of California Cities 1400 K STREET • SACRAMENTO, CA95814 • (916)444-5790 Ca/i/orn/a Cities Work Together March 1986 QUESTIONS AND ANSWERS PROPOSITION 51: FAIR RESPONSIBILITY ACT OF 1986 - CLOSING THE DEEP POCKETS 1. What will Proposition 51 do? Proposition 51 will provide cities — and the taxpayers — with relief from the increasing incidence of "deep pocket" lawsuits, while ensuring accident victims are compensated for their actual out-of-pocket expenses. These lawsuits stem from the application of the legal doctrine of joint and several liability to personal injury claims. Simply stated, the doctrine means that when more than one defendant is involved and any of the defendants is unable to pay, the remaining defendants must pay 100 percent of the judgment. In practice that means cities, counties and other entities with substantial pocketbooks are increasingly being named in lawsuits where they have little or no responsibility, merely to provide a "deep pocket" capable of paying the judgment. Proposition 51 would keep that rule in place for actual out-of-pocket losses, such as medical costs and loss of income. But it would limit the payment of non-monetary judgments — such as pain and suffering — to only each defendant's degree of fault as determined by the court. That means no victims would be left with medical bills they could not pay or without a source of income. But cities and other defendants — and, ultimately, the taxpayers and consumers — will no longer be saddled with immense judgments for non-monetary losses for which they have little or no responsibility. 2. Why is this necessary? Because the current law is unfair. It provides that any defendant found liable — regardless of degree of fault — is responsible for the total amount of the judgment. This, in effect, has resulted in millions of dollars of judgments paid by defendants who were found only minimally responsible, but who had the deepest pockets to reach into. 3. What is a deep pocket lawsuit? EXHIBIT 1 A lawsuit attempting to "dig" into the deepest pockets — those with the best potential for paying large settlements — by naming them as defendants, based on little or no negligence and often minimal connection with the accident. Some examples: An adult male who regularly crossed a railroad track to gain access to a beach, crawled under a stopped freight train to cross. The train moved, severing his foot. He has brought suit against the train operator, the railroad, the State of California and the city. His claim against the State (which operated a State park on the other side of the tracks) and the city is that they should have posted warning signs. — A man and a woman who had allegedly been drinking left a restaurant, crossed a city street and were struck by a motorist, also allegedly under the influence of alcohol. The suit against the city is based on a claim there should have been a crosswalk mid-block in front of the restaurant. (Ironically, other suits involving virtually similar circumstances have been based on the claim injuries resulted because the cities had placed a crosswalk in the middle of a block.) — A driver with a blood alcohol level of 0.17 was killed when his car ran off a dead end street and over a railroad embankment 100 feet from the road. His survivors sue the city, claiming "dead end" signs were improperly placed. 4. What are the effects of this law on cities? In a League survey of California's 441 cities last year, 162 mostly small- to medium-sized cities reported paying out over $19 million in "deep pocket" judgments and settlements in 1983-84 and over $18 million in 1982-83. This compares to just $5.1 million paid out in 1981-82 in this kind of lawsuit. The same 162 cities estimate they have spent more than $15 million on the cost of defending these suits from 1982 through 1984. That figure does not include defense costs which are typically borne by the insurance companies in smaller cities. Those same cities also report they could be expected to pay out as much as $210 million in the next few years, if they were found to be just one percent responsible in lawsuits pending at the time of the survey. The joint and several liability rule also has been a contributing factor in a liability insurance crisis that has reached devastating levels for cities. Municipal insurance premiums typically have shot up at least 300% during the past year. (In some cities, the increases have amounted to over 1000%, while coverage has dropped.) This has forced some hard decisions on the part of city officials over which city programs to cut in order to afford liability insurance — or which programs, like public swimming pools or parks and recreation programs — to eliminate in order to qualify for insurance. In many cases, liability insurance has been unavailable at any price. By mid-February of this year, 43 California cities had been unable to find liability insurance and 25 more were dangerously underinsured. Many factors contribute to the high cost and unavailability of insurance. But the fact that any city can be made to pay 100 percent of a judgment, even though it may have little responsibility for the damages, is like playing Russian roulette: It's virtually impossible to predict where risk may lie. 5. What about other government agencies? Counties are facing similar difficulties, with insurance increases of up to 594 percent. And state agencies also are affected. For example, CalTrans currently is facing 2,000 liability cases with potential awards of approximately $4 billion. 6. How does that affect the average person? In the end, it's the taxpayers and consumers who pay. When 162 California cities were faced with judgments of $19.1 million in 1984, the dollars had to be shifted from much needed public programs. Businesses (both large and small), health care providers and others have all likewise been hit with skyrocketing insurance premiums, forced by the massive awards. And when insurance rates skyrocket, the consumer foots the bill. A further impact cannot be measured: the chilling effect the insurance crisis is having on new business start-ups and on businesses that aren't making it this year, because of insurance they can't afford. 7. What assurances do victims have that they will be adequately compensated? The rights of the victim are fully protected in respect to economic or actual losses, both present and future, such as medical expenses, loss of income and property damage. Any defendant, regardless of degree of fault would be held liable for these judgments. However, Proposition 51 provides that awards over and above actual monetary losses would be shared proportionately by the defendants according to degree of fault. 8. Who supports the Fair Responsibility Act? Agricultural Council of California Alliance of American Insurers American Insurance Association Associated General Contractors of California Association for California Tort Reform Association of California Insurance Companies Association of California Water Agencies Association of California Life Insurance Association of California School Administrators California Association Sheet Metal & Air Conditioning Nat'l. Assoc. California Association of 4-Wheel Drive Clubs, Inc. - 3 - California Association of Obstetricians & Gynecologists California Association of Publicly-Owned Transit Systems California Association of Resource Conservation Dists. California Association of Sanitation Agencies California Association of Winegrape Growers California Association of Recreation & Park Districts California Association of Realtors California Chamber of Commerce California College Republicans California Community College Trustees Association California Council of Civil Engineers & Land Surveyors California Council, American Institute of Architects California Defense Counsel California Dental Association California District Attorneys Association California Farm Bureau Federation California Fertilizer Association California Grand Juror Association California Highway Users Conference California Hospital Association California Independent Oil Marketers Association California Interscholastic Federation California League of Savings Institutions California Manufacturers Association California Medial Association California Mining Association California Operator and Door Association California Park and Recreation Society California Peace Officers Association California Pharmacists Association California Podiatric Medial Association California Police Chiefs Association California Restaurant Association California School Boards Association California Seed Association California Society of Professional Engineers California Special District Association California State Parent-Teacher Association California State Sheriffs' Association California Taxpayers Association California Trucking Association California Women for Agriculture Chief Probation Officers of California Consulting Engineers Association of California Consumer Alert - National County Supervisors Association of California Far West Equipment Dealers Associations Insurance Agents and Brokers Legislative Council League of California Cities Marina and Recreation Association National Federation of Independent Business Painting and Decorating Contractors of California, Inc. Peace Officers Research Association of California Professional Association for Childhood Education Professional Insurance Agents of California Service Employees Int'l Union, Joint Council #2 - 4 - Sierra Ski Areas Association Society of Insurance Brokers Structural Engineers Association of California Union of American Physicians and Dentists Western United States Lifesaving Association Also numerous engineer and insurance associations and several small non-profit and social organizations. In addition/ this measure has gained the support of all 58 counties and more than 330 cities throughout the state. - 5 - March 1986 REASONS OTHER GROUPS MAY SUPPORT PROPOSITION 51 ("Deep Pockets") The aim of Proposition 51 is to provide cities — and the taxpayers — with relief from the increasing incidence of "deep pocket" lawsuits/ while ensuring accident victims are compensated for their actual out-of-pocket expenses. Under current law/ if more than one defendant is involved in a lawsuit and any of the defendants is unable to pay/ the remaining defendants must pay 100 percent of the judgment. In practice that means cities/ counties and other entities with substantial pocketbooks are increasingly being named in lawsuits where they have little or no responsibility/ merely to provide a "deep pocket" capable of paying the judgment. Proposition 51 would keep that rule in place for actual out-of-pocket losses/ such as medical costs and loss of income. But/ it would limit the payment of non-monetary judgments — such as pain and suffering — to only each defendant's degree of fault as determined by the court. That means no victims would be left with medical bills they could not pay - or without a source of income. But cities and other defendants — and/ ultimately/ the taxpayers and consumers — will no longer be saddled with immense judgments for non-monetary judgments for which they have little or no responsibility. Responsible citizens/ homeowners — The same law that can force a city to pay 100 percent of a judgment for an injury for which it has little fault applies to any homeowner or motorist with significant assets. That means that if you are involved in a traffic accident or an injury takes place on your property and you can be shown to be just one percent responsible/ you can be forced to pay 100 percent of the judgment. Another party may be 99 percent responsible, but have no assets/ and that party may end up paying nothing. — Its bad public policy to unfairly punish people who have little or no fault in an accident while those with a greater degree of responsibility get off without paying. It encourages disrespect for the law and discourages good citizenship. - 1 - Far too many "deep pocket" lawsuits have been brought - and won - by individuals who were/ themselves/ primarily responsible for their injuries. They drove while drunk or under the influence of drugs. They dived head first into shallow water. They rode motorcycles without helmets. They got into a car with a drunk or drugged driver. This humane law would recognize their need for compensation for medical expenses and loss of income/ but it would not reward them for their irresponsibility or lack of judgment by providing large sums of money for non-out-of-pocket expenses. Taxpayers and Consumers — Judgments/ settlements and defense costs resulting from "deep pockets" lawsuits are costing governmental agencies and private businesses more and more money every year. The cost of insuring against liability losses has skyrocketed in both the public and private sectors during the past year. Whenever the cost of doing business or of running any level of government goes up/ its the consumer and the taxpayer who pays. — Its bad public policy to unfairly punish people who have little or no fault in an accident while those with a greater degree of responsibility get off without paying. It encourages disrespect for the law and discourages good citizenship. Far too many "deep pocket" lawsuits have been brought - and won - by individuals who were/ themselves/ primarily responsibility for their injuries. They drove while drunk or under the influence of drugs. They dived head first into shallow water. They rode motorcycles without helmets. They got into a car with a drunk or drugged driver. This humane law would recognize their need for compensation for medical expenses and loss of income/ but it would not reward them for their irresponsibility or lack of judgment by providing large sums of money for non-out-of-pocket expenses. Owners of business — both large and small — Businesses — like cities and counties — are frequent targets of "deep pocket" lawsuits because they have assets which can be called upon to pay large judgments. Businesses also have been the target of huge increases and a lack of availability of insurance/ just as cities have. They also are having to look for ways to cut costs so they can afford insurance — or eliminating some of their more risky enterprises. And businesses would benefit from the proposition in exactly the same way cities would benefit — they would face lower judgments in "deep pocket" cases and their risk would be more predictable and more manageable/ so they would be more attractive insurance risks. - 2 - There is one further, unmeasurable impact of the current unavailability of insurance: It is impossible to determine how many potential new businesses are never getting started, because they cannot find or cannot afford insurance no one can enumerate how many fledgling businesses — the source of most new jobs in the 1980s — are going under because the cost of insurance or the potential risk puts them into the red. Its bad public policy to unfairly punish people who have little or no fault in an accident while those with a greater degree of responsibility get off without paying. It encourages disrespect for the law and discourages good citizenship. Far too many "deep pocket" lawsuits have been brought - and won - by individuals who were, themselves, primarily responsibility for their injuries. They drove while drunk or under the influence of drugs. They dived head first into shallow water. They rode motorcycles without helmets. They got into a car with a drunk or drugged driver. This humane law would recognize their need for compensation for medical expenses and loss of income, but it would not reward them for their irresponsibility or lack of judgment by providing large sums of money for non-out-of-pocket expenses. Parents Schools, like cities, are frequent targets of "deep pocket" lawsuits. That means the already tight educational dollar is increasingly being spent to defend lawsuits, pay settlements and judgments in cases where the school has little or no responsibility, and to pay higher liability insurance premiums. That's money that isn't being used to provide children with a good education. Child care providers are increasingly being hit with higher costs for insurance, partly as a result of "deep pocket" lawsuits. That means increasing costs for child care, and, often, fewer child care options, since many providers can not charge enough to cover the costs. Many cities have been forced to cut back on recreation programs, because of high insurance premiums or because such programs represent high risks. Swimming pools are being closed, some small cities have removed equipment from playgrounds, one city has dropped a horseback riding program at a city-leased facility, another has cancelled ice skating at a city-owned rink. Private providers of recreation programs also are cutting back services or raising prices to cover their risk. This all means fewer activities for young people in a growing number of communities and fewer options for parents. Its bad public policy to unfairly punish people who have little or no fault in an accident while those with a greater degree of responsibility get off without paying. It encourages disrespect for the law and discourages good citizenship. - 3 - Insurers — The biggest impact of the rule of joint and several liability on insurers is that it makes it virtually impossible to predict where risk may lie/ since it is only necessary to prove that a "deep pocket" defendant is only one percent responsible for an accident. A city's fine safety record is no longer a predictor of how big a risk it may pose to an insurer. - 4 - March 1986 REASONS OTHER GROUPS MAY OPPOSE PROPOSITION 51 The primary argument made against Proposition 51 is the claim that it's unfair to victims. But the Proposition is written so that it protects victims' ability to collect 100 percent of any judgment for their out-of-pocket damages. No victim will be left with medical bills he or she could not pay, and no victim will be left without a source of income. The proposition does limit the amount a victim could collect in non-out-of-pocket damages/ since each defendant would be responsible for paying only a percent of the judgment for "pain and suffering" equal to his degree of fault. The aim of the proposition is to be fair to the victim, but also to be fair to defendants who are often saddled with all of the judgments for both economic losses and "pain and suffering" judgments when they are only minimally at fault. When one defendant who may be only 5 percent at fault is required to pay 100 percent of the judgment/ that's unfair. It creates disrespect for the law, and it's bad public policy. Some argue that the entire "deep pocket" controversy is a ploy by the insurance companies to increase their profits. This is merely an effort to draw attention away from the real problem: the law which makes it possible for someone who was only one percent responsible to end up paying all of a judgment. It costs everyone money, because the costs are passed on to all of us as taxpayers and consumers. more... While the "deep pocket" law does not account for the entire current insurance crisis/ it is a contributing factor/ because it's impossible to assess where risk may lie/ when a jury has only to agree that a "deep pocket" defendant is only one percent responsible. The fact of the matter is: Insurance companies are in business to make money/ and if they could make money insuring cities in California/ they would. But most insurance companies have left the market in this state/ and many California cities are having to do without insurance as a consequence. And/ under current tort law/ being without insurance is like playing Russian roulette. 1 RESOLUTION NO. 8535 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, IN SUPPORT OF PROPOSITION 3 51: THE FAIR RESPONSIBILITY ACT OF 1986 4 5 WHEREAS, The present court-adopted doctrine of "joint and 6 several liability" operates as a "Deep Pocket Doctrine," and 7 has unfairly cost the taxpayers and consumers of California 8 millions of dollars in court judgements, settlements, legal 9 costs, skyrocketing insurance premiums and difficulty in 10 obtaining adequate liability insurance coverage; and 11 WHEREAS, many cities, other governmental bodies, business 12 firms and professionals are selected as defendants in lawsuits 13 merely because of their perceived assets or insurance and often 14 are found only fractionally at fault but must pay most or all 15 of the judgement because the defendants most at fault cannot 16 pay; and 17 WHEREAS, ultimately this cost is unfairly borne by the 18 taxpayers and consumers of California; and 19 WHEREAS, the "Fair REsponsibility Act of 1986" is an 20 initiative measure that would give the voters of California an 21 opportunity to reform the inequities and injustices of this 22 "Deep Pocket Doctrine" by holding liability lawsuit defendants 23 financially liable in closer proportion to their degree of 24 actual fault: 25 /// 26 /// 27 /// 28 /// 1 NOW, THERFORE, BE IT RESOLVED by the City Council of the 2 City of Carlsbad, California as follows: 3 1. That the above recitations are true and correct. 4 2. That the City Council does hereby support the "Fair 5 Responsibility Act of 1986" to relieve the financial strain 6 imposed on local government and its taxpayers. 7 PASSED, APPROVED AND ADOPTED at a regular meeting of the 8 Carlsbad City Council held on 6th day of May 1986, 9 by the following vote to wit: 10 AYES: Council Members Casler, Lewis, Kulchin, Chick and Pettine 11 NOES: None 12 ABSENT: None 13 /M^t^^Y (J< ( MARY H^/CASLER,14r - - Mayor ATTEST: 15 Aletha L. Rautenkranz, City Clerk 18 (SEAL) 19 20 21 22 23 24 25 26 27 28