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HomeMy WebLinkAbout1986-09-23; City Council; 8769; Tort Reforml l l I f t l ! j. i \ l f l' I 0 UJ ~ a. a. < z 0 ~ -c ..I 0 z ::::, 8 .. t' " -,,.-Cll OF CARLSBAD -AGEND BILL AB# ?7te ' iliLE: DEPT. HD. __ _ MTG. 9/23/86 TORT REFORM DEPT. CA CITY ATTYVE/3 CITYMGR.a,t!L--, RECOMMENDED ACTION: That the City Council by motion authorize the Mayor to meet with Assemblyman Frazee and Senator Craven to urge support for the tort reform program proposed by the Proposition 51 Coalition. ITEM EXPLANATION The Proposition 51 Tort Reform Coalition consists of the League of California Cities. County Supervisors Association of California, California Chamber of Commerce and the California Medical Association. The Coalition has proposed a four part program to adopt additional tort reform. Attached is a letter from John Witt, City Attorney of San Diego, datl:!d September 11, 1986 explaining the reforms in detail. The Coalition has asked mayors and city council members to engage in personal conversations with our state legislative representatives about the need for tort reform. If the City Council concurs please consider the action recommended above. EXHIBIT Letter from John Witt, San Diego City Attorney, dated September 11, 1986 I ~ I ,-"1iil\ )RECEIVED SEP 1 5 198' CURTIS M. FITZPAlRICK AS!UTAlll' Clrf ATroltllty RONALD L. JOHNSON SWIOl O!IEJ' DIMY art ATIOJJUY OFFICE OF THE CITY ATTORNEY CITY OF St\N DIEGO JOHN W. WJTT CITY ATTORNEY September 11, 1986 IMPORTANT Vincent F. Biondo, Jr. City Attorney City of Carlsbad 1200 Elm Avenue Carlsbad, CA 92008 Dear Vince: CITY ADMINISTRATION BUILDING SAN DIEGO,,CALIFORNIA 92101-3863 /619) 236·6220 / Tuesday in Sacramento I was privileged to take part in Surr.mit '86, an action forum to set the course for future tort reform, presented by the Prop. 51 Tort Reform Coalition. I am pleased to tell you that a very active campaign to achieve tort reform legislation favorable to cities is underway. The Prop. 51 Tort Reform Coalition consists of the League of California Cities, the County Supervisors Association of California, the California Chamber of Commerce and the California Medical Association. We are assured that the resources of all four organizations are available in the tort reform effort. The first step in reaching our goal is to a!ran~~to,- f e meetings between community leaders and members of the State _Legislature w pective communities. I can think of no more important community leaders to be members of the contact team than the Mayors and Councilmlilmb'1rs .of each city in which part of a legislative district is located. • The ~u~pose of this letter is to enlist your assistance in arrangi :'lg for the Ma or and as many members of our Cit Council aR possible to engage in persona conversations with YQJ.lr__,__State 1-egisJative representatives on this important matter. The goal is to meet b.efore the November 7 election with every member of the Senate and Assembly to seek his or her support of tort reform. Enclosed are copies of the Coalition Agenda to change Tort Laws and background materials pertaining to the Agenda. You will note that the effort has a broad public/private sector base. While the Agenda may contain items you consider of little - Vincent F. Biondo, Jr. -2-September 11, 1986 interest to local government, it is important that the Coalition remain broad and strong to the advantage of all its members. Our old friend, the Hon. Gordon Cologne, now special counsel to the California Medical Association for government relations, has offered to provide special assistance to us here in San Diego and Imperial Counties. He and I will meet tomorrow with President Lee Grissom of the San Diego Chamber of Commerce to lay addltional groundwork for the local effort. In the meantime, I would like you to give special consideration to how you can delive~ th~ personal commitment and active participation of the elected officials of your city. As an aside, it would be helpful to have your City Manager's assistance, too. Next week, I'll contact you personally by telephone to discuss this matter and to learn your plans with respect to our effort. JWW:c Enclosure cc: Hon. Gordon Cologne Lee Grissom Gladden v. Elliott, M.D. Sincerely yours, AN ACTION FORUM TO SET THE COURSE FOR FUTURE TORT REFORM Coalition Agenda to Change Tort Laws The most significant underlying causes of the liability insurance problem are increa~ed liability exposure which has been expanded by the courts in the absence of statutory guidelines, rules which apply to the resolution of damage disputes which encourage litigation, and an inordinate proportion of awards being diverted from the injured party. The results are an increasing number of personal injury lawsuits, more and higher awards, greater amounts going to plaintiffs attorneys instead of the injured party and an alarming erosion in the availability and affordability of liability insurance coverage for all of the necessary services provided by business, commerce, the professions and government. Passage of Proposition 51, relating to joint and several liability, is a step in the right direction but, as was stated frequently by both the pror,onents and opponents in the campaign preceding the June 1986 Primary Election, the provisions of the "deep _pocket" initiative will affect liability insurance coverage only slightly. The significance of the 62 percent vote in favor of that proposition is that the people are very much aware of the liability eoverage problem and favor efforts to solve it. Four major changes are needed in tort law if the problem is to be impacted sufficiently to affect . availability and affordability of coverage: . 1. Extend to all areas of personal injury liability the four major reforms enacted in 1975 for professional liability: cap on -pain and suffering; periodic payments; sliding scale limitation on lawyers' contingency f ces; and eliminate double-recovery foi' economic losses-the "Personal Injury Compensation Reform Act" (PICRA). 2. Change the rules govemin1 punitive damages to assure that these actions are used as punishment only in cases where punishment is warranted, and not used as a "settlement hammer" to extort money from innocent defendants. 3. Establish the "state of the art" rule for product liability damage suits so that industry is held accountable for product safety based on the level of technology known and accepted at the time of its manufacture, not for technological changes and improvements developed subsequent to the product's manufacture. 4. Restore immunity to state and local aovemment agencies for dama1es arising from the condition of public improvements which were safe at the time they were designed and constructed. This immunity is warranted because it is unreasonable for a public agency to be held accountable forever for public works which were, at the time of construction, adjudged to be safe. Endorstd and proposed by a coalition comprised of the California Chambtr of Com~rce, Ltague of California Cities. County Suptnisors ASJociation of Califomia, Calif ornk! Mtdical Association, Assodan'on of Californians for Tort Reform. Association of California Insurance Compa111"t.r, California Defense Counsel California Dental Association. California Hospital Association, California Manufacturers Association and more tlton JOO other major associations_ tJ1lli elllities. ' t AN ACTION FORUM TO SET THE COURSE FOR FUTURE TORT REFORM Background Materials: Proposition 51 Coalition Agenda to Change Tort laws The four components comprising the coalition-proposed legislative program are as follows: 1. Personal Injury Compensation Refor11 Act (PICRA) The following tort reform provisions currently apply in a similar form to actions against health care providers. We propose to make them applicable to all remaining tort lawsuits. A. Periodic Payaents A periodic payments provision would permit a defendant to pay for a plaintiff's future losses in excess of a specified amount, such as $50,000, as they accrue rather than in one speculative, lump-sum amount. Periodic payments are an advantage to both parties. The plaintiff benefits because the money is available when the loss, e.g., future medical expenses, occurs. The defendant benefits by paying less money if the anticipated future losses do not occur. B. Exception to Collateral Source Rule The Collateral Source Rule permits a plaintiff to recover double for certain losses. For example, the plaintiff may have most or all of the medical expenses or wage loss or both paid by an employer, insurance company, or a public benefit program. Nevertheless, the plaintiff recovers for those items again in his/her lawsuit --double recovery. An exception to that rule would reduce the award a plaintiff recovers by the amount of previous payments made for the plaintiff's medical expenses and wage loss. The plaintiff continues to be fully compensated for all losses. The cost to the defendant and ultimately to taxpayers and ,~nsumers is reduced. 2 C. Lillitation on Non-£cOflOllfo D81Rages Current law, in actions other than thosa against health care providers, provides an inadequate standard for jurors to assess non-economic damages. Hence, non-economic damages are subjective. Runaway verdicts result. In 1966, 11on-economic damages equalled awards for economic damages. In 1972, only six years later, awards for non-economic damages were two times awaros for economic damages. [O'Connell & Simon, Payment for Pain and Suffering 29 (1972)]. Today, estimates place awards for non-economic damages at three or more times the award for economic damages. An objective standard or cap is needed. In lawsuits against health care providers, for example, plaintiffs can recover up to $250,000 as no~-economic damages. A similar standard in other tort actions, while continuing to compensate a plaintiff beyong his/her economic damages, would help control runaway verdicts. D. Sliding Contingency Fees Scale A large portion of a plaintiff's award is taken by his/her contingency-fee lawyer. Uncontrolled fees can deprive a plaintiff of needed relief and can cause escalating awards. [Kohlman "An Equitable Contingency Fee Contract" (1975) California State Bar Journal 268-269]. The. Legislature, addressing similar problems, has adopted attorney fee standards in probate and workers' compensation cases and in cases against health care provider~. In the latter cases, the Legislature adopted a sliding scale that reduces the attorneys' percentage taken in cases with higher awards, thereby increasing the net award ta a plaintiff who experiences a 'greater loss. The scale provides that an attorney may charge: (1) 40% of the first $50,000 recovered; (2). 33 and 1/3% of the next $50,000 recovered; (3) 25% of the next $100,000 recovered; and (4) 1mo of all amounts exceeding $200,000. A similar provision applicable to other tort cases would benefit plaintiffs by increasing their net recovery and would reduce some of the drive to escalate awards. 3 2. Punitive Danages The law relating to punitive damage claims, as it has developed in this state, serves neither a public purpose nor the legitimate interest of the recipient. In California, punitive damages --a concept better fitted to criminal law since its purpose is punishment and deterrence --has been used to punish commercial enterprises and individuals for ordinary negligent conduct. Punitive damages are unlimited in size and aworded without strict guidelines. They are being awarded with increasing frequency and in outrageous amounts. The very threat of a punitive damage lawsuit is routinely used to extort large settlements from defendants. To bring more fairness into this situation, we propose reforms which would assure that punitive damages are used as punishment only in those cases where ounishment is warranted. We propose that awards for punitive damages be given only when the conduct necessary to support such an award is proven "beyond a reasonable doubt" rather than by "preponderance of the evidence," as is now the case, We propos~ that unanimous verdicts of a jury be required to award punitive damages, rather than the current 3/4 vote. We propose that more explicit definitions should be required of the conduct necessary to support an award of punitive damages. further, a financial relationship must be established between compensatory and punitive damages so that such awards are reasonably related to the actual damage suffered by the plaintiff. Finally, we propose to restrict the awarding of punitive damages in so-called "bad faith actions" where employers are accused of bad faith contract breaches solely as a means of unfairly inflating settlement values of a lawsuit. 3. State of the Art Defense All post-manufacture changes should be excluded from evidence when it is used to prove that the product was defective in design or that a warning or instructions should have accompanied the product at the time of manufacture. To achieve that end we propose the following: A. Evidence of changes in 1) a product's design, 2) warnings or instructions concerning the product, 3) technological feasibility, 4) "state of the art," or 5) the custom of the product seller's industry or business, occurring after the product was manufactured, should not be admissible for the purpose of proving that the product was defective in design or that a warning or instruction should have accompanied the product at the time of manufacture. 4 If the court finds that the probative value of such evidence substantially outweighs its prejudicial effect ar,d that there is no other proof available, this evidence could be admitted for other relevant purposes if confined to those purposes in a specific court instruction. Examples of "other relevant purposes" include proving ownership or control, or impeachment. B. "Custom" would refer to the practices followed by an ordinary product seller in the product seller's industry or business. C. Evidence of custom in the product seller's industry or business or of the product seller's compliance or non-compliance-with a non-. governmental safety or performance standard, existing at the time of manufacture, could be considered by the trier of fact in determining whether a product was defective in design, or whether there was a failure to warn or instruct or to transmit warnings or instructions. D. "Practical technological feasibility" would mean the technological, mechanical, and scientific knowledge relating to product safety that was reasonably feasible for use, in light of economic practicality, at the time of manufacture. E. If the product seller proved, by a preponderance of the evidence, that it was not within practical technological feasibility for it to make the product safer with respect to design and warnings or instructions at the time of manufacture so as to have prevented the claimant's harm, the product seller would not be subject to liability for harm caused by the product unless the trier of fact determined that: (1) The product seller knew or had reason to know of the danger and, with that knowledge, acted unreasonably in selling the product at all; (2) The product was defective in construction; (3) The product seller failed to meel the post-manufacture duty to warn or instruct; or (4) The product seller was subject to liability for express warranty. 5 4. Design and Construction IIIIIIUnity for Governnent Agencies The Tort Claims Act, Government Code Section 810, et. seq., provides to government er.tilies immunity from liability for an injury caused by the plan or design of a public improvement, if that plan or design was approved as safe at the time the improvement was designed. Two decisions of the California Supreme Court have effectively repealed that immunity. In Baldwin v. State (1972), the court reversed two of its previous decisions and held that even though a road was safe when designed, that if physical conditions changed (for example, traffic substantially increased), the public agency could lose its immunity if it did not redesign the improvement-to respond . to those changed conditions. Then in Cameron v. State (1972), 7 C. 3d 318, the Supreme Court held that even if a public entity had "design immunity," the entity could still be held liable if it failed to warn of the danger presented by the condition. The Tort Claims Act as written makes design immunity an issue of law for the court, but these court decisions have made a public road's condition an issue of fact tried before a jury, thereby greatly increasing the amount of litigation and the cost of defending each case. Because government agencies' resources are limited, they frequently lack the resources to inspect and redesign roads and other public improvements that have been safe, but become unsafe due to changes that occur after a road is built --changes that usually are beyond the control of the agency which designed the improvements. Because of the increased liability costs ~aused by these Supreme Court decisions, government resources are diverted into the liability system, further depleting the resources available to review the condition of roads and to make safety improvements and to post warning signs --a circular situation. Consequently, legislation should be enacted to reverse or limit the holdings of Baldwin and Cameron, and to restore the design immunitt enacted by the. Legislature in 1963.