Recently the defense industry has been complaining about “nuclear verdicts,” “social inflation,” and “eye popping numbers” in jury verdicts. Having to pay out large verdicts has insurance companies complaining in the media, trying to drum up sympathy. In a first quarter earnings report in April 2020, Travelers Insurance CEO Alan Schnitzer complained that tort reform was needed because of a “tort tax” that he said was costing every household in America even though Travelers saw a reduction in claims made because of the “Shelter in Place” orders due to the COVID-19 virus. Mr. Schnitzer apparently thinks that his company shouldn’t have to pay damages awards, even if Travelers is an insurance company, because he went on to say that the average family “can’t afford” to this phantom “tort tax.” Mr. Schnitzer, don’t mislead the country. The average person doesn’t pay the damages awards and it is not a “tort tax.” The “study” that Mr. Schnitzer used to trick everyone was put out by a Big Business and Insurance Industry shill, the U.S. Chamber of Commerce’s “Institute for Legal Reform.” The “study” estimated the cost paid out by insurance companies in the various areas of coverage (which includes all sorts of things like employee theft coverage) and divided that number by the number of households in America. The “study” concluded that each household is paying for all of the insurance claims. The problem with the “Institute’s” logic is that you and I aren’t paying the money. The insurance companies are. And when was the last time you heard of an insurance company going out of business? Look at it this way, if you and I were paying our share of the claims that the “Institute” claims we are paying, then there wouldn’t be any insurance companies. While Mr. Schnitzer would prefer that Travelers make more money and not pay out anything, that isn’t how insurance works. Of course, if Traveler’s hadn’t made $76,000,000 in bad investments, it would have been able to add to the more than $400,000,000 it fed back to its stockholders. Speaking of “eye-popping” numbers, in 2019, Travelers doled out $2,396,000,000 to shareholders. As of February 2019, Mr. Schnitzer’s net worth was estimated to be at least $56,000,000. His salary in 2019 alone was $16,778,800. The average Joe on the subway makes $53,490 and Mr. Schnitzer, who makes more than 300 times as much, is complaining that his stock options aren’t worth enough because Travelers has to pay claims. Don’t forget, that $600 million dollars Travelers made was for three months in 2020. At that rate, Travelers will make $1.2 billion by the end of the year. That is a “breath-taking” number. Another eye-popping number is that in 2018, State Farm had a net worth of $100.9 billion ($100,900,000,000.00)
The Fulton County Daily Report here in Georgia recently mentioned a “breath-taking” verdict of $2 billion against Monsanto in the past year. What is truly breath-taking is that Monsanto booked net sales of $43 billion from 2015 to 2017. To put that into perspective, the Fulton County School system projected $1.05 billion in expenditures for 2019. Monsanto had enough revenue in three years to run the Fulton County School System for 25 years. Putting aside the financial hyperbole, the Daily Report article completely ignored the why of the verdict against Monsanto. Lawsuits were filed due to Monsanto’s glyphosate herbicide, also known as Roundup, which is linked to cancer and increased incidence of birth defects worldwide. As a result of the lawsuits, and only because of the lawsuits, Monsanto was forced to release internal emails and correspondence that suggested that Monsanto “had ghostwritten research that was later attributed to academics” and that showed what appeared to be collusion between Monsanto and an EPA deputy division director to prevent governmental investigation into the cancer-causing propensities of its product.
One of the fundamental rights in this country is the right to a trial by jury. Over and over again, courts of appeal emphasize that the people that make up the jury hear all of the evidence, get to see and assess the credibility of witnesses first hand, and then make decisions based on the law given by the judge. Again and again, courts of appeal pay lip-service to the judgment of the men and women on the jury. We have faith in our juries because we are a part of them. Jurors are your doctors, your nurses, your car mechanic, and your bank teller; and juries get it right more times than they get it wrong. All of this talk of “nuclear verdicts” or “breath-taking numbers” is a veiled attack on the ability of jurors to understand evidence and make correct decisions. It is an attack on the jury system. In the eyes of the insurance companies and profit makers, a “nuclear” or “socially inflated” verdict is wrong and should be prevented at all costs. To reach that conclusion, the insurance companies and Big Business have to assume that in each case all of the facts were in their favor, that all of the law was in their favor, that they had the best lawyers in the room and the judge in their pocket, and the jury was too stupid to see that the insurance company was right. That is never the situation when a jury awards a large amount of damages.
The defense industry never talks about the other side of the coin. Why haven’t the insurance companies complained about the horrible injustice that results when a jury gives a terribly injured person nothing? Are we to believe that juries only make mistakes in favor of plaintiffs? Why haven’t the insurance companies ever stepped up and paid anyway when a jury made a mistake that benefitted the insurance company? It’s because of that quarterly earnings call the CEO will have to make.
Perhaps the reality is that a large verdict reflects that a tortfeasor did a really bad thing that caused horrible injuries to an innocent victim. Perhaps the reality is that the insurance company was too stupid to settle a case for a lot less money when it had the chance. Maybe the insurance company decided to take a case to trial when the facts clearly showed that the plaintiff was entitled to a large damage award. Perhaps the reality is that the insurance company failed to properly train or supervise its adjuster who thumbed her nose at a good settlement offer and forced the plaintiff to file suit.
Why is the defense industry so desperate to throw juries under the bus? Why is the U.S. Chamber of Commerce, which is not, in fact, associated with the United States Government, but instead is “the strongest, most active business advocacy group in the country,” pushing so hard to cap damages and prevent juries from doing their jobs? Why is the “Institute for Legal Reform,” an arm of the Chamber of Commerce, spinning statistics to make it sound like juries are going “nuclear” on the poor, underprivileged insurance companies? The reason is obvious: Big Business, including the Chamber of Commerce and its “connected” legislators, want to make it less expensive for corporations to kill you.
Take for example the Georgia Senate Judiciary Committee’s proposed “tort reform” legislation earlier this year. It included a proposal that imposed a $250,000 cap on punitive damages for injuries caused by defective products. In the past, punitive damages were thought of as a way to keep defective products out of the stream of commerce and to keep the general public safe. For example, Ford was hit for a record amount of punitive damages in the 1980s for knowingly building a death-trap called the Pinto. In 1977 Mother Jones published “Pinto Madness” by Mark Dowie, which exposed the corporate misdeeds behind the Pinto. In its rush to get the Pinto to market in 25 months instead of the usual 43 months, Ford ignored crash testing that showed that rear-end collisions pushed the Pinto’s fuel tank into bolts on the differential, causing fuel leaks and explosions. As a result, hundreds of people were maimed or killed in what should have been survivable crashes. In one such case, Lilly Gray was killed and her passenger, 13-year-old Richard Grimshaw, was burned over 90 percent of his body. He also lost portions of fingers on his left hand and portions of his left ear. Young Richard underwent multiple extensive surgeries, including skin grafts, and was projected to need many more surgeries over following decades. At trial, the jury heard evidence that Ford engineers knew that people were going to die because of design defects. Ford, however, circulated an engineering mem0 (“Fatalities Associated with Crash Induced Fuel Leakage and Fires“) that did a cost-benefit analysis and decided a human life was worth about $200,000 but engineering safety into cars would cost the industry $137 million. Ford reached the conclusion that it was cheaper to kill people than it was to build a safe car. The jury in the Grimshaw v. Ford case felt that punitive damages of $125 million might get Ford to change its ways. Unfortunately, the judge reduced the punitive damages award to $3,000,000 and the car manufacturers continued on their merry way.
I wonder how Richard Grimshaw is doing now. Perhaps his horrendous burns have miraculously gone away and his fingers grew back. More likely, if he survived the additional surgeries and the long-term damage from his burns, 40 years later he is still living with the consequences of Ford’s misdeeds. If you were to ask him whether, looking back, he would voluntarily go through the same thing again for a “nuclear verdict,” do you really think he would say that his burns and surgery weren’t so bad? That it was all worth the money a jury awarded? Of course, if the Georgia Judiciary Committee and Big Business have their way, people like Lilly Gray and Richard Grimshaw won’t be able to make it costly for Big Business to kill people. If a life was worth $200,000 in the early 1980s, what makes Senator Steve Gooch and Senator Bill Cowsert, who spearhead the “reform” efforts, think that a punitive damage award of $250,000, at most, is going to keep Georgia citizens safe from the next death-trap? If Mr. Gooch’s son had burned to death in a Pinto, do you think he would be ringing the bell to make it cheaper for Ford to kill people?
The proposed Georgia legislation didn’t stop with the cap on punitive damages. The Chamber of Commerce and its legislative cronies are trying to make it harder to bring class action lawsuits in Georgia and trying to make it easier for drunk drivers to avoid the consequences of their actions. The good senators are trying to give the wrong-doer a financial windfall when she maims or kills someone, by reducing damages awards to people who had the foresight to buy health insurance. They are also working hard to put laws in place that encourage property owners to turn a blind eye to crime on their property. No matter how they try to spin it, Senators Gooch and Cowsert, the primary allies of the insurance industry, are only trying to save insurance companies and Big Business from having to pay for their misconduct. If Travelers doesn’t want to pay a bunch of money when Ford builds its next death-trap, then Travelers shouldn’t agree to provide Ford insurance coverage. Of course, then Travelers wouldn’t get its big, juicy premium, and Mr. Schnitzer wouldn’t get his multi-million-dollar end-of-year bonus. I can see how Travelers would be faced with a conundrum: how can it avoid paying claims and keep all of its income? I’m pretty sure the Chamber of Commerce and its “connected” senators are burning the midnight oil trying to come up with a workable scheme that is really “pro-death,” even though they spin it as “pro-business.”
It’s time for the insurance companies, the Georgia legislature, and Big Business to get their collective heads out of the sand. Wake up people. Juries made up of your doctors, your architects, your car mechanics, your nurses, your bank tellers, and your neighbors are telling you that you are doing business the wrong way. Stop blaming everyone but yourselves. Quit complaining about the size of the verdict. Make a safe product. Pay attention to the road when you are driving. Don’t ignore that hazard on your land that will hurt someone. Stop trying to low-ball injured people with offers that are wildly out of line with the value of a case (this means you Allstate). If you do what you are supposed to do, take responsibility for the injuries you caused, or make fair offers of settlement, you won’t get sued and you won’t have a jury show you just how wrong you are.