Has Tort Reform Worked Too Well in Texas?

The Texas Legislature enacted tort reform measures in 2003 that among other things placed a $250,000 cap on non-economic damage awards against individual health care practitioners, a $250,000 cap on non-economic damages against single health care institutions and a $500,000 cap on non-economic damages against combined health care institutions in a single case.

Other aspects of the reform legislation revised the state’s “Good Samaritan” law to protect volunteer firefighters, teachers and charity volunteers from litigation abuse; allowed defendants to appeal class certification directly to the Texas Supreme Court to decide if the plaintiff has a class action status; and limited the ability of trial lawyers to venue shop.

Upon their passage, Texas Gov. Rick Perry praised the reforms, saying they would add 240,000 permanent jobs and $36 billion to the Texas economy.

By most accounts, the reforms have been tremendously successful. Medical liability insurance rates have fallen and the number of medical liability insurers has increased, along with the numbers of physicians willing to locate their practices in Texas.

But at least one insurance defense lawyer wonders whether the success of tort reform in the state is a case of — be careful what you ask for, you just might get it.

“Tort reform has worked. It has accomplished everything everyone hoped it would accomplish and I think even accomplished a whole lot more,” said Gary Schumann, a partner in the law firm of Savrick, Schumann, Johnson, McGarr, Kaminski & Shirley.

Speaking at the 2007 annual meeting of the Texas Surplus Lines Association in Austin, Schumann told attendees that the reforms are working so well, judges are trying cases that might otherwise go to mediation, just to have something to do.

Schumann said he experienced such a situation recently when he argued a motion to compel mediation in a case he wanted to settle. The judge decided to try the case, saying he didn’t have a lot on his docket and needed a few cases to try.

Schumann said such an incident — a judge not wanting to get rid of a case because they wanted something to try — was not only unheard of previously, it is a direct consequence of tort reform.

“And that’s the consequence I think the people who were lobbying for it wanted to achieve,” he said.

He wondered, however, if tort reform has gone too far in lowering the risk of litigation.

“Everybody is sort of happy if judges sit around and don’t have a lot to do. And if lawyers don’t have cases to bring, who cares about that? But what about you guys? Schumann asked.

He said total protection from the threat of litigation could affect the sales of insurance, citing the case of an acquaintance whose family owns a chain of nursing homes in Texas.

“Because of tort reform, nursing homes are considered health care providers,” Schumann said. His friend told him the family is “so unconcerned about liability they are not going to buy insurance this year. If we don’t have to worry about liability, what do we need insurance for?”

The group will self-insure in lieu of buying insurance, Schumann said.

So, Schumann asked, “We want a little bit of litigation out there, don’t we? We want a little bit of risk. We need risk or we’re all out of business. … We’ll see what happens but tort reform has worked. I just hope for all of our sakes it hasn’t worked too well.”

Read the complete version of this story in the Dec. 3, 2007, edition of Insurance Journal – South Central Region.