« Nanotech success stories | Home | Violating civil rights is legal... »
June 13, 2002
Tort law abuses and the cost to society
Three examples of what I feel is America's biggest domestic problem: tort law abuses.
First, fat from asbestos and tobacco, will the trial lawyers target "big food" next? After all, obesity kills. Lawsuits may have less success with food than tobacco, but the costs of the industry defending itself will surely show up in food prices.
Second, how skyrocketing malpractice insurance costs have created a statewide healthcare crises in West Virginia.
Third, 401(k)s have been poor performers because employers can't risk the liablity associated with giving their employees good financial advice. How many Enron employees wouldn't have lost their life savings if the company had been able to give rudimentary investment guidance?
Read summaries of these issues from NCPA:
"BIG FOOD": SCAPEGOAT FOR OBESITY?Will it come down to this: makers of high-fat or high-sodium foods being held legally responsible for obesity in America -- much as tobacco companies were pilloried for smoking-related health problems? Food companies are preparing for just such a battle.
- In December, the U.S. Surgeon General issued a report saying that obesity rates had reached epidemic proportions and called for "a national plan of action."
- It has been estimated that some 300,000 Americans died of obesity-related causes in 2000 -- deaths which are called preventable -- resulting in $117 billion in health care costs.
- Already, a handful of class-action lawsuits have accused food companies large and small of deceptive marketing -- cases which some experts see as the forerunners of suits against companies for simply selling fattening foods.
- A tobacco critic is working with students at Northeastern University to develop strategies which could be used to bring obesity-related claims against food-makers.
But legal observers note that anti-food activists may be biting off more than they can chew. First, food is not addictive in the way tobacco was. Also, metabolism rates vary among individuals and physical activity -- including a walk after dinner -- can do wonders for waistlines.
Then there is the issue of personal responsibility, which seemed to carry weight with some juries in tobacco cases.
Source: Shelly Branch, "Is Food the Next Tobacco?" Wall Street Journal, June 13, 2002.
More on Class Action Suits from NCLC
DOCTORS QUIT WEST VIRGINIA OVER INSURANCE COSTS
West Virginia is one of the costliest states in the nation in terms of obtaining medical malpractice insurance. It has also achieved the dubious distinction of driving one in every 20 of its doctors out of the state or into early retirement in the past two years.
Medical officials call the situation no less than a statewide crisis -- exacerbated by West Virginia's traditional difficulty in attracting physicians due to its poverty and rural character.
- Obstetrical and neurosurgical practitioners are at particular risk -- having seen their premiums rise by 30 percent or more.
- Trauma center services are also said to be hard hit by the exodus -- as in Wheeling, for example, where the departure of the last emergency room neurosurgeon means patients must be helicoptered to other areas.
- According to a recent medical association poll, 40 percent of West Virginia's doctors are considering early retirement or moving to another state.
- Nationally, malpractice jury awards grew from an average of $1.95 million in 1993 to $3.49 million in 1999.
The state's largest major commercial underwriter, the St. Paul Companies, withdrew from malpractice coverage nationally last winter -- which one medical official in West Virginia described as having the bottom fall out.
More on Medical Personnel from NCPA
REFORMING 401 (k)s THE RIGHT WAY
The post-Enron drive to reform pension laws has stalled in Congress over what regulations to impose on employers. Most of the reform plans run the risk of making 401(k)s too costly and burdensome for companies, especially small employers. Some companies may drop employee retirement savings plans altogether.
There is a better way.
A Watson Wyatt consulting firm survey covering the period 1990 to 1995 found traditional pension plans (defined benefit plans) averaged an annual return 1.9 percentage points higher than employee-directed 401(k) plans. The 401(k) plans performed poorly because unsophisticated investors make one or both of two poor decisions:
- They invest in what they know -- thus 30 percent of 401(k) plan assets are invested in company stock.
- They invest in what is safe -- almost two-thirds of funds invested by employees in the lowest-income quintile are in money market or bond funds, or both.
When employees don't choose an investment alternative, employers typically default them into money market funds to protect themselves from tort liability. The accounts can never decrease in value -- but they pay too low a rate of return for retirement investing. To address this problem, the NCPA proposes giving employers liability protection if they do the right thing:
- Employers would actively encourage their employees to invest in diversified portfolios that broadly reflect the market as a whole.
- Employees who do not exercise a choice would be defaulted into diversified portfolios unless employees specifically opt out.
- Since the plan is purely voluntary, no employer would have to adopt it. The employer would be exempt from lawsuits.
By shielding companies that help their employees invest prudently, this would encourage employers to help their employees without burdensome new regulations.
Source: Matt Moore, policy analyst, National Center for Policy
Analysis, June 13, 2002.
Leave a comment