West Virginia sees some, not enough, tort reform

By Sean Parnell

There are two tort systems in West Virginia, or so it seems to observers of the litigation climate there.

The first has been reformed in recent years, delivering the benefits of competition and choice to consumers, lowering prices, and luring companies and professionals.

The second tort system, however, continues to drag down the West Virginia economy, delivering verdicts against defendants that bear little relation to actual damages or a fair reading of liability.

This second and unreformed tort system earned West Virginia the dubious distinction of being the only statewide area to be named a "judicial hellhole" by the American Tort Reform Association in its late 2005 report. The other areas named "judicial hellholes" were the Rio Grande Valley and Gulf Coast in Texas; Cook, Madison, and St. Clair Counties in Illinois; and South Florida.

The first West Virginia tort system addresses medical malpractice, automobile, and homeowners insurance. The reforms, enacted in 2001 and 2003, have ended the exodus of doctors who could not afford skyrocketing malpractice insurance and led auto and homeowners insurance carriers who left the state earlier to return. Insurers who had remained have been filing for rate decreases with the state's Insurance Commission.

In sharp contrast to the insurance market, however, firms in other lines of business are not so lucky when it comes to West Virginia's tort system. West Virginia was ranked 49th of 50 states in a survey of legal counsels and senior litigators at major corporations conducted for the U.S. Chamber of Commerce, beating only Mississippi.

Their key concerns include lawsuits relating to asbestos and silica; a state supreme court that is openly hostile toward corporate defendants; and extremely loose product liability laws that don't require evidence showing a product is unreasonably dangerous.

HURTS JOB, BUSINESS GROWTH

Government and business leaders alike have expressed their concern. In his 2005 State of the State address, Gov. Joe Manchin said West Virginia needs to enact tort reforms beyond the earlier efforts in medical malpractice, homeowners, and auto insurance, in order to "... build a stable and attractive business climate."

Manchin also noted the success of those earlier reforms, led by previous governor and fellow Democrat Bob Wise. "Under the leadership of Governor Wise and the legislature, the state recently enacted significant reforms to address skyrocketing malpractice costs for our doctors," Manchin said. "And these reforms have worked, cutting medical malpractice lawsuits significantly and reducing the total amount of paid verdicts and settlements by over 50 percent."

A study prepared in 2003 by The Perryman Group, an economic research and analysis firm, found excessive litigation cost the West Virginia economy $300.6 million in 2001 alone, a figure expected to reach $626.3 million in 2006. The study also found an expected permanent loss of 16,306 jobs.

According to the report, the typical West Virginia household would lose about $1,519 per year through higher inflation, lost income, and decreased spending. In addition, the report noted West Virginians would face "substantially diminished job prospects" and a "less efficient judicial system to compensate for legitimate losses."

"The civil justice climate has definitely had a negative impact on West Virginia," said Karen Price, president of the West Virginia Manufacturers Association. "Companies look at the climate and it affects decisions on where they invest or reinvest."

ASBESTOS, SILICA REFORMS SOUGHT

Manchin and the state legislature are considering additional tort reforms this year. Price cited legislation to cap appeal bonds in civil lawsuits as a top priority. At the time she spoke with Budget & Tax News, legislation to accomplish that had passed the Judiciary Committee of the State House.

In its Policy Issues 2006 report, the West Virginia Chamber of Commerce cites the need for reforms in medical criteria for asbestos and silica claims. "Currently in West Virginia," the report notes, "people with serious asbestos-related illnesses, who need immediate help, must get in line with thousands of plaintiffs who are not sick/impaired and may never be." As a result, people who are sick with asbestos-related illnesses "are receiving reduced or delayed compensation" as the number of claims overwhelm the system.

An additional concern is that West Virginia companies "are facing significant challenges, including bankruptcy, because a few aggressive plaintiff attorneys are filing thousands of asbestos suits for non-impaired claimants." The chamber fears similar concerns could arise over claims based on silica exposure.

The solution offered by the state chamber is to establish medical criteria based on standards developed by the American Medical Association for claims based on asbestos and silica exposure and require that there be a doctor-patient relationship between the claimant and the doctor making the diagnosis. Currently, doctors are allowed to diagnose patients they have never seen based on a brief examination of x-rays.

According to the chamber, passing medical criteria legislation would ensure that people who have asbestos- and silica-related illnesses have their day in court. Florida, Georgia, Ohio, and Texas have adopted similar legislation.

'GOOD CHANCE' OF REFORM

Price is optimistic about the chances of getting significant reforms passed in 2006 and beyond. "I think there is a good chance that we will make several reforms this year. Reforming civil justice isn't something you solve in one year, it is going to take several years."

She also said successful earlier reforms have helped make it easier to pass additional reforms. "West Virginians have seen the past reforms bringing doctors back into the state, and greater availability of automobile and homeowners insurance at lower rates than before," Price explained.

"People ought to keep an eye on West Virginia. We're going to make significant reforms over the next few years," Price said.

Sean Parnell is vice president - external affairs of The Heartland Institute. E-mail him at parnell@heartland.org.