The Louisiana Legislature last week approved sweeping vehicle tort reform in a state known for having some of the highest insurance premiums in the country and some of the largest court damage awards.
And that’s where the consensus ends. What happens next is still very much up in the air.
Both houses of the Republican-controlled Legislature passed the tort reform bill a week ago in an ongoing special session. Gov. John Bel Edwards, a Democrat, has not yet signed the bill nor vetoed it.
The votes to override a possible veto are not there. Not only that, it isn’t clear just when the time limit for Edwards to sign or veto the bill runs out. It might be this weekend; other interpretations of the law put it at the end of the month..
What does appear possible, according to sources who are closely watching the progress of the bill, is that even if Edwards vetoes the bill, there is enough area for agreement on several provisions that revised legislation will be crafted either in the current special session or a future session.
Doug Williams, an attorney with the Baton Rouge law firm of Breazeale, Sachse & Wilson and general counsel for the Louisiana Motor Transport Association (LMTA), said the insurance cost problems for the trucking industry in Louisiana, as well as for motorists, “has been bad. The cost of insurance has skyrocketed here because of our history of ever-growing damage claims.”
When FreightWaves first spoke to Williams, he said the LMTA was in favor of the legislation. But confusion that has ensued over some provisions led Williams to say this week that “more and more people are coming out against it.”
The biggest issue now over whether Edwards will sign the legislation is a legal concept called “collateral source.” It’s complicated.
An example Williams gave is that if a medical provider bills an insurer $125,000 for a procedure but subsequent negotiations knock that down to $50,000, is the $125,000 the basis for collecting medical costs, or is it the $50,000? In the past, the $125,000 would have been acceptable. The legislation seeks to change that.
Mark Ballard, the reporter for The Advocate group of newspapers who has been covering the tort reform debate, offered the example of a person who had $5,000 in injuries but had also paid $1,800 in medical insurance costs in the prior 18 months. The question then is whether the payout would include the $1,800.
But it’s even more complicated than that. As Ballard told FreightWaves, there is language in the final bill that says the payout based on the broader inclusion of costs “shall” be made. But the intention was that it “may” be paid. And that controversy may lead to a gubernatorial veto. One source who has been watching the proceedings closely said it is possible that Edwards will sign the bill but only after having reached an agreement with the Legislature that it will later pass a “patch” fixing this one provision.
The Louisiana Association of Business and Industry was one of the groups pushing tort reform. In a statement released after the bill passed, it acknowledged the “may vs. shall” issue, calling it a “problematic provision” and that LABI was working with legislative leaders to fix it.
But if there’s a veto by the governor, the group said, “that same broad, bipartisan coalition is more than prepared to send additional measures to his desk during this special session, to ultimately fix Louisiana’s broken legal system and lower auto insurance rates for all drivers in our state.”
One of the most significant provisions in the legislation does not address “nuclear verdicts,” massive awards that have been blamed far and wide for the alarming rise in truck insurance rates. Instead, it deals with smaller numbers, cutting to $5,000 from $50,000 the amount of damages in a lawsuit that would bring in the possibility of a case being heard by a jury rather than a judge.
While runaway jury awards are the stuff of legend, Williams said he has found that it is often judges who dole out some of the biggest awards.
Williams said there is a history of plaintiff attorneys with what he called a “weak case” to keep the size of the suit they are filing under the $50,000 threshold, because they think they may be able to get a better verdict from a judge rather than a jury.
“Let’s just recognize that some judges are going to be more liberal than others,” Williams said. “Maybe that just reflects the community. Some are conservative and some are liberal.”
Being able to go to a jury at a lower threshold opens up the possibility or a “more reasonable settlement,” Williams said.
Another part of the legislation has been referred to as the “direct action” statute. The current law allows a plaintiff to bring the defendant’s insurance carrier in as a separate defendant. The changes in the tort legislation would prohibit that.
“There is a general belief that when you can’t sue the insurance company directly, it becomes easier to settle,” Williams said. Without that, juries tend to believe that a big award gets paid out of “just insurance money” and a lower settlement is possible, he added.
There is also a provision in the legislation to extend the time period for filing a lawsuit to two years from one year. Williams said he believes that extension will “encourage more settlements and reduce the cost of defense.”
Another change is that the bill allows a judge to introduce into evidence whether the plaintiff was wearing a seat belt, Ballard said. Prior law blocked introduction of that fact.