Colorado tort reformers are cheering the progress of legislation to rein in a “lawsuit tax” they say drives excessive and costly litigation. Senate Bills 181, sponsored by Sen. Bob Gardner, R-Colorado Springs, and 191, sponsored by Sen. Jack Tate, R-Centennial, would tweak what the Colorado Civil Justice League calls, “obscure laws that drive up the cost of a lawsuit beyond the actual cost of damages.” Though the laws in question go unnoticed by much of society, the League contends the ripple effects undermine the overall economy.
The unheralded measures passed the state Senate last week.
As we’ve reported here before, SB 181 takes on what are sometimes called “phantom damages.” The League explains:
Let’s say someone injured in an auto accident receives an initial bill for $140,000 for medical costs. The injured party’s insurance company settles the bill for a negotiated amount of $40,000. But when the injured party sues the at-fault driver for other damages — like pain and suffering or physical impairment — he will begin by claiming the full $140,000 in damages for medical costs. That’s because current law says that juries cannot be told that those bills were actually settled for $40,000.
The difference between the two amounts equals the phantom damages, i.e., an amount never actually paid out for expenses incurred by the plaintiff — yet included in the amount submitted to the jury as the basis of the plaintiff’s claims for pain and suffering.
SB 181 would change that, instead requiring juries to be informed of both amounts when deciding what reimbursement to award.
And 191 would rein in the interest rates that are assessed on damages awards; critics say current law encourages plaintiffs and personal injury lawyers to drag out disputes to reap the rewards of statutorily, yet arbitrarily, set interest rates that inflate the final payout.