Those who contend that litigation is out of control across society point to a “lawsuit tax” as one of the culprits. You won’t find a lawsuit tax per se in the state revenue code, of course, but the tort-reforming Colorado Civil Justice League says there are laws on the books that amount to pretty much the same thing. They are “obscure laws that drive up the cost of a lawsuit beyond the actual cost of damages,” as the League puts it in a press release this week.
The League is supporting a couple of bills now pending in the legislature to address the issue.
Senate Bill 181 takes on what are sometimes called “phantom damages.” The press release 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.
Senate Bill 191, meanwhile, 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.
The plaintiffs’ bar, of course, begs to differ. Particularly when it comes to the issue of phantom damages, the counterpoint from trial lawyers against changing the law is that defendants should have to own up to their negligence. Plaintiffs shouldn’t be shortchanged for their pain and suffering just because their health insurers were successful in bargaining down their bills for medical care.
The League, however, contends:
SBs 181 and 191 preserve the right of an injured party to be fully and properly compensated for their injuries, while sparing Colorado drivers and homeowners the burden of paying for phantom damages and ridiculous interest rates.
Tort reform long has been a cause associated with the GOP, and these bills are no exception. SB 181’s sponsors are Sen. Bob Gardner and Rep. Yeulin Willett. SB 191’s sponsors are Sen. Jack Tate, Willett and Rep. Cole Wist. All are Republicans.