Pennsylvania's economy continues to struggle, with an unemployment rate of 9.1 percent. If lawmakers want to put people back to work without costing taxpayers another penny for "stimulus," they can enact desperately needed lawsuit reforms.
In the recently released "U.S. Tort Liability Index: 2010 Report," the Keystone State ranks a dismal 46th out of the 50 states in the quality of its civil-justice tort climate. The ranking is based on each state's tort losses, numbers of tort lawsuits and lawyers, number of huge jury awards and presence of plaintiff-friendly "judicial hellholes." The data were adjusted for the size of each state's economy and population.
Pennsylvania fell one place from 45th in the previous 2008 edition, so it continues to move in the wrong direction. Pennsylvania has the second-highest monetary tort losses out of the 50 states. It also ranks 42nd in tort litigation risks.
Pennsylvania had five of the nation's 101 largest jury-verdict awards in 2008. Gov. Ed Rendell was personally given a "dishonorable mention" in the judicial hellholes report by the American Tort Reform Foundation. The state has the 11th-highest number of lawyers per dollar of state output. Pennsylvania practices the rule of lawyers, not the rule of law. The state Legislature has done nothing to fix the problem.
The index reveals that Pennsylvania's tort rules rank 48th in their ability to contain tort costs and risks. The state ranks 50th, dead last, in 15 of the 29 areas tracked. Pennsylvania emerges as a "sinner" state because of its weak tort rules in the face of high tort costs and litigation risks. In Pennsylvania, businesses are easy targets for personal injury lawyers, costing jobs in the process.
When deciding where to start a business, expand operations or relocate, entrepreneurs prefer states with balanced tort systems that discourage abusive lawsuits. In 2006, job growth was 57 percent greater in the 10 states with the best tort climates than in the 10 worst states. Business leaders are leery of Pennsylvania because of its sky-high tort costs and skewed courtrooms.
Fear of lawsuits also causes companies to withdraw or withhold beneficial products. Volkswagen planned to sell a 46-mpg three-wheel vehicle. This "green machine" would have cost only $17,000, but VW decided not to market it in the United States because of lawsuit fears.
Total direct tort costs in the United States were $255 billion in 2008. Abusive lawsuits cost every American a hidden "tort tax" of about $2,000 a year in higher prices and insurance premiums, fewer jobs and new products, lower wages and benefits for working people, reduced access to health care and higher taxes to pay for court costs. And the current system is very inefficient at its intended purpose -- less than 15 cents of every tort-cost dollar goes to compensate plaintiffs.
Pennsylvania lawmakers should get serious and enact meaningful lawsuit reforms, which would be the best jobs bill. University of California Berkeley economist Lisa Kimmel examined six common tort reforms adopted by states from 1970 to 1997 and found that instituting an additional tort reform increased total employment in a state by 1 percent. In other words, one tort reform in Pennsylvania -- such as capping noneconomic damage awards, capping punitive awards, reforming joint and several liability, or setting maximum contingency fees -- would put more than 55,700 people back to work.
An uncompetitive legal climate has spurred some states, such as Oklahoma in 2009, to enact meaningful reforms. If Pennsylvania politicians are serious about jump-starting the economy, they should reduce the state's massive tort burden. Commonsense reforms would bring needed jobs to the Keystone State.
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