Academic journal article Defense Counsel Journal

Tort Reform in America: Abrogating the Collateral Source Rule across the States

Academic journal article Defense Counsel Journal

Tort Reform in America: Abrogating the Collateral Source Rule across the States

Article excerpt

IS "TORT REFORM" still a dirty word? The debate over tort reform in America has been raging for more than thirty years, since the time when corporate and insurance interests began lobbying for legislation limiting the availability of financial relief in personal injury tort actions. (1) Proponents of tort reform argue that such reforms as statutory caps on damages and the abolition of the collateral source rule will both decrease insurance premiums and reduce the number of frivolous lawsuits. (2) Opponents of tort reform contend that such reforms undermine the compensatory purpose of the tort system and do little to reduce insurance rates. (3) Empirical studies have been conducted without a clear result. (4) As the debate continues over tort reform, litigation costs and insurance premiums remain high, (5) and the American economy is straining. (6)

Each year state legislatures enact statutory tort reforms in an attempt to reduce tort system costs. Each year opponents of tort reform challenge these reforms in courtrooms across the nation. These reforms meet constitutional challenges ranging from the right to trial by jury, to due process, to separation of powers. (7) While it is difficult to generalize about these constitutional challenges, it can be said that tort reforms overall have passed muster at the state level since most statutes have been upheld by the states' high courts. (8) Proponents of tort reform are successfully promoting change in state legislatures and courts across America, using victories in business-friendly jurisdictions to bolster tort reform arguments in other, less receptive, jurisdictions. (9) One area of tort reform that has recently seen such success involves the statutory and judicial abrogation of the common law collateral source rule.

This paper discusses the role of the collateral source rule in the modern American tort system. It begins with a review of the American tort system and its underlying policies. The paper then discusses what the collateral source rule is and what purpose it serves. The discussion then turns to recent reforms that the common law collateral source rule has undergone. Finally, this paper concludes with a call for abrogation of the collateral source rule on a broad and national scale.

I. The American Tort System

The American tort system has been called the most expensive tort system in the world, with an annual cost of approximately 2.3 percent of the annual U.S. gross domestic product ("GDP"). (10) Italy averages the second highest tort cost at 1.3 percent of its GDP. The average cost of the tort system in other nations is 0.9 percent. (11) With American tort costs so high both practically and comparatively, the question then becomes, is the cost of the U. S. tort system appropriate? Is it worth it? Ultimately, is the American tort system working? While there is no clear consensus, proponents of tort reform submit that the answer is a resounding "no."

As the cost of the American tort system continues to remain high, there are ever increasing pressures to enact sweeping tort reforms in an effort to reduce tort system costs. The most prominent types of reform include caps on both non-economic and punitive damages, caps on attorney's fees, and abrogation of the collateral source rule.

The tort system first developed at common law, founded on principles of compensation and accountability. The modern American tort system, while grounded in the same principles, involves many significant, and at times complex, policy bases and objectives. One of the most important considerations is compensation for the injured. The tort system seeks to make an injured plaintiff "whole" again. (12) The tort system also plays a role in protecting personal dignity and autonomy, and it serves to protect personal freedoms by regulating the imposition of tort liability in situations involving accidents or mistakes. (13) The tort system also serves to express societal disapproval of particular forms of conduct. …

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