Legislative “Caps” on Recoveries: An Unseen “Bailout” Taxpayers Pay for Every Day

The oil spill in the Gulf of Mexico from the British Petroleum platform is a catastrophe of growing proportions. Recent projections that the spill could turn the corner of Florida and cover the beaches of the East Coast bring this disaster uncomfortably close to home. Nobody should make political hay out of a disaster, but we cannot ignore the history lesson before us.

Since the 1990’s, there has been a concerted effort to limit the rights of juries to assess full and fair compensation for injured persons. 1 It all started with the infamous McDonalds’ hot coffee case, where an elderly woman suffered third degree burns on her genitals when she accidentally spilled a cup of McDonald’s coffee in her lap. She was awarded a substantial verdict from a jury who heard evidence of over 700 serious burns of similar accidental spills of scalding hot McDonald’s coffee; coffee that was handed out of drive-through windows around the country with no warning the liquid was heated to scalding temperatures. 2

The United States Chamber of Commerce jumped on the McDonald’s coffee case as evidence of a judicial system run amok. It started spending millions to convince Americans that this country needed “tort reform.” Tort Reform, as the Chamber of Commerce saw it, capped the amount of damages that a jury could award to a victim and, in some cases, took away any right of recovery at all. Many states enacted such misguided “tort reform” measures.

Here in Virginia, the General Assembly enacted a cap on damages in medical malpractice cases that is now $2 million dollars. As a practical matter, that means if a baby suffered a brain injury at birth and needs full time care, care that might cost $6 million dollars or more over the child’s lifetime, the negligent health care providers who caused the injury will only pay a small fraction of the damages. We as taxpayers pick up the balance when when a jury’s award is exhausted, in the form of Medicaid, Medicare, Social Security Disability, and even the cost of being in an institution if the parent’s cannot afford care and the child must be institutionalized at state expense.

Now we learn that the Federal Government jumped on the same bandwagon and had passed legislation capping certain damages of any oil company that caused an oil spill at $75 million dollars. What seemed to be a good idea at the time doesn’t appear to be so good now. Companies making record profits have a legislative” cap” that protects them from paying the full cost of the damages they cause.

In Virginia, in 2006 the legislature passed a law that limits the responsibility of a railroad company for claims arising from a single accident or incident related to passenger rail services to $250 million per incident or accident. 3 If a major catastrophe occurred involving a passenger railroad, the damages could easily be greater than this cap on the railroad’s liability.

On May 5, 2010, the Associated Press reports that the White House is pushing to remove the oil spill cap that protects BP in light of the billions of dollars of damage that is projected from this recent spill in the Gulf of Mexico. Sen. Menendez (D-NJ) is co-sponsoring a measure to raise the liability limit to $10 billion and to make it retroactive.

This disaster should give us all pause. If BP doesn’t have to pay to clean up its mess, you know who will pay — us taxpayers. If you don’t think that is fair, then ask yourself why we as taxpayers end up paying to care for the victims of health care provider negligence or passenger railroad negligence when a damage cap permits negligent defendants to get away with paying for only a portion of the damage they caused.

Let’s hope the good that will come from this tragedy is an elimination of all damage caps, renewed support for the constitutional right to trial by jury, and a respect for the intelligence of juries to award full and fair compensation in every case of damage.

1 – In some states, these laws have been held to be an unconstitutional violation of the .7th Amendment to the U.S. Constitution, which states: “In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved,?”, or a violation of the state’s constitution which grants the same right For example, on March 22, 2010, the Georgia Supreme Court held that a state law limiting non-economic damages to $350,000 in medical malpractice cases was unconstitutional. “The very existence of the caps, in any amount, is violative of the right to trial by jury,” the Court stated in its written opinion. See the court’s opinion at www.gasupreme.us/sc-op/pdf/s09a1432.pdf.

2 – For the true facts of this case, not the incorrect view promoted by those in favor of tort reform, see http://www.justice.org/cps/rde/xchg/justice/hs.xsl/2473.htm.

3 – See description of this legislation at: http://leg6.state.va.us/cgi-bin/legp604.exe?061+sum+HB317S.