Posted by: Joshua Gross | January 29, 2009

Martin/Harrell – Tort Reform Returns

The US Chamber of Commerce recently ranked the fifty states on a series of tort and liability issues in terms of their business friendliness.

The results? South Carolina’s ranking dropped in 2008 from 37th to 43rd, despite the tort reform and workers compensation reforms passed earlier in the decade?

Why are we ranked so low? The data points we took the most grief from included non-economic damages, the competence of our judges, and our treatment of scientific evidence. Class action lawsuits got a particular nod as well.

Here’s where that rubber meets the road – every frivolous lawsuit in South Carolina costs roughly $30K to defend. Since the median wage in the state is now hovering around $29K, this means that every single lawsuit against business costs the state roughly one job. So, the fact that we’re in the bottom ten in business friendly litigation and unemployment (currently 49th at a whopping 9.5%) at the same time makes some sense.

One other note on what’s wrong, before we get to the fix. The other problem that needs fixing relates to bad judges. In the recent Colleton Prep v. Hoover case, the SC Supreme Court, in a ruling handed down by Justice Don Beatty, found that a construction contractor was liable not for the damage that was done, but for the damage that could have been done when a roof partially collapsed. (That’s jurisprudential malfeasance, and it happens when legislators pick judges without regard to their judicial philosophy, but rather on who is scratching whose back, or comes from whose home county. But I digress…)

Into this mess steps Senator Larry Martin (along with 12 Senate co-sponsors and a probable House counterpart to be introduced next week by Speaker Harrell) with a tort reform bill S.350 that can have a solid positive impact on the business-friendly nature of our legal system.

“Martin/Harrell” – S.350 is modeled after the tort reform proposal of the American Legislative Exchange Council (ALEC) and seeks to put our state on more of a nationally normed footing. That includes improvements to the way our state handles class actions, punitive damages, and admissibility of certain types of evidence. The bill includes a paragraph modeled after SC’s medical malpractice statute, giving businesses the same protective caps on non-economic damages that our doctors currently enjoy. The bill includes language worked out by Attorney General Henry McMaster to provide standards and accountability for the hiring of outside legal counsel. And, yes, the bill reverses the definitions of two bad SC Supreme Court decisions, including the “could have been” Economic Loss Rule provisions from the regrettable Colleton Prep case.

Senator Martin and Speaker Harrell should be applauded for bringing this bill to the Legislature, especially at a time when our economy needs a boost. The best kind of boost we can give is to ease the tort burdens on business that allow them to hire more workers. The House and Senate should work to pass this bill this year. We’ll be watching to make sure they do.

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