Time For Change?

Little Progress

Despite tort reform efforts by lawmakers, attorneys, business groups and consumer advocates, not much has been accomplished. On the federal level, even if Congress passes a tort reform bill, President Bill Clinton has vowed to veto it. "It's not likely that we'll have federal reform any time soon," Wittner says.

Numerous states have passed their own tort reform bills, however. Just this year, the Florida legislature passed a package of reforms including caps on punitive damages and limits on compensatory damage awards proportional to the fault of the parties. Texas is considering a law to rein in class-action lawsuits. Virginia has limited medical malpractice awards, Minnesota is debating a modification of joint- and several-liability, and New York is considering a whole package of reforms.

Even if these measures are signed into law, don't expect immediate relief. Typically, opponents challenge tort reform laws in court, leaving everything in limbo. Since 1986, state courts have struck down statutory limits on noneconomic damages in six states, while courts in eight states have upheld them. In some states, legislators are considering bills to roll back earlier tort reforms.

In the absence of meaningful tort reform, small businesses continue to face lawsuits, some of which have no real merit. They may be filed in hopes the business owner will offer a cash settlement just to avoid the expense of going to court. Too often, insurance companies advise businesses to settle rather than pay more for a rigorous defense. "You have to be mindful not only of the money but of your company's reputation and brand image," Wittner says. Fighting frivolous lawsuits protects that reputation--and discourages others from suing for more easy pickings.

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This article was originally published in the August 1999 print edition of Entrepreneur with the headline: Time For Change?.

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