In 1997, the Florida Legislature saw a serious lobbying effort aimed at securing the enactment of wholesale revisions to Florida's civil justice system. These reforms, if enacted, would substantially dilute important doctrines such as Florida's dangerous instrumentality doctrine, provide more defenses to escape liability, and create higher hurdles before plaintiffs can receive certain types of damages. Championed by the business community, the reforms would limit defendants' liability at the cost of putting the safety of Florida's citizens at risk.
Part II of this Article examines both the historical and political environment that led to this effort. Part III analyzes the motivating factors behind the push for reform. Part IV addresses the proposals for reform, while Part V discusses what has happened since the end of the 1997 session. Part VI examines whether there truly is a need for tort reform. Part VII concludes that the battle over tort reform will surely continue into the 1998 legislative session.
In the ongoing ebb and flow of the legislative process, every session sees a handful of "tort reform" bills aimed like rifle shots at smaller, specific issues. These bills typically reduce or eliminate liability in a particular circumstance that has been the subject of a particular court decision. On a few occasions, efforts at comprehensive liability-reducing "reform" packages resulted in fundamental changes to Florida's tort law.
Like many other states, Florida experienced a tumultuous period of intensive legislative tort reform activity in the mid-1980s, especially in the areas of medical malpractice and the civil justice system. These efforts were followed by similarly sweeping reforms in the workers' compensation area from 1989 to 1993. Each reform effort was precipitated by a real or perceived insurance availability and/or affordability "crisis" that tort reform advocates pointed to as justification for their proposed restrictions on individual liberties. In retrospect, however, these "crises" were at least arguably precipitated by the business practices of the insurance industry rather than abuses in the tort system.
In the mid 1980s, medical malpractice was the first area to receive legislative attention. In response to a perceived medical malpractice insurance crisis, the 1985 Legislature attempted to offer relief in what was known as the Comprehensive Medical Malpractice Reform Act of 1985 (1985 Act). Before the ink dried on the 1985 Act, the Legislature enacted the much more comprehensive Tort Reform and Insurance Act of 1986 (1986 Act). The 1986 Act was conceived as an effort to relieve the general liability insurance affordability and availability "crisis" perceived to exist throughout much of the business community. The 1986 Act, which gained national recognition for its far-reaching tort reforms, superseded and supplemented many of the provisions adopted specifically for medical malpractice in 1985. Additionally, it made fundamental changes to the general tort law, including nearly eliminating joint and several liability, placing caps on noneconomic and punitive damages, and imposing requirements for periodic payments and collateral source offsets.
This was a major shift in the Florida civil justice system. Virtually every one of these changes was designed to decrease defendants' exposure to liability at the expense of injured plaintiffs. Theoretically, this shift in the system's balance would reduce liability insurance costs and alleviate the insurance availability problems. However, the Legislature was not willing to rely upon the liability insurance industry to voluntarily put theory into practice. Instead, it threw into the mix extensive new insurance rate regulation provisions, an excess insurance profits law, and a mandatory liability insurance rate rollback.
Within only two years, yet another medical malpractice insurance "crisis" arose, this time highlighted by obstetricians' inability to obtain coverage for delivering babies. In response, the Legislature convened in a Special Session and quickly passed the Florida Medical Incident Recovery Act of 1988 (1988 Act). The 1988 Act revisited many of the provisions enacted in 1985 and 1986, and included five major reforms, including extensive immunity for providers, presuit screening requirements, arbitration, caps on damages, and a no-fault program for infants suffering brain damage at birth.
After this furious flurry of legislative activity, the general liability and medical malpractice field remained fairly quiet over the next decade, marked primarily only by the annual legislative skirmishes over discrete issues. The liability insurance markets stabilized. Day care centers could buy liability insurance, and obstetricians could once again deliver babies secure in their medical malpractice coverage. For the most part, the changes adopted during this period remain intact today.
In the fall of 1996, a dramatic political change occurred in Florida. For the first time in this century, both houses of the Florida Legislature came under the control of the Republican party when the Florida House joined the Senate under Republican leadership. This change in the political balance was eagerly anticipated by the business community as an opportunity to promote business interests and to push through pro-business legislation. Specifically, business interests viewed the power change as a chance to revise the tort system, notwithstanding the conspicuous absence of even a hint of the traditional sine qua non of tort reform-an insurance crisis. Business interests openly showed their intentions with statements such as, "We think we have a two-year political window."
Soon, a coalition of business and health care groups sharing a common interest in shielding themselves from liability joined forces, forming the "Tort Reform United Effort" (TRUE). TRUE set out to assemble its wish list and sell it to the Legislature. It focused its lobbying efforts on convincing legislators that reform was necessary to protect Florida's businesses from "deep-pockets lawsuits" and "frivolous lawsuits and outrageous damage awards." TRUE's claims, of course, provoked a strong response from citizen, consumer, and lawyer groups. The next phase of the tort reform battle began.
Senate Bill 1774 was the first comprehensive reform bill to appear on the 1997 legislative scene. Sponsored by Senator John Ostalkiewicz, the bill included six major provisions. After the initial splash of publicity, Senate Bill 1774 faded into obscurity. It was referred to three committees: Senate Judiciary, Senate Banking and Insurance, and Senate Ways and Means. Ultimately, it died in the Senate Judiciary Committee at the end of the session without ever receiving a hearing.
Shortly after Senate Bill 1774 was unveiled, another tort reform bill was filed by Senator John McKay. Although substantially different in approach from the earlier Ostalkiewicz bill, Senate Bill 2148 shared the theme of liability reduction through seven major provisions. Like its predecessor, Senate Bill 2148 ultimately died at the end of the session in the Senate Judiciary Committee without having been heard.
TRUE spokespeople lauded the Ostalkiewicz and McKay bills as "a good starting point," but suggested that there was "much more to come." However, TRUE was having its own internal problems. Although TRUE's constituent members seemed to have no problem agreeing among themselves that trial lawyers were the target, internal bickering among the diverse members, each pushing their own personally self-serving list of "reforms," frustrated the formation of a consensus agenda. Finally, at almost the latest possible moment in the session, there appeared in the House the proposed Florida Accountability and Individual Responsibility Liability Act (FAIR). Unlike the two earlier bills, this bill sprang forth with a head of steam as a proposed committee bill from the House Committee on Financial Services. After a display of legislative theatrics, the Committee voted the bill out of committee, and it was subsequently introduced as House Bill 2117 under the sponsorship of the committee and its Chairman, Representative R. Z. "Sandy" Safley. It thus attained the significance of being the only bill of the three reform packages to have made it out of committee.
House Bill 2117 included some of the same concepts addressed in the earlier Senate bills and added some new twists of its own. The bill first recited a number of legislative "findings," including that "there is an overpowering public necessity to eliminate perpetual liability for defective products because such perpetual liability places an undue burden on manufacturers, increases costs to consumers, and unreasonably restricts economic growth." The bill set forth nine propositions.
First, like Senate Bill 2148, House Bill 2117 would impose a twelve-year statute of repose in products liability cases. However, under House Bill 2117, the statute would run from the date the product leaves the possession and control of the manufacturer rather than the date it was delivered to its original purchaser.
Second, the bill would substantially dilute Florida's dangerous instrumentality doctrine. Unlike either Senate Bill 1774 or Senate Bill 2148, the bill would limit the vicarious liability of an owner of any type of personal property for an injury caused by another person's use of the property when the property owner has liability insurance coverage of no less than $100,000 per person or $300,000 per incident for bodily injury, and no less than $50,000 for property damage, or umbrella coverage of $500,000. Notwithstanding whether or not the owner had this insurance, the owner would also have no duty whatsoever to warn a user of the property of defects in the property which are unknown to the owner or which are known, or should be known, to an ordinary user of the property. Thus, this draft has very negative consequences. The bill would not encourage an owner to look for defects in his property that could harm another person, and even worse, would provide no incentive to warn of known hazards. Furthermore, the way this provision is actually drafted, it deems the owner of the property not to be the legal owner, thus effectively eliminating the body of law relating to negligent entrustment.
Third, House Bill 2117 would create new defenses to personal injury and property damage claims. Under this provision, a defendant would not be liable to an injured plaintiff if the plaintiff was under the influence of drugs or alcohol to the extent that the plaintiff's faculties were impaired, or the plaintiff had a blood or breath alcohol level of 0.08 % or more, and the plaintiff was more than 50% at fault for the injury. Additionally, any person who enters the property of another without actual consent, commits a crime against a person or property of another, or enters the property of another while intoxicated or under the influence of an illegal drug, would not be able to recover for injury to person or property unless he or she could prove by clear and convincing evidence that his or her culpability was less than the person from whom recovery was sought. Among this provision's deleterious effects, the imposition of the higher standard of proof-clear and convincing rather than preponderance of the evidence-forces the injured person to leap a high hurdle to prove the defendant's fault. Another problem with this provision is its broad application-it does not just apply to trespassers, criminals, and substance-impaired people, but it also applies to anyone who enters a premise without "actual consent," such as a child who visits a friend.
Fourth, House Bill 2117 would prohibit the imposition of vicarious liability against a defendant for any harm caused by an intentional tort committed by a third party.
Fifth, the bill would change the standards for liability and the procedure for pleading punitive damage claims. The burden required for pleading punitive damages would increase from a reasonable showing to clear and convincing evidence of a reasonable basis for recovery of the damages. Immediate certiorari review of both the procedure and the sufficiency of the evidence would be available. Punitive damages would be disallowed in cases involving only economic damages, except in cases of fraud. Liability for punitive damages would require a finding based upon clear and convincing evidence that the defendant was guilty of "intentional misconduct," defined as meaning that the defendant "had actual knowledge of the wrongfulness of its conduct and the high probability that injury to the claimant would result and, despite that knowledge, intentionally pursued that course of conduct, resulting in personal injury." Upon motion by the defendant, punitive damages would have to be tried separately from compensatory damages, but by the same trier of fact. Evidence relating solely to punitive damages would not be admissible until after the trier of fact determined that the defendant was liable for more than nominal compensatory damages and computed the amount of compensatory damages.
Sixth, the bill would extend the current punitive damages cap to three times the amount of compensatory damages for all civil actions, except contract actions. Thus, by precluding contract actions, it appears the drafters may be seeking to remove the "three-times" cap when business sues over business practices. The state share of punitive damage awards would be reinstated and increased to 75% of the award after deduction of attorneys' fees and costs. Punitive damage awards would be allowed against a person based on vicarious liability only if "[t]he person intentionally participated in the intentional misconduct or, in the case of a corporation, the officers, directors, or managers of the corporation intentionally participated in or intentionally condoned the intentional misconduct."
Seventh, the bill would also limit subsequent punitive damages awards against an entity. Under House Bill 2117, a defendant would have the ability to limit exposure to punitive damages by establishing before trial that "punitive damages had previously been awarded against that defendant in any state or federal court in [Florida] . . . alleging harm from the same act or course of conduct." This concept is defined for purposes of a product liability action as "acts resulting in substantially the same manufacturing defects, acts resulting in substantially the same defects in design, or failure to warn of substantially the same hazards, with respect to substantially similar units of a product." A plaintiff would be able to overcome this protective shield only by a showing of clear and convincing evidence that "the amount of prior punitive damages awarded was totally insufficient to punish that defendant's behavior." Even if successful in meeting that burden, the plaintiff's punitive damage award would then be reduced by the amount of all the earlier punitive damage awards.
Eighth, like Senate Bill 2148, the bill would eliminate the current exception allowing application of the doctrine of joint and several liability in cases where the total damages are less than $25,000.
Finally, the bill would create a civil cause of action against convicted drug dealers for damages, costs, and attorneys' fees incurred by a plaintiff as a result of the defendant's illegal actions. Damages would also be recoverable from the parent of a minor who is liable for the damages.
Ultimately, House Bill 2117 was not moved to the House Floor for a vote, in all likelihood because the Senate President, Toni Jennings, sent signals that it would not be taken up in the Senate during the 1997 session. After the session, both the merits of the FAIR Bill and the questionable attempt by the business community to pass it in the closing days of the session brought media criticism. The Miami Herald called it "A Too-Rushed Reform" and the St. Petersburg Times opined that "[f]or most residents, 'FAIR' might not be."
When the 1997 session ended with House Bill 2117 still on the House calendar, the bill did not fade away. Under a major change to the House Rules adopted in 1997, House bills now have a two-year life. Thus, House Bill 2117 did not actually die at the close of the 1997 session. When the 1998 session begins, House Bill 2117 will be right where it was, on the calendar, ready for referral to the House Civil Justice and Claims Committee, to the House Economic Impact Council, or directly to the floor for action.
The tort reform movement did not disappear upon adjournment sine die of the 1997 session. In anticipation of the 1998 session, several things are happening. In the closing hours of the 1997 session, when it began to be clear that House Bill 2117 was not going anywhere, representatives from TRUE and the Academy of Florida Trial Lawyers were requested by the Speaker of the House, Dan Webster, and other House leaders to form a working group. This group is to examine whether some common ground can be reached between the two groups on the issues. The groups were given a mandate to come back with a plan or be faced with the return of House Bill 2117 or another set of reforms, a threat clearly aimed more at the trial lawyers than the business community.
At the same time, the House Civil Justice and Claims Committee, which ironically was not involved with House Bill 2117, planned to hold an extensive series of committee hearings on "Small Business and the Tort System in Florida" during the fall and winter of 1997. From the schedule of meetings and topics, it appears this ambitious project is designed to educate committee members on virtually the entire tort system as it may affect small businesses in Florida.
Reports indicated that Senate President Toni Jennings was considering the creation of a select committee to examine the tort system, but as of the end of the 1997 session no action was taken. Reportedly, Senate President Jennings was still not convinced of the need for tort reform. In mid-August, however, citing concerns raised by the business community, she appointed the Senate Select Committee on Litigation Reform to consider "whether our civil litigation system is, in fact, limiting Florida's economic development potential." The stated goals of the Select Committee are to "separate perception from reality, . . . create a friendlier business climate, . . . [and] provide an open forum for review of the civil justice system." To this end, the Select Committee was charged with the following mission:
The select committee shall conduct hearings to assess the manner and extent to which the current civil litigation environment is affecting economic development and job-creation efforts in the state. The select committee shall ascertain what civil litigation reforms, if any, would enhance the economic development climate of the state while continuing to preserve the rights of citizens to seek redress through the courts.The jurisdiction of the new Select Committee will include all of the major elements of the civil litigation system, but it is not to delve into the areas of workers' compensation or medical malpractice. It held hearings during the fall and winter of 1997, and will report its findings and recommendations back to the Senate by January 20, 1998.
As yet, the Governor has not become actively involved in this fray. As pointed out by the Governor's Chief of Staff, Linda Loomis Shelley, "This is not an issue that people talk to the governor about as he travels the state nor is it an issue people raise when he tries to recruit businesses to come to Florida."
The proponents of tort reform have tried to create the impression that we are in the midst of a tort litigation explosion. Statistics compiled by the Florida Office of the State Courts Administrator quickly and empirically dispel this notion. The statistics speak for themselves-civil case filings have remained remarkably stable over the last ten years and negligence actions have remained but a tiny proportion of the caseload of Florida's courts.
In 1996, civil cases accounted for 57% of the total cases filed; criminal and juvenile cases made up the other 43%. These relative percentages have remained constant for at least the last three years. Last year, professional malpractice cases represented only 0.4% of all civil cases filed, products liability cases 0.5%, auto negligence cases 4.6%, and all other negligence cases 2.9%. Domestic relations and probate cases accounted for 70% of all civil cases.
On the other hand, in 1996, there were over twenty times as many mortgage foreclosure cases and over ten times as many contractual indebtedness cases as there were products liability cases in Florida. In fact, mortgage foreclosures and contractual indebtedness cases accounted for twice as many cases as all the types of negligence cases combined.
The proportion of negligence cases has remained remarkably constant relative to other types of civil cases. In 1986, negligence cases comprised 8.9% of the total civil cases filed in Florida; in 1996, they accounted for 8.3%. Domestic relations cases have consistently accounted for about 50% of all civil cases, while probate cases have accounted for almost 20%.
Although the number of cases filed has increased over the years, case filings have kept pace with the increase in Florida's population. Civil case filings peaked in 1990, but for the last four years they have been at the same level as they were in 1986-1987. In contrast, the number of negligence cases filed has slightly decreased over time. In the ten years between 1986 and 1996, there was more than an 8% decline in the number of negligence cases filed per capita in Florida.
Nationwide, statistics collected by the U.S. Department of Justice, Office of Justice Programs, and the National Center for State Courts dispel the myth of any kind tort explosion. Tort litigation has been stable since 1986, and in relative decline since 1990. The National Center for State Courts sums the national situation up succinctly: "The bottom line is there is no evidence of an 'explosion' in the volume of tort filings."
Big business loves to complain about punitive damages, but the numbers hardly show that things are "out of hand" in Florida, at least when it comes to negligence cases. Since 1986, punitive damages in negligence cases have been capped at three times compensatory damages except in very exceptional circumstances. During the period from July 1, 1986, to July 1, 1995, the Florida Comptroller's Office kept records of punitive damage awards and collections resulting from negligence cases. While this data does not necessarily reflect all punitive damage awards because there is no information from cases other than negligence cases, they provide some indication of the low level of activity in Florida.
During this nine-year period, 177 cases were reported as involving punitive damage awards out of a total of approximately 350,000 tort cases disposed of during the same period. Put another way, punitive damages were awarded in only one case out of each 1723 negligence cases disposed of from 1986 to 1995. The state received payment toward its share of punitive damages in only 64 of the 177 cases (36.2%). The remaining 113 (63.8%) were either uncollectible or are still to be collected. Since the state took a pro rata share of partially collectible awards, it can be assumed that in 36.2% of the cases overall, there was some, but not necessarily all, of the award collected.
Total collections by the state averaged less than $975,000 per year. Based on this number, it can be roughly estimated that total awards that should have gone to the state averaged approximately $1.9 million per year. Overall, collection of punitive damage awards thus amounted to only 13.2 cents of each dollar awarded.3 Cases other than asbestos products liability cases accounted for only 29% of the total amount collected.
Similarly, national studies show that punitive damages are infrequently awarded. For example, one survey found that juries awarded punitive damages to plaintiffs in only 4% of tort cases. Of the total punitive damages awarded in all jury cases in a nationwide survey, only 34.1% were awarded in tort cases. The vast majority of punitive damages were awarded in contract disputes and real property cases.
One particularly startling finding in another study is that between 1965 and mid-1995, the total number of punitive damage awards in product liability cases nationwide was only 379, fewer than thirteen cases per year including all the asbestos cases. In most of these cases, the defendant made a clear calculation that it would be more profitable to sell a product with a known safety flaw and pay liability costs than to fix the hazard and sell a safe product. Most of the cases involved catastrophic injuries or death, and 70% of the cases involved corporate failure to warn about a known product danger.
A recent study looked at punitive damage awards in financial injury cases, such as disputes arising from insurance or employment contracts or from unfair business damages. Researchers found that these cases accounted for almost half of all punitive damage awards. They further found that punitive damages are awarded in these cases at a rate more than three times that for civil cases overall. Moreover, punitive damages accounted for more than half of all the damages awarded in financial injury cases.
The only evidence suggesting that Florida's civil justice system is a hindrance to existing or new businesses comes from self-serving polls and surveys conducted of businesses by business interests for the sole purpose of promoting the business tort reform agenda. Information from other sources paints a somewhat different picture.
The state's official keeper of labor market statistics recently said:
Florida's nonagricultural employment growth rate of 3.9 percent was faster than the U.S. rate of 2.1 percent over the past year. . . . Compared to the ten most populous states, Florida created the second greatest number of jobs over the year and had the fastest job growth rate. . . . California is the only state to create more jobs than Florida over the year. However, California has more than twice the population base of Florida.The Miami Herald reported: "[Florida] is leading the nation in job creation, for instance. The number of jobs in the state has grown 3.9 percent annually for the last four years, or roughly double the national figure. There are 800,000 more jobs in Florida than in 1992." Florida Trend's annual supplement, TopRank Florida 1997, published the Top 10 Things to Know About Florida, which paints an excellent picture of Florida's economy and portrays Florida as a great place to do business. The Wall Street Journal reported that, "[a] survey by the National Association of Business Brokers shows that interest in buying businesses in the state is at an all-time high."
Florida is far and away the national leader in new business incorporations, with 86,037 in 1992 and 88,048 in 1993. This is more than double the number for California (36,973 and 40,072), and Texas (34,011 and 34,907). Florida's "Gross State Product" grew at the torrid annual pace of 7% from 1986 to 1992. This is the eighth highest rate in the country, and well above the national average of 5.9%. Job growth increased at a 2.4% annual clip between 1986 and 1995, ranking Florida twelfth and well above the national average of 1.8% annual growth. In all, there were more than 1.5 million new jobs created in Florida since 1986. Payroll (total aggregate wages) grew at a respectable 6.6% per year, ranking Florida tenth and above the national average of 5.5%.
These statistics do not show a state in economic trouble. Nevertheless, TRUE contends that Florida's economy could be improved by reforming Florida's tort system. In support, they have presented an unpublished study that attempts to use an econometric model to relate the influence of legal reforms both to productivity (measured by output per worker) and to employment.
Even taking this study at face value without questioning the validity and reliability of the authors' assumptions, methodology, and data, and thus their results and conclusions, it cannot rationally be used to justify further tort reform in Florida. For example, one major flaw that limits its usefulness as a basis for setting policy is that it looks only at monetary issues. Even the authors acknowledged that their analysis does not take into account any social or human factors, or "issues of fairness and justice." They also acknowledged the need for liability and stated that "[w]ithout liability and a means to enforce it, economies lack efficient incentives, predictability and fairness."
Because the study makes no evaluation of the impact of one reform versus another, the study cannot be used to justify enactment of a specific reform. Similarly, it cannot be used to justify the revision of a reform previously enacted; for example, a lower cap on punitive damages or elimination of the limited applicability of joint and several liability. In fact, regarding revisions of existing law, it seems that a more plausible argument is that, for purposes of the effects demonstrated by the study, Florida has already benefited from these reforms.
The bottom line, however, is that Florida has already adopted all of the tested liability-reducing reforms, although a general cap on noneconomic damages was declared unconstitutional. It has adopted one of the two tested liability-increasing reforms-comparative negligence. Florida would thus seem to have already implemented the "portfolio of reforms" necessary to achieve a "consistent impact" on the state's economy.
Despite all of the fanfare regarding the alleged need for tort reform in Florida, there is no liability insurance crisis. Nor has there been an increase in tort cases. Systems already exist to control frivolous lawsuits, damage awards, and attorneys' fees. Florida's economy is booming, and big business itself is the primary source of many problems in the civil justice system. Without empirical evidence justifying a need for reform, big business, including the tobacco industry, has embarked on a massive propaganda campaign designed to set the stage to "strip away many of the fundamental protections provided to Florida's families by the civil justice system." Big business is trying to manipulate the system to "shield those who injure others with the products they sell," to make "access to our courts harder for Florida's citizens with serious injuries," and, as a result, is endangering "the safety of Florida's families and . . . [leaving] Florida's citizens and small businesses at the mercy of large corporations."
The comprehensive liability-reducing tort reform proposals set forth during the 1997 session are the most far-reaching since the massive tort reform efforts of the mid-1980s. The battle line has been drawn. On one side, business is contending that it needs tort reform in the form of liability reduction to bolster Florida's economy. On the other side, citizens, consumers, and trial lawyers are contending that there is no evidence, economic or otherwise, supporting a need for these types of proposals, and that big business is opportunistically trying to shield itself from liability for its wrongful acts at the expense of the safety of Florida's citizens.
The 1997 session saw the opening skirmishes of a war in which the stakes are enormous, both politically and for the future of Florida's citizens. The battles that will decide Florida's future will most likely be fought in 1998. Hopefully, the Florida Legislature will not forsake the long-term protection afforded to Florida's citizens by a strong civil justice system for a short-term economic gain to selected Florida businesses.