Coronavirus Liability: Shield Legislation Needed to Protect Businesses

Policy


A man passes a sign at MGM National Harbor as the hotel and casino opens its doors to guests after an easing of restrictions imposed to control the spread of the coronavirus in Oxon Hill, Md., June 29, 2020. (Kevin Lamarque/Reuters)

Businesses large and small face crippling lawsuits. Will the GOP step up to protect them?




NRPLUS MEMBER ARTICLE

R
epublicans have been hoping that Mitch McConnell can deliver a coronavirus liability fix in Washington. Question: Why haven’t Republicans already delivered coronavirus liability fixes in Tallahassee, Phoenix, and Boise?

Maybe they were too busy off attending lectures on federalism.

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The coronavirus liability shield authored by Senators Mitch McConnell (R., Ky.) and John Cornyn (R., Texas) would redirect lawsuits accusing businesses of exposing employees or customers to the coronavirus, diverting them into the federal system. It would limit the cases to those in which the businesses could be demonstrated to have shown “gross negligence” and would exempt from liability those businesses that can prove they made “reasonable efforts” to comply with government guidelines.

Senator McConnell has held fast to the liability shield, and President Donald Trump did his standard thing of standing tall right up until the moment Nancy Pelosi bullies him into rolling over, which he did on Thursday, offering to support a deal without the liability provision that was, until five minutes ago, the top legislative priority. Instead of having to fight Pelosi, McConnell and Senate Republicans now have to in effect fight the speaker of the House and the president together. As usual, Mr. Art of the Deal cannot figure out how to make a deal with his own team.

Republicans have for years made a big noise about tort reform in the states, and they have made some progress on that front, most notably in Texas. (That policy victory for Texas Republicans made independents and Democrats out of a whole bunch of rich Republican lawyers in Dallas and Houston — politics is all about tradeoffs.) But these advances have been for the most part halting and partial. If, as seems likely, January brings with it some very good reasons and excellent opportunities for Republicans to turn their attention to the state capitals, tort reform should be near the top of the agenda.

It should be already. In the particular matter of the coronavirus epidemic, several states have passed very limited liability protections, mostly for health-care facilities. Republican-governed Iowa has passed a broader bill that would apply a good-faith exemption similar to the one in the federal shield to most businesses; Democrats bitterly opposed this, licking their chops at the potential gravy train of litigation against meat-packing facilities and retirement homes. A Utah bill offers blanket protection to businesses save those that have engaged in “willful misconduct, reckless infliction of harm, or intentional infliction of harm.” Democrats bitterly opposed it, licking their chops at the potential gravy train of litigation against restaurants and landlords. North Carolina has created broad protections for businesses that enacted coronavirus-mitigation plans and has enacted other measures that in some cases enjoyed bipartisan support and in other cases were — sing along, now — bitterly opposed by Democrats dreaming of a once-in-a-lifetime payday for the trial lawyers.

The coronavirus epidemic is an extraordinary event that requires an extraordinary legislative response. But the workaday problem of excessive and abusive litigation, especially against businesses, has been around since long before the coronavirus, and almost certainly will still be a problem when we have put this ghastly epidemic behind us. This is a fight worth having, and the reformers have not yet begun to fight — at least, they have not pressed the fight to anywhere near the point they must. There has been some encouraging action, notably in Louisiana. There is room for much more.

Tort reform presents a classic case of concentrated benefits vs. dispersed costs. The lawyers who get rich by suing businesses — in response to legitimate abuses or for purely mercenary harassment — have fought reform tooth and talon, and they can be counted on to continue doing so. Business leaders understand the issue from the other side, though it does not land on them with great weight until they find themselves in the crosshairs. Most of the real cost is borne by third parties, meaning consumers, meaning you and me. We pay more for food and medicine, for housing, for everything that moves in a truck, for everything that requires labor — for everything, effectively — in order to enable the nation’s trial lawyers to make the payments on their G550s.

I do not mean to suggest that the trial bar is purely parasitic. Individuals and institutions sometimes damage the well-being of others in a way that violates the law, and the trial bar, when it is functioning as it should, works as a kind of supplementary regulatory apparatus. There are even some kinds of lawsuits that we do not have enough of, notably libel and lawsuits against the likes of the Washington Post and Joy Reid. But the loosey-goosey norms of American tort action create powerful incentives for irresponsible and opportunistic litigation, which can impose very high costs, e.g. contributing to the high cost of doctors’ fees by making malpractice insurance radically more expensive than it needs to be. Texas has made some progress on that front, with the predictable result of the Texas Medical Board licensing a record number of new physicians in the years after the reforms were implemented. Fewer lawsuits means lower insurance costs means more doctors and more competition.

Texas imposed controversial caps on noneconomic damages in medical liability cases, and that is a tricky policy to get right. A more straightforward model for reform would be wider application of the so-called English Rule, the “loser pays” model. That would discourage the most parasitic kind of lawsuits, those in which the plaintiffs have no real case but the defendants (usually businesses) are financially better off settling the case than they are winning it, because winning it means being crushed by heavy legal fees.

The coronavirus epidemic has revived interest in tort reform, not just among big national lawsuit firms whose deep pockets are lawsuit bait but also among small and independent businesses whose owners have suddenly been made acutely aware of the depth and immediacy of certain liability risks. Republicans looking for something to offer other than tax cuts — or even dreaming of finding a way back into competitiveness in California or New York — have a rare opportunity here that combines good politics with good policy.

And they don’t have to wait on Mitch McConnell or Donald Trump to get to work.


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