Damage Caps Help Nobody Except Insurance Companies

The Big Lie About “Capping” Damages That Injured People Can Recover

One of the big lies that insurance companies and business lobbying groups tell is that jury verdicts affect costs to consumers.  This has been disproven over and over again, but when these insurance companies and lobbyists want consumers to sell their own rights to a fair justice system and vote for “caps” on damages, they have to offer something in return.  What they offer is the lie that if injured people can’t get full justice for their injuries caused by negligence, that somehow that will mean that the rest of us will have lower bills.

This sounds like it makes sense—until you think about it.  But when you think about how business actually works, it becomes obvious that artificially limiting the damages injured people can recover from the responsible party can’t—and won’t—lower the bills that consumers pay for goods and services.

Insurance Companies Keep the Difference

Lets consider, for example, what actually happens when people injured or killed by medical malpractice are limited to recovering only part of their losses from doctors who commit malpractice. Without question, that is a very good thing for medical malpractice insurance companies who would otherwise have to pay all of the losses suffered by victims of malpractice, instead of an artificially low amount.  These insurance companies are big winners.  But what happens to the money insurance companies save?

 First, imagine that you are in a board room with the executives in charge of a medical malpractice insurance company.  A law has been passed that saves the insurance company and the doctors it insures from having to pay for the damage and suffering caused by malpractice, and now the insurance company has millions of dollars in extra profits—money that would have gone to people injured by malpractice.  The question in the board meeting is “what do we do with all these extra profits?”

Option A:  Keep the money and pay dividends to our stockholders and big bonuses to our executives, or Option B:  Send the people who paid premiums a reimbursement check.

Do you think that the insurance company executives will vote to make less profits next year and lower their malpractice premiums?  Do you think that the insurance company will pay those profits to the doctors who bought malpractice insurance last year?

Of course the insurance company will keep those profits and pay bonuses to their top executives.   Maybe their stockholders make a profit.  So instead of money going to injured people who otherwise would be made whole for their injuries, that money ends up going into the pockets of insurance company stockholders and executives.  But it doesn’t help consumers.  How do I know?  Because putting an artificial limit on what injured people can recover has never, ever, helped consumers.  The incentives of everyone involved makes it a certainty that it never will.

And If the Insurance Company Doesn’t Keep the Difference, the Policy Owners Surely Will

Lets pretend that the insurance company decides that its stock holders and executives are “making too much money” and actually cuts malpractice insurance premiums to some or all of its doctors.  What happens to the money that the doctors are saving in premiums?  Do you think that the doctor is going to say “I paid $10,000 less in malpractice insurance this year—instead of keeping that $10,000, I’m going to split it up and pay it all to my patients”?  Do you think the doctor is going to lower his charges because he made more money last year?   You know the answer to that question, too.

Selling Your Constitutional Rights for Nothing

Artificially limiting what injured people can recover in the courts benefit nobody but insurance companies.  Artificial damages limits hurt people who deserve help, and help companies that are already collecting premiums and making profits.

And what do you get if you vote for these “tort reforms”? 

Nothing except a loss of your Constitutional right to full justice if you or your family needs the courts.

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