Tort Reform in Louisiana?

The concept of “tort reform” has been the most widely reported issue during the recently concluded regular and special legislative sessions. The regular legislative session started out promisingly for tort reform advocates, who characterize purported litigation abuse by plaintiffs’ lawyers as a tax in the form of higher automobile insurance rates for Louisiana citizens. During the regular session, via SB 418, tort reform advocates sought to address the following issues:

  • Jury Threshold: Louisiana’s jury threshold of $50,000 is the highest in the nation. Currently, unless a case is valued at $50,000 or higher, a judge rather than a jury may decide the case. Tort reform advocates sought to lower the jury threshold to $5,000 for general tort claims, for example, automobile accidents, and $35,000 for all other matters.
  • Collateral Source: Collateral source is a judicially created law that allows plaintiffs to recover medical damages in the amount that was billed by providers as opposed to the amount that a plaintiff actually paid. The rule fails to take in account contractual adjustments for health insurance or limits on reimbursement established by payors such as health insurance providers, Medicare, and Medicaid. Tort reform proponents contend this allows a windfall to plaintiffs and their attorneys that far exceeds what they are actually entitled to for medical care and the costs of health insurance premiums they have paid.
  • Direct Action: Louisiana is currently one of only three states where a plaintiff can sue both an insured and the insured’s insurance provider. Tort reform advocates contend that there is no need for the direct action statute because (1) under an insured’s policy, the insurer is required to pay the amount its insured is legally obligated to pay, up to the policy limits, and (2) the statute’s sole purpose is to promote larger damage awards because a jury will view a company differently than an individual person with respect to an award of damages.
  • Prescription: Louisiana currently provides that injured persons have only one year following an accident to file suit before losing this right. Tort reform proponents wish to extend that period of time to two years for injury or damage arising from the operation or control of any motor vehicle, aircraft, watercraft, or other means of conveyance, which gives the aggrieved party and the insurance company more time to settle the claim.
  • Seatbelt: When a plaintiff is injured, whether that person was wearing a seat belt at the time of the accident is currently prohibited from being introduced as evidence to the jury. Tort reform advocates wish to repeal this law.

However, Governor Edwards vetoed SB 418 citing the following reasons:

  • Not a single insurance company testified in committee that SB 418 would actually reduce rates.
  • The rate reduction provision in SB 418 is permissive, rather than mandatory, and actually allows for rate increases if insurers are able to demonstrate need.

Governor Edwards also argued that distracted driving, poor road and bridge infrastructure, and discriminatory practices based on credit rating and gender leading to more uninsured or underinsured drivers is the reason for high automobile rates as opposed to purported litigation abuse by the plaintiffs’ bar.

During the legislative special session, instead of attempting to override Governor Edwards’ veto, legislative leaders focused their efforts on drafting new legislation that would garner bipartisan support. HB 66, which overwhelmingly passed both houses, addressed the issues important to tort reform advocates and also addressed Governor Edwards’ concerns regarding permissive rate reduction in SB 418 and discriminatory insurance practices based on gender. However, this bill ultimately failed to get brought up for concurrence in the House on the final day of the special session.

Instead, the Legislature passed Speaker of the House, Clay Schexnayder’s bill, HB 57, titled “Civil Justice Reform Act of 2020,” as legislative leaders were most confident in gaining the Governor’s approval of this bill. The legislation that came out of the conference committee and passed both houses is summarized as follows:

  • Jury threshold: $10,000 jury threshold for all matters as opposed to the current $50,000.
  • Evidence of Insurance: The legislation would forbid mentioning the defendant driver’s insurance company and policy except at the beginning and end of the trial. However, the legislation fails to repeal La. R.S. 22:1269, the direct action statute, which still gives an injured party a right of action against an alleged tortfeasor’s liability insurer.
  • Collateral Source: The legislation codifies the judicially created collateral source rule and limits a plaintiff’s ability to recover medical damages to the amount actually paid plus any co-pay or deductible rather than the amount billed. After a verdict is rendered, the trial judge is also required to award the plaintiff forty percent of the difference between the amount billed and the amount actually paid unless a defendant can prove such an award is unreasonable.
  • For example, consider a plaintiff that has a surgical procedure that was billed for $60,000. Because of a contract between the hospital and the plaintiff’s insurance carrier, the procedure only costs $20,000. Under this legislation, the plaintiff would be able to collect the $20,000 plus any co-pay or deductible as a form of damages and the trial judge would also be required to award an additional $16,000 ($60,000-$20,000 = $40,000 X .40 = $16,000) unless the defendant can show such an award would be unreasonable.
  • Despite these purported limits on the actual recovery of medical damages, the jury will still be informed of the amount billed for the medical services as opposed to the amount actually paid. This means that a jury may still award greater general damages based on the amount the plaintiff was billed for medical services even if the cost of the medial services was in reality much less.
  • Collateral Source (Worker’s Compensation): In cases where the injured party’s medical expenses are paid pursuant to the Louisiana Workers’ Compensation Law, the injured party’s recovery of medical expenses is limited to the amount payable under the medical payments fee schedule of Louisiana Workers’ Compensation Law. This rule was recently judicially created in Simmons v. Cornerstone Investments, LLC, et al, 2018-0735 (La. 05/08/19), but this bill’s passage would codify the law.
  • Seatbelt: The legislation repeals the law that prevents evidence of whether plaintiff was wearing a seatbelt from being offered to the jury.

As modified by the conference committee and passed by both houses (House: 86-15; Senate: 35-4), HB 57 was sent to Governor Edwards’ desk on July 1. Governor Edwards has 20 days to either sign or veto the legislation. He could also let the 20-day period lapse without taking any action at which point the legislation becomes law. However, Governor Edwards has indicated that he will sign the legislation, which would become effective on January 1, 2021, and would not apply to a cause of action arising or action pending prior to January 1, 2021. Whether this legislation results in the reduction of automobile insurance rates remains to be seen.