‘Tort tax’ of $719 per resident fuels push for Florida legal reforms

By Michael Carroll
Florida Record
January 27, 2020

Armed with new data pointing to how out-of-control civil litigation affects the Florida economy, business leaders launched a push for tort reform measures they say will reduce the “tort tax” residents pay.

Among those attending a recent Tallahassee news conference spotlighting a new study of excessive civil litigation costs was Bill Herrle, the state executive director for the National Federation of Independent Business (NFIB).

“The NFIB announced last week a study that showed the annual tort tax in Florida is $719 for every Floridian annually,” Herrle told the Florida Record. “That’s an increased cost in goods and services for every Floridian.”

The number comes from a study by the Perryman Group, an economic research firm based in  Waco, Texas. It found that civil litigation in Florida results in $10 billion in annual direct costs and a gross domestic product cost of $15.5 billion, the analysis says.

“All major industry groups are negatively affected, with the retail trade, business services, other services and health services industries experiencing the greatest losses,” the study says.

Nearly 162,000 job losses are also attributed in the annual toll described in the Perryman Group analysis. In addition, the current legal climate is to blame for a loss of more than $811 million in annual state revenues and nearly $680 million in local government revenues, the report says.

“We’re saying, ‘Let’s take a clear-eyed look at what we are paying for the civil justice system,’ and it’s significant,” Herrle said.

The Perryman study used a study on tort-reform effects in Ohio to gauge the economic drag that a flawed civil justice system may be having on Florida. Ohio’s recent reforms included a cap on punitive damages in medical malpractice cases and other situations, as well as changes in the way cases involving asbestos, nursing homes and silica are handled.

“We modeled the response and the nature of the benefits of reform to the Ohio economy and then localized a scenario to Florida which reflects the specific industrial composition and characteristics of the Florida economy,” Ray Perryman, the company’s president and CEO, told the Record in an email. “With reforms, Florida should realistically see comparable benefits in the form of cost reductions we quantified in the study.”

The Florida study was made available to coincide with the start of the Florida legislative session, Perryman said.

Herrle was joined at the Jan. 15 news conference by state Sen. Doug Broxson (R-Gulf Breeze), chairman of the Committee on Banking and Insurance, and Rep. Bob Rommel (R-Naples), who chairs the Civil Justice Subcommittee in the Florida House.

Rommel’s panel last week advanced a measure, CJS 20-01, dealing with an issue of major concern to small businesses – third-party lawsuit lending that finances civil litigation at often high loan rates. That’s something Herrle terms a perversion of the justice system.

“What our legislation does is it caps interest rates at 30 percent,” he said. “It requires that these lawsuit lenders register with the state.”

Herrle added that the proposal would shine a bright light on the lending practice, in which third parties can buy a stake in a civil lawsuit before it goes to court. This can ultimately leave the plaintiff with only a small portion of a damages award since much of it would go to lenders as profit, he said.

Another group that supports third-party litigation financing reform is the American Property Casualty Insurance Association (APCIA). 

“With Florida having one of the worst legal climates in the country, it is imperative we look at all avenues to enhance our civil justice system and bring relief and protection to Florida consumers,” said Logan McFaddin, APCIA assistant vice president of state government relations, in response to a query about lending reform. “CJS 20-01 would do just that.”

The bill would do more than just add registration requirements and cap fees and charges to consumers, he said. It would help protect consumers by making litigation financiers subject to the Florida Deceptive and Unfair Trade Practices Act, McFaddin said.

Another top priority of both the Florida NFIB and the APCIA involves the state’s bad faith law, which oversees insurer responsiveness in handling claims. The business groups see the current law as poorly crafted, allowing plaintiff’s attorneys to get courts to increase damages awards over minor insurer responsiveness issues.

“Bad faith completely flies in the face of sound insurance principles,” Herrle said. “It’s unsustainable for insurers to pay damages beyond the policy limits. That’s not insurance.”

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