Lawsuit Reform

Sunshine Needed to Oust Phantom Lawsuit Damages

Celebrate Sunshine Week with ALEC Ideas!

Lawsuit awards are often arrived at with misleading evidence. A little sunshine can help the jury award fair recovery free of phantom damages.

Following a doctor’s visit, most people receive an invoice in the mail showing a billed rate and an often much lower negotiated rate.  Insurance companies and consumers rarely pay the sticker price for medical care. This lower rate, sometimes called a “member rate” or a “plan discount rate,” is the actual amount of money changing hands in exchange for care: the price.

In a lawsuit, however, the plaintiffs’ attorney will often submit the billed rate rather than the price paid as evidence to determine economic damages. A lawsuit award meant to compensate a victim for loss often reflects much more than the actual economic loss because of this allowance. This can easily turn a $50,000 case into a $100,000 case and inflict excessive punishment on a defendant.

Instead, the jury should be made aware of the actual money paid and awards should reflect out-of-pocket costs. The ALEC Phantom Damages Elimination Act would make sure that medical economic damages include only those damages paid or reasonably expected to be paid, providing plaintiffs with a complete recovery and protecting defendants from inflated judgments.

Missouri, Florida, Wisconsin and West Virginia are considering reforms to expose phantom damages and align lawsuit awards with actual expenses. The Missouri reform, SB 847, passed the Senate with a bipartisan vote of 25 to 7 and just passed out of the House Civil and Criminal Proceedings Committee this week.

Advocates of traditional tort reforms like caps on damages have considered phantom damages reform as an alternative way to rein in excessive lawsuit awards. Considering punitive and noneconomic damages are often set as multiples of economic damages, correcting inaccuracies in medical expenses can go a long way toward tempering lawsuit awards as a whole.


In Depth: Lawsuit Reform

State legal systems and the liability they exert on businesses and individuals are a disincentive to bad behavior and allow fair players to succeed in the marketplace. When lawsuits inappropriately punish good actors, resources are sucked out of the business economy, away from research & development and job creation. Lawsuit …

+ Lawsuit Reform In Depth