Wednesday, January 19, 2005


A Most Perverse Legal Incentive

SWLIP opposes tort reform.

I disagree: though I can't really see micro-managing the legal system as the best approach to the problem, I do think the proposed changes will do a lot more good than harm.

But to really get to the root of the problem, you need to attack the perverse incentive that fuels it: i.e. that plaintiffs and their lawyers can indeed get rich quick by launching dubious lawsuits.

I'm not a lawyer, but I can sure see the temptation at work, so why not remove it? Since the vast bulk of the money, at least in the headline cases, appears to be from punitive damages, it raises a simple question: why should any of the punitive damages go to the plaintiff? The purpose of those damages is to dissuade the guilty (and those who would also commit similar "crimes") from repeating those actions.

Let me propose instead that punitive damages go to a registered charity. Actual damages (e.g. you smashed your car into mine and now I have actual damages involved in repairing my vehicle) would, of course, still go to the victim, and I would also have no problem in also awarding them reasonable legal fees.

But as long as plaintiffs stand to collect a pot of gold via the punitive damages, there will never be an end to those who would game the system, or their creativity in finding new ways of doing so.