Lawsuit caps tied to Southeast Texas growth
By DAN WALLACH, The Enterprise
Lawsuit reforms in Texas since 1995 have helped lead to $1.75 billion in local investment and creation of more than 8,300 permanent jobs, an economic analysis released Monday said.
A group called Texans for Lawsuit Reform Foundation sent out the analysis by Waco-based economist M. Ray Perryman.
In his analysis, Perryman said the entire state has seen $112.5 billion and almost 499,000 new jobs, along with $2.6 billion in increased state revenue since reforms in 1995.
Perryman attributed just 8.5 percent of the economic benefit to lawsuit reform and 91.5 percent to “other factors,” he said in an e-mailed comment to The Enterprise.
Beaumont lawyer Walter Umphrey said he didn’t dispute the idea that Texas needed some lawsuit reform – also called tort reform.
“It got out of hand in some places,” he said, adding that some laws then in force did not treat both sides equally.
However, Umphrey disputes the notion that tort reform underlies billions in investment locally.
“The need for refined products has nothing at all do with tort reform,” Umphrey said.
“Permanent jobs have a lot to do with the price of gasoline. I think it’s absurd to make that claim,” he said. “(The investment and job creation) may have something to do with the price of liability insurance for doctors.”
Much of the lawsuit reform focused on medical malpractice in the mid-1990s, and the Texas Legislature set caps on non-economic damages for plaintiffs at $750,000 in 2003 with voters approving a constitutional amendment on the caps that year.
Putting caps into place helped Texas attract physicians and also insurance carriers, said orthopedic surgeon David Teuscher of Beaumont, chairman of the Texas Medical Association’s liability committee.
Teuscher said that by 2003, Texas had just four liability insurance carriers for physicians, and that was down from 17 carriers in 2000.
Now, physicians have up to 30 choices, a competitive market that has helped the state attract new physicians.
“We’ve been able to recruit specialists in orthopedics that we had not been able to recruit,” Teuscher said.
He said the lawsuit reforms also extend to homeowners and to other businesses – not just medical practitioners.
Perryman responded to Umphrey’s reading of the limited impact of lawsuit reform by saying investment in the petrochemical industry in Southeast Texas is a dominant factor in local growth.
“Our study is not in conflict with that situation in any way,” Perryman said in his e-mailed response.
“There are clearly other factors that are responsible for most of the growth in every region.
“We found that lawsuit reform was responsible for about 8.5 percent of the expansion in Texas since 1995. That leaves the vast majority (91.5 percent) being determined by other factors,” Perryman said in his e-mailed response.
As to where the jobs and investments are, Perryman said it cuts across all aspects of the economy.
“By the way, the $1.75 billion is total expenditures (all dollars that change hands). It is not all investment in the sense of purchases of plant and equipment,” he said of the economic impact for Southeast Texas in his e-mailed response.
Teuscher said Texas was 48th along the 50 states in 2001 of doctors per capita, representing the number of physicians available to the state’s population.
With lawsuit reforms in place, the state’s standing improved to 42nd by 2005.
“We’re probably in the mid-30s by now,” he said.
It’s not just liability costs that are responsible for attracting more physicians, he said.
“It’s the environment – whether there is a fear of lawsuits and if you’re going to be treated fairly,” he said.
He also said when people move to a new location, they base their decision on a variety of things such as quality of life, schools, churches and whether they would have good access to health care.
Umphrey cited overall safety issues and state law on liability as a cause of concern, specifying a case the Texas Supreme Court will rehear, Entergy v. Summers.
It’s a case in which an injured worker who is employed by a contractor doing work for an industrial employer is covered only by worker’s compensation through the contractor.
Its analogy is the BP refinery case in Texas City in which 15 employees of contractors were killed in an explosion. However, BP ultimately was held liable because of its own safety negligence, Umphrey said.
“BP would have been a pure workmen’s compensation case” if the liability law decided by the Texas Supreme Court was in effect.
The Legislature objected to it and the court will rehear it, he said.
Umphrey also said the U.S. Chamber of Commerce finances many state groups around the country in tort reform battles.
“There are many, many malpractice cases that are capped,” he said. “Doctors should be fully responsible for their actions.”
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