A new report examining the impact of excessive tort claims in California finds that reforming the system could help create more than 200,000 jobs and an estimated $46 billion in economic activity.
“It’s no secret that many of California’s largest employers have fled the Golden State for other states that treat the state’s employers more fairly without excessive taxes and regulations that lead to lawsuit abuse,” Maryann Marino, Southern California regional director of California Citizens Against Lawsuit Abuse (CALA), told the Northern California Record by email.
“California is at a critical juncture. Right now, there is a bill in the legislature, AB 247 authored by Assemblyman James Ramos. He is re-introducing his bill from last year that would provide COVID-19 liability protections for small business owners and non-profits with fewer than 100 employees, providing that if they substantially complied and implemented all the relevant public health and safety state and county protocols, they will not be liable for alleged Covid liability exposure claims absent gross negligence, willful misconduct, or discrimination.”
Marino noted the bill had unanimous bi-partisan support and passed the Assembly last year.
“When it came time to be heard in the Senate, the Senate refused to hear the bill,” Marino said. “The same is happening now in the Assembly. AB 247 is a common-sense bill that would protect business owners from shakedown lawsuits.”
The report outlines how tort reform will impact California’s economic recovery amid the COVID-19 pandemic.
“The report shows the opportunity we can create with just one tort law reform,” Marino said. “Tort reform law would strengthen innovation and employment that would lead to increased productivity of $46 billion and 206,000 jobs for our state.”
“When tort laws are misused it results in closed businesses, lower wages, lost jobs, decreased productivity and higher prices which are harmful to everyone,” Marino said.
“Without these reforms businesses pay out billions in settlements,” Marino said. “The first thing a business does to come up with the settlement money is to start cutting jobs, reducing productivity and raising prices.”
Marino also noted that when government agencies are sued, programs are cut, and taxpayers pay the settlements.
“Even government agencies sue one another to settle a dispute,” Marino said. “Instead of government agencies going to the boardroom to resolve a problem, they go to the courtroom forcing taxpayers to pay for the cost of litigation.”
Tort law reforms have happened in the past. In 2013, Gov. Jerry Brown signed AB 227 sponsored by then-Assemblyman Mike Gatto, D-Los Angeles. “It gave relief to coffee shops and other businesses who failed to post a Prop 65 sign,” Marino said. “Instead of being sued $2,500 a day, the business was given two weeks to purchase a new sign and pay a $500 fine.”
The new report helps raise awareness by placing a dollar value on the loss of wages, jobs and productivity.
“California is working to come out of the economic crisis caused by the pandemic, and it needs a simple tort reform to help lift it and not place more burdens on it like abusive litigation would bring,” Marino said.
The report states that lawsuit abuse costs every Californian a “tort tax” of $574 per person.
“When a business is sued, they have to come up with a lot of money to pay off the settlement,” Marino said. “One way they do this is by raising prices. The cost of a ladder, for example, has an additional $20 added to it so manufacturers have funds should they be sued.”