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http://www.nytimes.com/2002/12/29/weekinreview/29OPPE.html

Limiting Lawsuits, the Texas Way

By RICHARD A. OPPEL Jr.

ASHINGTON — President Bush never much cared for lawyers, though he once tried to be one.

Rejected by the University of Texas law school, Mr. Bush instead earned an M.B.A. from Harvard and set out for the oil patch. As governor of Texas, Mr. Bush had few political enemies, but he never flinched when his actions drew the enmity of some of the state's wealthiest lawyers.

Now, Mr. Bush and Congressional Republicans are poised to back changes in tort law next year, including proposals that would make it harder to win large jury awards for medical malpractice and force many class-action lawsuits out of plaintiff-friendly state courthouses and into federal courts. Other proposals would protect companies facing asbestos-related claims.

The arguments for and against change often take the form of anecdote, with debates over such things as the merits of overweight children suing fast-food restaurants. Corporate America blames trial lawyers for making everything from football helmets to health care premiums more costly. Trial lawyers — and the Democrats they often support — argue that lawsuits make products safer and that the Republicans want to allow corporations to evade responsibility when they hurt people.

But it is possible to get some idea of the impact of a new system by looking at Texas, which over the past dozen years has become something of a tort-reform laboratory. The changes Texas made, most of them under then Governor Bush, differ from what Congress is likely to consider, but they demonstrate how dramatic the effect can be on plaintiffs, defendants and insurance companies.

In 1989, before Mr. Bush became governor, the Texas Legislature revamped the state's workers' compensation system, which was in disarray. The insurers were bleeding money, and business groups complained about large premium increases. The new system made it more difficult for workers to hire lawyers.

Then, in 1995, under Governor Bush, the Legislature passed a series of bills that made it harder to win big punitive-damage verdicts, narrowed the state's primary consumer protection law and limited what deep-pocketed defendants had to pay in multiparty lawsuits.

Immediately after all these measures were passed, payouts plunged for lawsuits, settlements and other claims covered by insurance companies. After 1995, for example, annual payouts by automobile liability insurers fell by more than $500 million, reversing an upward trend in the first half of the decade, according to data reported by insurance companies.

But premiums paid by consumers and businesses didn't drop nearly as fast as insurers' payouts did, and the profits of insurance companies soared. Before the workers' compensation system was changed, for example, insurers had been paying out all of their premium income, and then some, to cover losses. But by 1994, under the new system, insurers were paying out just 40 cents for every $1 collected in premiums. Similarly, after 1995, auto liability insurers went from paying more than 70 cents for every dollar of premium to about 54 cents.

Over the years, the premiums eventually fell, and insurers' profits moderated. Last year, auto liability insurers were paying 79 cents for every $1 in premiums. Payouts by workers' compensation insurers have also been rising, and total premiums are a half-billion dollars less than a decade ago.

Mr. Bush and state officials have argued that the 1995 changes cut insurance bills by almost $3 billion. The muscle behind that claim originated with a provision that year by a Democratic legislator requiring officials to roll back rates ahead of time to account for tort reform, so that insurance companies did not keep the savings from reform.

But even state officials acknowledge that insurers have most likely kept some benefits. Moreover, insurers overcharged consumers $2.9 billion for auto insurance in the three years after the system was changed, argued D. J. Powers, a former general counsel of the Texas Department of Insurance who is president of the Center for Economic Justice, a consumer-advocacy group based in Austin.

The changes had another effect, other critics say. Trial lawyers and consumer advocates argue that plaintiffs were stripped of much of their ability to seek redress for everything from workplace injuries to consumer fraud. In fact, studies done for the Texas Department of Insurance found that businesses facing lawsuits became more aggressive because of the new laws, making low settlement offers or refusing to negotiate.

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"Instead of settling a case, more insurers are telling their counsel to take it to trial," reported one study by the University of Texas conducted for the insurance department two years after the law changed. "Soft-tissue injury cases in auto and premises liability cases are way down in value."

INSURERS say the changes have weeded out many specious lawsuits and restored fairness to the state civil justice system. They say other factors, like safer cars and workplaces, have contributed to the higher profits as well.

But they now want more changes in the tort laws, arguing that jury awards are still too generous. "There are still certain jurisdictions in Texas that are viewed as judicial hellholes," said Robert P. Hartwig, chief economist of the Insurance Information Institute, a trade group.

Rick Gentry, the executive director of the Insurance Council of Texas, another industry group, said plaintiffs' lawyers have found creative ways to get around the 1995 laws. Insurers' profits did improve after the changes, he said, "but we're still not where we ought to be."

For the Bush administration, tort-law changes at the federal level makes almost perfect political sense. It unites business groups willing to send millions of dollars to sympathetic politicians to fight plaintiffs' lawyers, often generous patrons of Democrats.

Despite Mr. Bush's long-held views on "junk and frivolous" lawsuits, Karl Rove, his longtime top political adviser, apparently had to persuade Mr. Bush to make tort reform part of his 1994 campaign for governor.

"I sort of talked him into that one," Mr. Rove is quoted as saying in a coming book, "Bush's Brain: How Karl Rove Made George W. Bush Presidential," by Wayne Slater and James Moore.

Mr. Rove didn't return a call seeking comment, but in an interview, a senior Texas Republican official recalled Mr. Rove's dislike for trial lawyers. "He thinks they're quick-buck artists out to make a lot of money for doing very little," he said.

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