CONTENTS:

Makes numerous changes to civil practice and procedure, including generally specific causes of action, statutes of repose, trial, liability, damages, and judgment, product liability actions, and asbestos claims

State Fiscal Highlights

STATE FUND	FY 2004	FY 2005			FUTURE YEARS
General Revenue Fund
Revenues	- 0 -		- 0 -	- 0 -
Expenditures	Potential decrease		Potential decrease	Potential annual decrease
Other State Funds
Revenues	- 0 -		- 0 -	- 0 -
Expenditures	Potential decrease		Potential decrease	Potential annual decrease

Note: The state fiscal year is July 1 through June 30. For example, FY 2004 is July 1, 2003 – June 30, 2004.

· Healthcare expenditures. It is difficult to establish a direct empirical or causal connection between the bill and its fiscal effects on the state, particularly in terms of various healthcare expenditures. There is likely some proportion of medical costs incurred annually by the state that are the result of or directly affected by the current liability system. It is not unreasonable to conclude therefore that state healthcare expenditures may experience some decrease as a result of the bill. The precise fiscal impact of the bill on state healthcare expenditures, including the cost of providing state employees with healthcare coverage, is unclear. In addition, the bill’s provisions relative to establishing certain medical requirements for filing asbestos related claims and limiting successor asbestos related liability might limit future state expenditures.

Local Fiscal Highlights

LOCAL GOVERNMENT		FY 2003		FY 2004		FUTURE YEARS
Counties and Municipalities
Revenues	- 0 -		Factors leading to possible gains and losses in filing fee revenues, with likely net minimal effect in most local jurisdictions		Potential annual loss in filing fee revenues, likely to be no more than minimal, if that, in most local jurisdictions
Expenditures	- 0 -		Factors increasing and decreasing civil justice system expenditures, with likely net minimal effect in most local jurisdictions		Potential annual decrease in civil justice system expenditures, likely to more than offset any associated revenue losses in most, if not all, local jurisdictions

Note: For most local governments, the fiscal year is the calendar year. The school district fiscal year is July 1 through June 30.

· Local civil justice systems generally. The net effect of the bill’s various changes to civil practice and procedure over time is potentially that fewer suits will be filed against manufacturers and professionally licensed persons, and fewer suits will be filed to recover other damages by plaintiffs. If there is in fact a reduction in the number of professional tort actions, product liability actions and other civil suits, there will in all likelihood be an overall savings that will be realized in various local civil justice systems resulting from a decrease in judicial dockets and a reduction in the related workload of other court personnel. The tort action cases likely to be most affected by the bill are handled by courts of common pleas. Whether the resulting savings in annual operating costs for any given court of common pleas might exceed minimal is uncertain. If the number of professional tort actions, product liability actions, and other civil suits are reduced, courts will likely see a loss in various filing fee revenues. However, the savings realized by courts in terms of their personnel and related operating costs would likely be greater than any possible revenue loss. Revenues from filing fees flow to county treasuries in the case of the courts of common pleas and county courts. In the case of municipal courts, these revenues flow to treasuries of the municipal corporation within which the municipal court is located.

· Municipal and county court civil caseloads specifically. The bill will likely reduce the number of cases being filed over time in municipal and county courts and perhaps make the disposition of said cases more efficient. However, given the bill primarily addresses professional tort actions, product liability actions, and other large tort actions, any decrease in county and municipal court caseloads and related annual operating costs are expected to be no more than minimal, if that.

· Insurance premium costs. If insurance premiums are reduced, or if there is a reduction in their growth as a result of tort reform, political subdivisions stand to gain as their expenditures for liability premiums would be reduced. The biases and the dynamics involved with estimating future insurance losses and premiums make predicting any decreases in expenditures for political subdivisions nearly impossible, beyond stating any decreases are indeterminate.

· Potential one-time increase in civil action filings. Following the enactment of Am. Sub. H.B. 350 of the 121st General Assembly, a “tort reform” bill, and prior to its effective date, courts of common pleas experienced a “one-time surge” in civil case filings. The uncertainties created by Am. Sub. H.B. 350 apparently induced attorneys to get their cases filed with the court to avoid potential exclusion. Many were subsequently settled out of court. Thus, the passage of this bill (S.B. 80) could potentially produce a similar dynamic. If it does so, then it seems very likely that the previous experience of the courts with changes of this magnitude would mean that the courts could absorb the short-term impact on civil case filings with no more than a minimal one-time administrative cost, if that.

Detailed Fiscal Analysis

Operation of the bill

The bill makes numerous changes to civil practice and procedure. The most notable provisions for the purpose of this fiscal analysis are changes in current civil practice and procedure relative to:

· Specific causes of action.

· Statutes of repose.

· Damage awards.

· Product liability actions.

· Asbestos claims.

Specific causes of action

The bill generally eliminates or restricts certain causes of action in various types of cases such as tort actions involving civil liability for wrongful deaths if the decedent was compensated for the decedent’s injuries prior to the decedent’s death or prior to the decedent’s death a judgment for damages was entered in a civil action. If certain conditions were met, the commencement of a wrongful death action would be prohibited.

If there is cause for a civil action for wrongful death, the cause of action accrues, or arises, either upon the date the claimant is informed by competent medical authorities that the decedent’s death was related to exposure to the product in question or by the exercise of reasonable diligence the claimant should have known that the decedent’s death was related to the product exposure. In such a case, if a claimant chooses to bring forth a civil action for wrongful death, it must commence within two years after the cause of action accrues.

The bill also creates certain restrictions on the time frame in which actions for personal injury, based on product liability claims or exposure to certain hazardous chemicals, can be filed.

Statutes of repose

The bill creates a ten-year statute of repose for: (1) product liability claims, and (2) persons who performed services for the improvement to real property or a person who furnished the design, planning, or supervision of construction of the improvement to real property.

Generally, the bill prohibits the commencement of a wrongful death action or another tort action later than ten years from the date that a product was delivered to its first purchaser or first lessee (product liability) or from the performance of services, design, planning, or construction in relation to the improvement to real property.

Subject to the statutes of repose, the bill retains certain statutes of limitations applicable to the commencement of specific civil actions and provides other exceptions to these provisions, such as a manufacturer engaging in fraud regarding information about a product and the fraud contributed to the harm.

These changes to the statutes of repose may curtail some cases involving allegations of adverse long-term effects of certain products. Should such products be hazardous or toxic chemicals, the time frame for a cause of action may be extended no more than two years beyond the statute of repose if the discovery of harm related to the product is not discovered until the end of the ten-year period in the statute of repose.

Damage awards

Under the bill, there are several different provisions that affect trials and awards of damages. For example:

· Juries are to be instructed that an award of compensatory, punitive, or exemplary damages in all tort actions is not subject to state or federal income taxes.

· Compensatory damages that may be awarded for non-economic loss in tort actions are limited.

· Awards are generally limited to the greater of $250,000 or an amount equal to three times the plaintiff’s economic losses to a maximum of $350,000 per plaintiff or a maximum of $500,000 for each occurrence.

· If the non-economic losses are for permanent and substantial physical disfigurement or permanent functional injury that prevents the injured person from being able to independently care for themselves, damage awards are capped at $500,000 for each plaintiff or $1 million for each occurrence.

· Punitive damages are also limited to the greater of the amount of compensatory damages awarded or $100,000 if the defendant is a small employer.

· The cap on non-economic damages does not apply in a tort action for bodily injury against a defendant who has been convicted of any offense of OMVI, rape, sexual battery, or unlawful sexual conduct with a minor, in which the bodily injury that is the basis of the tort action was caused by that particular offense.

Product liability claims

The bill restricts some of the conditions under which some products would be considered defective. For example:

· A product is considered defective only if, when it left the control of the manufacturer, the foreseeable risks exceeded the benefits associated with the design or formulation.

· The award of punitive damages against a manufacturer of over-the-counter drugs that are legally marketed and recognized as safe and effective is prohibited, unless the product is misbranded or fraudulently marketed by the manufacturer.

Generally under the bill, if a manufacturer complies faithfully to all applicable regulations, and the product is generally recognized as safe when used as directed or the sum total of the benefits provided by the product and its design outweigh the foreseeable risks, manufacturers will likely not be subject to punitive damages to punish for past conduct and deter similar future conduct. The bill does not insulate the manufacturer from compensatory damages. This provision of the bill may result in some reduction of civil caseloads in which the intent is to seek large punitive damages and the pursuit of a settlement.

Asbestos claims

A cause of action for bodily injury caused by exposure to asbestos accrues, or arises, upon the date on which the plaintiff is informed by competent medical authorities that the plaintiff has an injury related to the exposure or upon the date on which by the exercise of reasonable diligence the plaintiff should have known that the injury was related to the asbestos exposure. The bill requires that civil actions alleging physical illness or impairment as the result of asbestos exposure include a written report and supporting test results constituting prima facie evidence of linkage between the alleged exposure and the resulting illness or impairment. The bill also limits the asbestos related liabilities of certain successor domestic corporations. The net of these changes relative to asbestos claims will likely be to eliminate some causes for action involving alleged asbestos exposure and resulting illness or impairments.

State fiscal effects

It is difficult to establish a direct empirical or causal connection between the bill and its fiscal effects on the state, particularly in terms of various healthcare expenditures. There is likely some proportion of medical costs incurred annually by the state that are the result of or directly affected by the current liability system. It is not unreasonable to conclude therefore that state healthcare expenditures may experience some decrease as a result of the bill. The precise fiscal impact of the bill on state healthcare expenditures, including the cost of providing state employees with healthcare coverage, is unclear. In addition, the bill’s provisions relative to establishing certain medical requirements for filing asbestos related claims and limiting successor asbestos related liability might limit future state expenditures.

Local fiscal effects

Local civil justice systems generally

From the perspective of local civil justice systems generally, the bill will essentially:

· Increase the “requirements” needed to win tort and civil action cases against manufacturers of products.

· Set more stringent time limits on the commencement of suits against manufacturers.

· Permit to a greater extent the introduction of negligence of the plaintiff in the determination of tort actions.

· Reduce compensatory damages awarded to the plaintiff accordingly.

· Reduce the amount of punitive and exemplary damages that may be awarded to certain plaintiffs.

The net effect of the bill’s various changes to civil practice and procedure over time is potentially that fewer suits will be filed against manufacturers and professionally licensed persons, and fewer suits will be filed to recover other damages by plaintiffs.

If there is in fact a reduction in the number of professional tort actions, product liability actions, and other civil suits, there will in all likelihood be an overall savings that will be realized in various local civil justice systems resulting from a decrease in judicial dockets and a reduction in the related workload of other court personnel. The tort action cases most affected by the bill are handled by courts of common pleas, which hear professional tort actions, product liability actions, and all civil cases in which the amount in controversy exceeds $500. Municipal and county courts are permitted to handle civil actions in which the amount in controversy does not exceed $15,000.

If the number of professional tort actions, product liability actions, and other civil suits are reduced, courts will likely see a loss in various filing fee revenues. However, the savings realized by courts in terms of their personnel and related operating costs would likely be greater than any possible revenue loss. Revenues from filing fees flow to county treasuries in the case of the courts of common pleas and county courts. In the case of municipal courts, these revenues flow to treasuries of the municipal corporation within which the municipal court is located.

Municipal and county court civil caseloads specifically

The bill’s provisions primarily affect professional tort, product liability actions, and other large tort actions filed in the court of common pleas. However, some of the bill’s provisions, such as the provisions for frivolous conduct, could have an effect on those cases filed in municipal and county courts, primarily personal injury cases. Municipal and county courts hear civil cases with damages up to $15,000. The bill will likely reduce the number of cases being filed over time and perhaps make the disposition of said cases more efficient. However, given the bill primarily addresses professional tort, product liability cases, and other large tort actions, any decrease in county and municipal court caseloads and related annual operating costs are expected to be no more than minimal, if that.

Insurance premium costs

It is sometimes argued that tort reform can reduce insurer losses and potentially reduce premiums. However, before concluding that the bill will reduce losses and premiums paid by government entities, other factors should be considered. First, a decrease in insurance losses does not necessarily mean reduced premiums. Although the bill may cause a reduction in losses, premiums may still increase as other risk factors (such as inflation and investment performance) continue to influence the rate of premiums. Thus, a “real” premium reduction may or may not be realized. Premium reductions depend upon more than just decreased losses; there is also a large element of human and business behavior.

If insurance premiums are reduced, or if there is a reduction in their growth as a result of tort reform, political subdivisions stand to gain as their expenditures for liability premiums would be reduced. The biases and the dynamics involved with estimating future insurance losses and premiums make predicting any decreases in expenditures for political subdivisions nearly impossible, beyond stating any decreases are indeterminate.

Potential one-time increase in civil action filings

Following the enactment of Am. Sub. H.B. 350 of the 121st General Assembly, a “tort reform” bill, and prior to its effective date, courts of common pleas experienced a “one-time surge” in civil case filings. According to the Franklin County Court of Common Pleas, this one-time surge in filings lasted about a week, and on the last day of that week, the court experienced 20 times the normal number of civil case filings. An official with the court stated that most, if not all, of the more urban courts around the state experienced a similar one-time surge.

From the perspective of the Franklin County Court of Common Pleas, if a similar “one-time surge” accompanies the enactment of this bill (S.B. 80), the court can prepare and accommodate such a one-time surge with currently available resources. The court would not incur any additional cost by having to hire additional personnel or purchase any new equipment. The net impact on court personnel would be a few long days and perhaps a small amount of overtime.

According to the Franklin County Court of Common Pleas, many of these additional case filings stemming from the enactment of Am. Sub. H.B. 350 were ultimately settled out of court and would not likely have been filed absent the enactment of Am. Sub. H.B. 350. The uncertainties created by Am. Sub. H.B. 350 apparently induced attorneys to get their cases filed with the court to avoid potential exclusion. Many were subsequently settled out of court. Thus, the passage of this bill (S.B. 80) could potentially produce a similar dynamic. If it does so, then it seems very likely that the previous experience of the courts with changes of this magnitude would mean that the courts could absorb the short-term impact on civil case filings with no more than a minimal one-time administrative cost, if that.

LSC fiscal staff: Joseph Rogers, Budget Analyst

SB0080SP.doc

BILL:	Sub. S.B. 80		DATE:	September 30, 2003
STATUS:	As Passed by the Senate		SPONSOR:	Sen. Stivers
LOCAL IMPACT STATEMENT REQUIRED:		No —	Minimal cost