Tort Reform and Insurance Markets
30 Pages Posted: 17 Nov 2003
Date Written: October 2003
Proposed tort reforms have focused on punitive damages and noneconomic damages, each of which pose problems for jury decision making. The U.S. Supreme Court decision in State Farm v. Campbell will greatly limit very large punitive damages awards, and will affect smaller punitive awards to a lesser degree. Noneconomic damages caps enacted by state legislatures have greatly enhanced insurance market performance. Insurers operate within the context of a highly imperfect, regulated market in which there is substantial price rigidity induced by regulation. Reform efforts should strive to establish greater predictability and stability in these awards components rather than simply being concerned with imposing specific numerical caps.
Keywords: tort reform, insurance, punitive damages, pain and suffering
JEL Classification: K13, G22
Suggested Citation: Suggested Citation