Politics

By CHARLES N. WHEELER III

Long tail, deep pockets, whole persons

DEEP POCKETS and Long Tail. Sounds like the title for a TV pilot, doesn't it? Perhaps an adventure series featuring Captain Kangaroo and Rin Tin Tin as undercover agents.

To anyone who hangs around the Illinois General Assembly, though, those catchy phrases instantly call to mind the No. 1 drama of the spring session — the liability insurance crisis, how much it costs and how difficult it is for some businesses and local governments to buy adequate coverage at any price.

The story line is fascinating, albeit contradictory. In one version, we're threatened by a tort system run amok, populated by suit-happy litigants, fee-hungry lawyers, and judges and juries who toss about other folks' money. In another, profit-greedy insurance companies and cold-hearted industrial barons hope to deprive innocent victims of their legal rights by making the tort system the scapegoat for bad business judgments by insurers.

Gov. James R. Thompson and Republican legislative leaders are featured in a subplot, hoping their early and enthusiastic support for the legislative package developed by the state's best-heeled business group will translate into GOP gains on election day. And there's a cast of thousands, with both those who would alter the court system and those who would clamp down on the insurance industry, turning out impressive numbers for Statehouse rallies.

So far, the activity seems to have generated more heat than light. Insurance crisis horror stories abound, and each side is quick to unleash them to support its claims. But such anecdotal evidence cannot be conclusive especially when much of it is conflicting.

Despite demands from legislative committees, the insurance industry was slow to produce detailed claims information that could buttress their case. Similarly, the fact that insurance rates rose for some cities and counties that had no claims does not prove there's an insurance industry scam at work, as one consumer group alleged.

Indeed, even the solutions being proposed by the two camps seem less than foolproof. The tort reformers want to make it harder for injured persons to collect damages from those who've harmed them. Even if their package passed intact, the insurance companies have been unable or unwilling to guarantee lower premiums and expanded coverage.

In fact, there's considerable evidence that the industry's normal boom-or-bust economic cycle, a key factor in the current crisis, will persist whatever happens to the tort system.

Likewise, those who would slap new state regulations on insurers have unanswered questions. For instance, how can a company be forced to write a particular line of coverage if its officers and underwriters perceive it to be a shaky investment? Or what state regulator during good times will tell an insurer that the rates it has discounted in a quest for market share and cash flow must be raised for underwriting soundness?

Despite such underlying uncertainties, look for something to emerge this session. The insurance crisis has too high a profile to be referred quietly to interim study; anyone able to recruit day-care operators and garbage haulers for a common cause, as the tort reformers did, can be sure of a spot on the legislative agenda. In the wake of such attention, election-leery politicians want something they can point to and say, "See, we solved the problem." Coalition leaders, too, need something to show rank-and-file members who've become true believers in the group's proposals.

So far the competing recommendations seem predicated largely on finger-pointing, proposing changes either in how civil lawsuits are handled or in how the insurance industry does business. While such blame-laying is satisfying for partisans, it's not particularly conducive to solving a complex problem. A more helpful approach might be to examine some of the fundamental issues raised by the current crisis. Once the underlying public policy questions become part of the discussion, whatever compromise is reached has a better chance of yielding the desired results.

Perhaps the key question is "Should every injured person be made whole?" Belief in that principle, one might argue, underlies joint and several liability, a legal doctrine that holds every defendant responsible for the entire award to an injured party, regardless of that defendant's degree of fault. Frequently, tort critics claim this tenet encourages juries to grant exhorbitant awards when any of the defendants is a government unit or a company with the resources to pay (the so-called Deep Pocket syndrome). Yet, without the legal doctrine, some victims would never collect the full recompense to which they are entitled because there will always be defendants unable to pay. Or, in another situation, what about the person injured long ago but only now realizing the injury, for example, someone unknowingly exposed as a youngster to some toxic substance who later develops health problems as a result (the so-called Long Tail effect)? Another important question follows from the first: "What does whole mean?" Does it include just medical bills, lost wages and other out-of-pocket expenses? Or does it also include some monetary recognition for non-economic loss, the so-called pain and suffering?

Finally, if the decision is to make injured people whole, is insurance the proper mechanism to do it? Or would it be more appropriate to spread the cost over all of society, through direct government grants paid for with tax dollars?

Considering such questions might help the General Assembly avoid a future rerun of Deep Pockets and Long Tail.

2/June 1986/Illinois Issues