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Tort reforms protect businesses from lawsuits
By Kim Chen Wiseman
Contributing Writer
Two important events hammered changes into the long-standing tort reform issue in South Carolina in 2005.
Because these changes are less than a year old, it is too early to tell how they will impact new and existing businesses.
The goal of tort reform is to lower the amount of frivolous lawsuits, to protect businesses in where they can be sued and how much they will have to pay, and to help lower insurance premiums by easing the burden on their liability insurers.
The following is a recap of this year’s tort reform changes.
A judicial loophole closed
The first change did not come from the state Legislature, but rather from the state Supreme Court. In February 2005, the Supreme Court of South Carolina decided the case of Whaley v. CSX Transportation Inc. and, in doing so, altered the ease with which a plaintiff can sue a business in certain counties.
Generally, an individual defendant is sued in his or her county of residence, but what about corporations?
At issue in the Whaley case was whether the plaintiff had the right to bring suit against the defendant railroad corporation in Hampton County.
Hampton County has become nationally infamous for its high verdicts for plaintiffs and has been named as the third worst “judicial hellhole” in the United States by the American Tort Reform Foundation.
The railroad company did not have offices or employees in Hampton County, and the county’s only connection to the lawsuit was that the company had a train that travels through the county.
Hampton County’s docket has been clogged by a loophole for years, with plaintiff lawyers seeking a venue unfriendly to business.
In the Whaley case, the state Supreme Court decided Hampton County was not the proper venue for the suite and clarified when a company “resides” in a certain county and thus can be sued in that county.
The rule now states that a company resides in any county in which it (1) maintains its principal place of business or (2) maintains an office or agent for the transaction of business (although this rule has now been altered slightly by the subsequent tort reform acts discussed below).
The end result is that the plaintiff is more restricted in where to bring suit, thus making it more difficult to sue a defendant company in allegedly business-unfriendly counties, such as Hampton County.
Tort reform passed
Most of the year’s tort reform changes stem from two acts passed by the state Legislature and signed into law by Gov. Mark Sanford this year.
Less than two months after the Whaley decision, Gov. Sanford signed into law the Economic Development, Citizens and Small Business Protection Act of 2005.
Two weeks later the governor signed another bill—the Tort Reform Act of 2005 Relating to Medical Malpractice.
Both acts contain significant changes touted as important and overdue tort reforms.
The acts addressed cases in which a “deep pocket” company is held responsible for an entire judgment, even if it accounts for a small share of the blame.
Previous tort law allowed a plaintiff to seek a full recovery from any one defendant so long as that defendant shared at least some blame in the plaintiff’s injury.
Called “joint and several liability,” it basically saddled the deep pocket company with the entire judgment, even if another defendant (presumably not a deep pocket company) was actually 99% responsible for the plaintiff‘s injuries.
New legislation now states that a defendant cannot be held liable for the whole judgment through joint and several liability if the defendant is less than 50% at fault.
The Legislature also took steps to shorten what is called the “statute of repose” for claims about construction defects.
This is different from the “statute of limitations,” which limits the time a plaintiff has to bring a suit to a certain number of years from the date the plaintiff learns of the claim.
A statute of repose limits the time to bring suit, regardless of whether the plaintiff knew of the claim. It essentially acts as an absolute cap.
The new law shortens this statute of repose from 13 years to eight years, thus protecting contractors from having to defend stale claims.
Many of the other major changes in the tort reform acts relate to malpractice actions against professionals.
For instance, the acts now state that before bringing an action against a professional (e.g., a medical doctor), the plaintiff must first acquire an affidavit from an expert supporting any allegations of professional misconduct. This is designed to filter out malpractice actions that lack merit.
Another key tort reform change is that “non-economic damages” in medical malpractice actions, more commonly known as “pain and suffering” damages, are now capped at $350,000 per claimant.
Other changes from these acts include a provision that attempts to strengthen the law regarding frivolous lawsuits and a provision that lowers the interest rate that can be applied after judgment.
The acts also place limitations on attorneys’ advertising and specifically address the use of nicknames that create an unreasonable expectation of results.
The acts also contain further changes in the law regarding venue, in large part mirroring the results of the state Supreme Court’s Whaley decision.
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