Research

Research

Though few realize it, forced arbitration clauses are endemic in today’s marketplace — hidden in credit card agreements, bank accounts, corporate social media pages, even Starbucks gift cards. More than half a billion arbitration provisions infiltrate our everyday lives. Forced arbitration is Corporate America’s Trojan Horse — a campaign dreamed up by a Wall Street coalition of banks and credit card companies to eliminate accountability. Despite their prevalence, few consumers are aware of the forced arbitration clauses they are bound to, and fewer still realize they have been stripped of their constitutional rights.

The dangers of traumatic brain injuries in sports have long been known, but it is only recently that widespread change in attitude to such injuries has taken hold, as the civil justice system has begun to hold sports leagues and school districts accountable. Through a small number of lawsuits, the civil justice system has driven the most radical change in the health care approach to athletes in the history of sports.

Every year, 48 million people fall sick, 128,000 are hospitalized, and at least 3,000 die from foodborne illnesses, costing the nation approximately $77 billion. And this is only the tip of the iceberg, as for each reported case many more go unreported. Salmonella, for instance, sickens 1 million people, hospitalizes 19,000, and kills nearly 400 every year, yet for every diagnosed case 29 more go undiagnosed. 

What makes an already imperfect situation intolerable are the frequent incidences of reckless negligence by food producers trying to cut corners. For example, the 2009 peanut scandal, in which executives allowed peanuts to be shipped with salmonella for three years, eventually killing at least nine people.

When food companies put profits before safety, and the regulatory system proves unable to force change, it has fallen to the civil justice system to protect consumers. Lawsuits have proven to be the most effective, and sometimes the only, mechanism for deterring negligent behavior. Research shows that litigation provides significant incentives toward food safety and deterrents against negligent conduct. 

GM’s fatal ignition switch scandal has once again brought the issue of automobile safety to the forefront. Like so many previous cases, a lawsuit has uncovered what is an unfortunately recognizable pattern: an automobile manufacturer discovers a defective design, but refuses to fix it because it puts profits over people.

In the latest case, GM recalled more than 2.6 million cars because of ignition switches that had a defect that allowed them to slip from the “on” position to the “accessory” position, shutting off engines, power steering, and brakes, and disabling airbags. Incredibly, GM knew of the fatal ignition switch defect as far back as 2001, but decided not to fix it because it would have meant adding a 57 cent part to the cost of each car. The danger was finally exposed by a lawsuit brought by a driver’s family. At least 13 deaths have been linked to the defect, though consumer advocates believe that number may be higher.

Litigation will ultimately play a key role in identifying what went wrong in the most recent safety issue—the GM ignition switch debacle. These findings will aid regulators and legislators in protecting the American public in the future. By holding manufacturers accountable, the civil justice system will continue to protect Americans, while spurring generations of safety innovations, as it has done for more than half a century.

The civil justice system is vital in holding negligent trucking companies accountable, and provides compensation to those killed or injured by unsafe trucks. However, archaic insurance rules undermine the economic incentives to safety provided by the courts. The insurance market itself is unable to function properly – offering lower premiums to safe companies and higher premiums to companies with dangerous histories – because outdated minimum insurance levels keep premiums artificially low for even the most dangerous companies.

Throughout modern history, women have suffered disproportionately from the effects of dangerous and defective drugs and medical devices.  Women take more medications than men, respond differently to them, and are more likely to suffer adverse drug events.  Because of the recent Riegel v. Medtronic (2008) and PLIVA, Inc. v. Mensing (2011) rulings by the U.S. Supreme Court, women injured or killed by dangerous drugs and medical devices may not be able to hold these manufacturers accountable.

Through its legal reform front group the Institute for Legal Reform (ILR), the U.S. Chamber has been at the forefront of a heavily-funded campaign toAAJ Report eliminate corporate accountability, even for massive violations of state and federal law. For decades, this has primarily revolved around high profi le PR campaigns to portray the civil justice system as beset by frivolous lawsuits. But where a billiondollar tort reform campaign has not succeeded in closing the courthouse door, its more stealthy compatriot – forced arbitration – has gone a long way to shielding corporations from accountability and replacing the courthouse altogether.

Take a moment to read the American Association for Justice's full report on how forced arbitration clauses are routinely hidden in the fine print of contracts and secretly abolish many of the safeguards the civil justice system provides.

During the early part of the last decade, many academics, insurance industry executives and policymakers were concerned with an apparent medical malpractice insurance crisis. The “crisis” appeared in the form of dramatic increases in physicians’ malpractice insurance premiums. News stories highlighted price hikes as high as 600 percent in one year.

In hindsight, it has become clear that despite the predominant storyline at the time, the crisis was not caused by an up swell of litigation. Claims severity – the average amount paid in medical malpractice claims – did increase during this time, as to be expected when such claims largely constitute medical costs that are subject to high levels of inflation. However, claims severity increased gradually, and not in a manner that would explain a sudden spike in claims costs. Moreover, claims frequency – the number of medical malpractice claims insurers were having to pay – actually decreased.

The Institute for Legal Reform (ILR), an arm of the U.S. Chamber of Commerce, has the sole mission of restricting the ability of individuals harmed by negligent corporations to access the civil justice system. According to the multinational corporations that finance ILR, American businesses are hindered by too many lawsuits. Yet these same corporations show no hesitation in liberally using the courthouse themselves.

Since 1980, the Medicare Secondary Payer (MSP) system has protected Medicare funds by ensuring that Medicare is reimbursed for costs that other entities have primary responsibility for paying. That system has become a poster child for inefficient bureaucracy. It is plagued with difficulties that range from posing inconveniences to causing genuine economic harm. Insurance companies, small businesses, municipalities and even other federal agencies have to spend millions of dollars to navigate MSP’s web of red tape. The system is so dysfunctional that even Medicare is harmed by its own bureaucracy, unable to recoup taxpayer dollars from people who are trying to give money back to the government.

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