On June 28, 2011, Pennsylvania Governor Corbett signed into law the Fair Share Act (“Senate Bill 1131”), which represents a significant shift in tort liability law in Pennsylvania. Under the Fair Share Act, when liability is attributed to more than one defendant, each defendant found to be less than 60% liable is responsible for only its proportionate share of the liability (with certain exceptions noted below). Five defendants found 20% liable would each be responsible for 20% of the verdict regardless of the ability to pay.
Pennsylvania Tort Liability Prior to the Fair Share Act
Prior to the enactment of the Fair Share Act, Pennsylvania followed joint and several liability. This concept meant that multiple defendants could be held jointly or separately liable for 100% of all damages owed to a plaintiff. Under this system, when a plaintiff obtained a judgment against multiple defendants, the plaintiff could require an individual defendant to pay the entire liability as long as the defendant was found to be at least 1% responsible. At first blush, that seems harsh. When you understand shell companies and intricate corporate maneuverings, however, the law makes perfect sense. The conventional wisdom behind joint and several liability was that Defendants would not escape liability through sophisticated and underinsured business maneuvers. Plaintiffs would be paid and a Defendant that paid more than its fair share of the judgment would seek compensation from those defendants who paid less than their portion. The innocent, injured victim would be paid and the business partners could fight their own battles.
Tort Liability Under the Fair Share Act
Under the Fair Share Act, defendants are now required to pay only their proportional share of liability, except in the circumstances listed below. Courts must now enter separate judgments in favor of the plaintiff and against each defendant for their apportioned amount of liability, rather than a single judgment covering all parties. A single defendant may still be required to pay the entire amount of damages under the following circumstances:
1. An action for intentional misrepresentation;
2. An action for an intentional tort;
3. Where the defendant has been held liable for 60% or more of the total liability;
4. An action over the release or threatened release of a hazardous substance;
5. An action concerning a violation of the Liquor Code.
In these situations, the prior law of joint and several liability applies and a single defendant can be forced to pay an amount of damages higher than their proportionate liability and that defendant is entitled to recover compensation from any other defendant who paid less than its fair share.
Additionally, defendants who became nonparties because of a release from the plaintiff may be brought back into the action for purposes of determining their respective share of the liability among all the other defendants.
Business groups such as the Chamber of Congress and insurance companies applauded The Fair Share Act. Governor Corbett publicly and proudly acknowledged that the new law is intended to benefit companies doing business in Pennsylvania because it may limit risk of liability for all damages in cases involving multiple defendants. Of course, there are no statistics or legitimate studies proving his assumptions. More troubling, however, is how the average citizen was misled into believing The Fair Share Act benefited them.
Consider this example of how the law works. Let’s assume there are two defendants racing down a highway who collide and critically injure a single working mother of three. Accident investigations clearly conclude that both drivers are each 50 percent at fault. Driver one has state minimum liability insurance of $15,000, Driver two is in a company car carrying $5,000,000 insurance. The parties all agree that it will take $ 7,000,000 to care for the quadriplegic mother and her children. Under the new “fair” law, the family will receive $15,000 from driver one and $3,500,000 from driver two. Who pays the balance of the $3,500,000? The victim is paralyzed and doesn’t have the ability to pay. Defendant two is protected thanks to Governor Corbett and the Chamber of Commerce.
So who pays? You guessed it. It’s you as a Pennsylvania taxpayer. The new law effectively transfers responsibility from corporate wrongdoers onto the shoulders of the taxpayer. Elected officials stating with a straight face that this law is beneficial to the citizens of Pennsylvania is an insult to the intellect of the populous. This law protects business and insurance companies and no one else.
Consider another example. You consent to have a surgical procedure performed a large regional hospital based, in part, on the fact that you see their commercials and corporate logo everywhere and you are confident in the hospital. You also believe the hospital is far more financially solvent than the small neighborhood hospital and, God forbid, if something bad happens the large hospital has the ability to pay for mistakes made. You have the procedure and things go very wrong in the post-op period. It is determined that the surgeon was 60% to blame and the hospital nurses were 40% to blame. Your damages are well in excess of $20,000,000. Under the new law that was touted as being good for you, you collect the $1,000,000 required insurance from the surgeon, $8,000,000 from the hospital and rely on the public to pick up the $12,000,000 shortfall. You also have the ability to pursue the surgeon personally, garnish his personal assets and force him into bankruptcy. Under this example, not a single individual (plaintiff nor defendant) was helped. The true recipients of the “fairness” of the new law were the large, wealthy regional hospital and its insurance company.
The legal principle behind the old joint and several liability rested upon the premise that defendants were in the best position to pay for the plaintiff’s damages. Now, under the “Fair” Share Act, injury victims may be under-compensated and the taxpayers will be forced to support the injured.
We suggest that Governor Corbett and the Pennsylvania Legislature invest in dictionaries and additional education because they certainly do not know the meaning of “fair.”