Save Virginia’s Collateral Source Rule

Share Button

thumbs_2-car-crash-1You’re driving south on Interstate 95 when you are suddenly rear-ended by a drunk driver. Your hospital bills will be high, your new car is totaled and it will be many months before you can return to work.  But when you sue the drunk driver for damages, he says he owes you nothing because you had health insurance, which covered your hospital bills, you were prudent enough to have collision insurance on your car and you also had disability insurance to pay you for the time lost from work.

For over two hundred years we have had a legal principle called the “Collateral Source Rule,” which prevented someone like the drunk driver from getting off scot-free just because the injured party was cautious enough to have insurance. But that Rule is under serious threat in Virginia.

The Collateral Source Rule is part of the ancient judge-made Common Law that the earliest colonists brought here from England.  The U.S. Supreme Court specifically recognized it at least as early as 1854.

Under the Collateral Source Rule, a wrongdoer, who the law sometimes calls a “tortfeasor,” is responsible for compensating the injured party for all the injuries and property damage he causes.  This remains so regardless of whether or not the injured party has insurance for his loss or whether his family, friends or employer help him to recover from the loss he has incurred. All these other sources, insurance, family, friends, an employer, are called “collateral sources” because they are not related to the wrongdoer; and the wrongdoer is not supposed to get any credit for any compensation or other help they may have provided.

The reasoning supporting the Rule is sometimes described like this: the defendant, whose negligence has injured another, owes to such other full compensation for the injuries he has inflicted and the payment for those injuries from a collateral source cannot relieve the defendant of his obligation. The wrongdoer cannot reap the benefit of an insurance policy for which he has not paid.

The Collateral Source Rule thereby serves to protect a fundamental principle in the law, which is that one who commits a wrongful act is responsible for all the damage caused by that act. That principle is essential to assure that the injured party is made whole financially for the loss caused by the wrongful act. It also protects society by discouraging wrongful acts by making sure that, one way or another, the guilty party will pay for them.  The Collateral Source Rule is also a lynch pin of consumer protection because it prevents companies from avoiding responsibility for the harm caused by defective products simply because the consumer that got hurt had insurance.

In Virginia, the Rule is both a rule of evidence, that is, whether you have insurance is not supposed to be admitted in evidence in your suit against the wrongdoer, and a rule of damages. This means that the compensation to which you are entitled is not reduced by anything your insurance company may have paid you.

Perhaps, some people might think that allowing the injured party to have his hospital bills paid by his health insurance carrier and then recovering for the injury from the wrongdoer was a kind of windfall or double recovery for the injured party.  But our Virginia courts, as well as those elsewhere, have rejected that notion.  For example, in a 2000 case called Acuar v. Letourneau, the Virginia Supreme Court said: “To the extent that such a result provides a windfall to the injured party, we have previously recognized that consequence and concluded that the victim of the wrong rather than the wrongdoer should receive the windfall.”

But the Collateral Source Rule is under heavy attack from “ATRA,” American Tort Reform Association, a group of chemical, tobacco, drug and insurance companies, who would like to save themselves some money. Flying under the flags of “tort reform” and improving public policy, members of this self-serving special interest group would simply like to be relieved of their current financial responsibility for harm caused by defective products. Joining them are defense lawyers who service clients who would also like not to have to pay for the injuries they cause.

In a recent 2014 case from neighboring West Virginia, called Kenney v. Liston, a drunk driver seriously argued that he should not be financially responsible for injuries he caused because the injured party had health insurance that paid the medical bills and that the drunk driver should also get the benefit of the reduced costs the health insurance company had negotiated with various health care providers.

Unfortunately, such attacks on the Collateral Source Rule are not uncommon and have gained some ground here in Virginia.  In a 1988 case called Schickling v. Aspinall, our Supreme Court went way out of its way to call the Collateral Source Rule into question. In a footnote to its opinion it said that, “arguably,” the balance is upset and the logic underlying the Collateral Source rule “is defeated when the wrongdoer is insulated by insurance from liability for his wrong and the plaintiff’s insurer is entitled, by way of subrogation, to the plaintiff’s right of recovery against the tortfeasor.” What this means is that, perhaps, the Collateral Source Rule prohibiting the wrongdoer from getting credit for the injured party’s insurance should not apply where the wrongdoer is also insured and the injured party’s insurance company has the right to be “subrogated,” paid back, for anything it has laid out for the injury.

The footnote is highly unusual because courts are not supposed to speculate, but only to keep their opinions narrowly focused on the case they are deciding. It’s also oddly out of touch with reality because, with the exception of health insurance, almost all insurance companies are always “subrogated,” entitled to be reimbursed for the payments they have made to their insureds from the insureds’ recovery from the wrongdoer. So, the possible exception that the Court was thinking about would actually occupy a huge amount of Collateral Source Rule territory.

Ignoring the principle of judicial restraint, manufactured entirely out of whole cloth and apropos of nothing, our Court has already wondered aloud whether the Collateral Source Rule should apply when an injured party’s insurance policy contains a subrogation clause, which almost all insurance policies, except health insurance policies, do.

Fortunately, many courts have rejected the ATRA-led invitation to abrogate the Collateral Source Rule and relieve wrongdoers of their responsibility to compensate injured victims. Addressing the very issue raised by our Supreme Court as to whether the rule applies if the injured party’s insurance policy has a subrogation clause, Oklahoma, in its Dippel v. Hunt case says, “Actually when the smoke of controversy clears away much can be said for the notion that it is really none of the tortfeasor’s concern what rights might exist between the tortfeasor’s victim and the latter’s own insurance carrier.”

Kansas, in its Southard v. Lira case, says that the Collateral Source Rule is “not affected by the fact that the insurer is entitled to be subrogated to the rights of the insured, as against the tortfeasor, or to recover back from him the amount he recovers.” Kentucky, in its Schwartz v. Hasty case, similarly says that “any agreements concerning subrogation rights between the insured and insurer are of no consequence or concern of the tortfeasor except to avoid his subjection to double recovery exceeding the amount of tort damages.”

It can only be hoped that when an appropriate case reaches the Virginia Supreme Court it will join Oklahoma, Kansas and Kentucky in holding that the Collateral Source Rule continues to apply regardless of what’s in the injured party’s insurance policy and reject ATRA’s efforts to abrogate the Rule, which has provided just compensation to injured parties and enforced responsibility against wrongdoers since the founding of our Republic.

jay-burton  Email this author

Facebook Comments
Posted in Regulation, State Government | 1 Comment

Can Atlanta’s East Lake Experiment Work in Virginia?

Share Button

drew_charter_schoolIt is axiomatic among social scientists that concentrating poor people in public housing projects accentuates the social pathologies that make poverty self-perpetuating and unbearable. The oft-touted solution is to create more mixed-income neighborhoods that de-concentrate poverty. Presumably, the presence of working- and middle-class households people would moderate the anti-social behavior of the poor. There’s just one problem: While the poor perceive mixed-income neighborhoods as beneficial, the non-poor do not. Typically, the non-poor flee poor neighborhoods associated with crime, poor schools and disorderly behavior.

How, then, does one develop mixed-use neighborhoods? The answer, according to Carol R. Naughton, president of the not-for-profit Purpose Built Communities: The developer needs to partner with allies who can provide amenities — grocery stores, recreational amenities, and above all else good schools — that make a neighborhood attractive to the non-poor.

“Poverty and place are tied together,” said Naughton Tuesday when addressing the Richmond chapter of the Urban Land Institute. Neighborhoods of concentrated poverty are “swamps” that breed inter-generational poverty that children can’t escape from. Changing the “place” can change the dynamic of poverty.

Naughton came to the view that developers can make a difference when working with the Atlanta Housing Authority. Her aha moment came when meeting Tom Cousins, a mega-developer and philanthropist with grand designs for repairing East Lake Meadows, a community dominated by public housing projects where the crime rate was 18 times the national average and the employment (not unemployment) rate was 12%.

Working through the East Lake Foundation, Cousins targeted 175 acres in East Lake Meadows to build mixed-use housing. But his approach differed from that of other such projects in several regards.

First, East Lake found people to start a charter school. The Atlanta Board of Education was too broken to help, said Naughton, but the George legislature had just passed a charter school bill. Second, upon the advice of local residents, mixed-use housing was limited to people who worked. Third, the foundation developed key partnerships: with the YMCA to build a community facility, with Publix to build the first grocery store to serve the area in 40 years, and with two Atlanta banks to put branches in the neighborhood. Fourth, the foundation morphed into a “community quarterback” pushing a vision for community wellness and cradle-to-college education.

Each element of the plan was important but the charter school proved decisive, Naughton said. In its first year, the school was the worst-performing school in Atlanta. But it improved year after year, and 20 years later now stands as one of the top schools in the city. “Our kids can compete against anybody, against the wealthiest kids in the city,” she says. “We’re serving more low-income kids than any other school in the community.”

The result is transformational, she said. “Now East Lake is an education destination. People want to live there. It’s a great neighborhood for kids.” Middle-class families are moving into the neighborhood. Indeed, the lure of the charter schools is driving revitalization of neighborhoods beyond the original project.

Naughton is not a big fan of the department of Housing and Urban Development. “HUD confuses funding streams with programs,” she says. Programs take more than money. They require local leadership to put it to good use. She believes that the backing of an entity like the East Lake Foundation, with a high-powered and well-connected board, is a critical ingredient to success.

The East Lake redevelopment model has proven so successful that it is being replicated by the Bayou Foundation in New Orleans, and Naughton runs her own organization, Purpose Built Communities, to work with dozens of other initiatives around the country.

Bacon’s bottom line: Even allowing for the fact that Naughton is a cheerleader for the East Lake project, the concept sounds enviably successful — certainly successful enough that it’s worth a try in Virginia. Could the concept work here? The biggest obstacle likely would be the hostility of Virginia’s educational establishment to charter schools. On the other hand, here in the Richmond area at least, there are dozens of entities — Tricycle Gardens and its community farms, Bon Secours and its community hospital, and the vibrant Communities in Schools program — that would make natural partners.

I am amazed by the number of Richmonders who are actively engaged in trying to ameliorate the concentrated, inter-generational poverty in the city’s East End. There is much good will, and there are many great anecdotal stories, but I don’t see much traction in actually vanquishing poverty. Perhaps the missing elements are a purpose-driven real estate developer and community foundation dedicated to building a physical community and institutions to support it.

(This first ran in Bacon’s Rebellion on June 22, 2016)

bacon-90Email this author

Facebook Comments
Posted in Education | Leave a comment

New Survey Research on Autonomous Vehicles

Share Button

Koala-front2-180x180I continue to be concerned about visions of an autonomous vehicle future based not only on the impressive capabilities of fully (level 4) self-driving cars but also of fleets of robotaxis replacing personal vehicles. These would, indeed, be major changes. But how soon large numbers of people will accept such vehicles, and whether they will own them or purchase “mobility as a service,” will make an enormous difference in the outcome.

We are just starting to get serious survey research data on what people think about an AV future, and the results are sobering. Fairly detailed survey research was released in April by the Texas A&M Transportation Institute: “Revolutionizing Our Roadways: Consumer Acceptance and Travel Behavior Impacts of Autonomous Vehicles.” TTI conducted the survey in the Austin, Texas metropolitan area—a far more representative location than often-studied New York City or Singapore. The study objective was “to gather empirical evidence on consumer acceptance and adoption: the factors associated with the intention to use, how that intention might influence mode choice and vehicle ownership decisions, and what all this could mean for travel demand and congestion.” The researchers did an online survey of 556 residents and followed up with in-person interviews with 44 participants.

Interestingly, respondents were split just about 50/50 on intent to use AVs, and nearly two-thirds described themselves as late-adopters of new technology. In addition, concern about data privacy was negatively correlated with intent to use AVs. When broken down by people’s current commute mode, 52% of those who currently drive to work were unlikely to be AV adopters, while 57% of those who walk, bike, or use transit were likely adopters. And while there was some correlation with age (younger people more likely, older ones less likely), the researchers found that psychological and behavioral traits were better predictors of AV adoption than demographics.

When it comes to travel behavior, 59% said that if they went with an AV, they would want to own it, compared with 41% favoring use of a shared on-demand vehicle. Interestingly, when asked to speculate on how the advent of AVs would affect the total number of vehicles owned by their household, 61% said no change, 23% said fewer, and 16% said more. On estimating the impact on their amount of travel, 66% expected the same annual VMT, 25% expected an increase, and just 9% expected a decrease. And when it came to the location of their residence, 80% expected no change, with most of the rest expecting to move farther out than their present location.

Drawing on these results, the TTI researchers then made use of the travel demand model of the local MPO, CAMPO. They tweaked a few parameters based on the idea that AVs would make travel time less onerous, ran the model, and compared the results with the status quo. The three main findings were a small increase in daily VMT, an increase in total auto trips, and less transit use. That is a long way from the utopian vision of a society where people have given up personally owned vehicles for mobility as a service, have relocated into high-density urban cores, and use transit or robotaxis for most of their trips.

These Austin, Texas results are broadly consistent with some recent international findings. In March 2015 the CityMobil 2 project in Europe convened transportation experts from the United States, Europe, Japan, and Singapore in La Rochelle, France to discuss the potential impact of AVs. After much discussion in various sessions, the experts were polled about the long-term impact of AVs in four different urban settings and for both individually-owned and robotaxi scenarios. As reported by Bern Grush and John Niles, “The direction of the responses point to more [VMT], lower vehicle occupancy, and lower ownership.” And because in most countries VMT will be increasing for demographic reasons (wealth and population), AVs “would likely make the growing problem of congestion a bit worse still.”

(This article first ran in the June 2016 issue of Surface Transportation Innovations)

Email this author

Facebook Comments
Posted in Transportation | Leave a comment

Why Iowa Farmers Should Win Drainage Case

Share Button

(Editor’s note: articles such as this are run in the Jefferson Policy Journal because the outcome of lawsuits such as this will have an impact on Virginia since the outcome will encourage or discourage similar actions.)

map-iowaThe Des Moines Water Works (DMWW) federal case is coming to a close. DMWW sued Sac, Calhoun, and Buena Vista Counties in Iowa, as trustees of numerous Iowa Drainage Districts. After the complaint was f
iled by DMWW, the Counties sought summary judgment in federal court regarding the Clean Water Act (CWA) issues. The U.S. District Court referred the common law issues to the Iowa Supreme Court for review and decision. The CWA claims are now fully briefed.

The Drainage Districts filed their reply brief on May 31, 2016. It is a homerun. Regarding jurisdiction issues, the Drainage Districts brief destroys DMWW’s claims. First, the districts describe how there is no jurisdiction for the Court to order a drainage district to resolve an issue where it has no power to resolve that issue. Second, the Drainage Districts point out DMWW sat on its hands for 44 years and did nothing regarding permits for tile drainage discharges. The killer argument the brief makes is “…everyone including Congress, the Environmental Protection Agency…the Iowa Department of Natural Resources…and every single state in the Union with drainage tile makes [it] clear NPDES permits are not required for drainage tile.”

Notwithstanding these facts, the bloviating director of DMWW claims he knows better than everyone else “…is a majority of one.” No, really.  In an answer to a question, the DMWW director responds that DMWW is a majority of one and his rate payers are a majority of one. He claims he is correct and everyone else is wrong in interpreting the CWA.

The Drainage Districts and their law firm actually demonstrate to the court that DMWW’s arguments are in conflict with 44 years of consistent interpretation. The brief actually reviews the CWA’s legislative history and cites to EPA documents which declare EPA has never required NPDES permits for drainage tile. On page 18 of the Drainage Districts’ brief, a thorough discussion begins describing how Congress placed agricultural runoff under State control in 1972.

A real surprise
In a real surprise, the Drainage Districts’ law firm cites a December 5, 1975 Federal Register which describes Congress’ understanding that agricultural runoff is considered to be “…a problem of significant magnitude, [and] Congress believed that technological solutions were not available…” The Drainage Districts’ lawyers found in old Federal Register documents with more interesting language. “Agricultural and silviculture runoff as well as runoff from city streets, frequently flows into ditches or is collected into pipes before being discharged into streams. EPA contends that most of these sources are nonpoint in nature and should not be covered by the NPDES permit program.”

Again this quote comes from a Federal Register document.

If DMWW and its attorneys had done their homework, they would know that EPA has rejected all suggestions that agricultural runoff discharged through ditches, pipes or culverts be regulated as a point source.

More astonishing is the Drainage Districts and their law firm found legislative history from the CWA amendments from 1987. Sen. Robert Dole, R, KS, articulated the argument that runoff from agricultural areas present a serious problem, but the 1987 amendments encouraged the states to manage nonpoint sources and set timetables for meeting cleanup goals. The 1987 CWA created a new state program to address nonpoint sources of agriculture pollution. The brief describes the fact that Section 319 “…allows regulatory and other control programs to be run by the state.”

Others defending agriculture in the courts have assumed Section 319 is “merely “a demonstration and grant program meant to assist farmers. Senator Dole made clear that Section 319 programs “…will target critical areas, identify nonpoint sources and set timetables for program implementation.” The Congressional Record on January 6, 1987 describes that “Congress expressly left agricultural land in the nonpoint category regulated by state programs – now Section 319.” The Drainage Districts’ brief hammers DMWW in listing EPA documents and state documents from California, Wisconsin, North Dakota, Indiana, and Minnesota which all declare with EPA approval “Agricultural activities that cause [nonpoint source] pollution include …tile drainage…”

As you can see, DMWW is attempting to overturn decades of established regulations and case law. Now you see why the farmers should win.

(This article first ran in Farm Futures on June 13,2016.)

Email this author

Facebook Comments
Posted in Agriculture | Leave a comment

More Job-Killing Rules From The EPA

Share Button

What is Ag Stormwater & Is It Regulated?

Having already done yeoman’s work stifling economic growth and job creation, President Obama’s Environmental Protection Agency is doubling down again.

The United States created a paltry 38,000 new jobs in May: one for every 8,000 Americans. Its labor force participation rate is a miserable 63% – meaning 93 million Americans are not working, while 6.4 million more are trying to feed their families on involuntary part-time positions and a fraction of their previous salaries. Manufacturing lost another 20,000 jobs in May, as the economy grew at an almost stagnant 0.8% the first quarter of 2016. Middle class family incomes and net worth continue to slide.

Meanwhile, well-paid federal bureaucrats increasingly regulate our lives, livelihoods and living standards, hand down fines and jail terms for some 5,000 federal crimes and 300,000 criminal offenses, and inflict $1.9 trillion in annual regulatory compliance costs on families and businesses.

EPA’s war on coal has already cost thousands of jobs in mines, power plants and dependent businesses. Low oil prices amid a tepid, over-regulated, climate-fixated, crony-corporatist American, European and international economy have already killed thousands of US oil patch jobs.

On June 3 EPA issued more rules: methane emission standards for new and modified oil and natural gas drilling, fracking, pipeline and other operations. Under steady environmentalist pressure, it may be only a matter of time before the agency covers existing operations – and maybe even livestock, rice growing, landfills, sewage treatment plants and other methane-emitting activities.

The agency justifies these new job-killing rules by citing something it calls the “social cost of methane,” which is patterned after its equally arbitrary, speculative, infinitely malleable “social cost of carbon.” (Carbon, of course, actually means carbon dioxide – the miracle molecule that enables plant growth and makes all life on Earth possible.) Both the SCM and SCC are needed, EPA insists, to prevent dangerous manmade global warming and climate change, which it claims are driven by these two trace gases.

EPA’s methane claims are absurd. Methane emissions from US hydraulic fracturing operations have plummeted 79% and from the overall US natural gas sector by 11% since 2005.

Moreover, methane is a tiny 0.00017% of the atmosphere, the equivalent of $1.70 out of $1 million. According to the Intergovernmental Panel on Climate Change, 17% of that is from energy production and use; 26% comes from agriculture, landfills and sewage; and the remaining 57% is from natural sources. (Carbon dioxide, the other climate bogeyman, is 0.04% of the atmosphere – 400 ppm.)

The United States accounts for a mere 9% of the world’s total manmade methane – and just 29% of that is from oil and gas operations that provide 63% of all the energy that powers America. That means US oil and gas account for less than 3% of global manmade methane emissions – and thus just 0.000004% of all the methane in Earth’s atmosphere. That’s equivalent to 4 cents out of $1 million!

EPA insists that this undetectable amount will cause a global climate catastrophe, and forcing the oil industry to spend billions of dollars to reduce its already minimal methane emissions will bring billions in health and environmental benefits via climate change prevention. It says methane is 23 (or 28 or 35) times more potent than carbon dioxide as a greenhouse gas, and the USA must lead the way. What nonsense.

The atmosphere contains 235 times more carbon dioxide than methane – so this “ultra-potent” greenhouse gas will have only 10-15% of CO2’s supposed global warming power. The US petroleum industry’s contribution is utterly meaningless, especially compared to the solar, oceanic, cosmic and other powerful natural forces that have driven climate change throughout Earth and human history.

Of course, EPA’s shenanigans don’t end there.

The agency’s “social cost of methane” calculations rely on arbitrary 2.5, 3 and 5 percent “discount rates” that supposedly quantify the present value of future regulatory benefits, derived from preventing climate chaos 20, 50 or 100 years from now. The rates yield miraculous compounded benefits up to $1,700 per ton of methane emissions prevented by 2020 to $3,300 per ton by 2050. They could bring up to $550 million in alleged health benefits by 2025 – for “only” $330 million in oil industry costs.

But if EPA had used the 7% discount rate required under Office of Management and Budget guidelines, the supposed benefits would plummet to only $259 per ton by 2020. Naturally, EPA didn’t use that rate.

Even more dishonest, as it did for its “social cost of carbon,” EPA’s analysis incorporates virtually every conceivable “cost” of methane emissions and thus alleged “dangerous climate change” – to agriculture, forestry, water resources, “forced migration” of people and wildlife, human health and disease, rising sea levels, flooded coastal cities, ecosystems and wetlands harmed by too much or too little rain, et cetera.

But it completely ignores every obvious and enormous benefit of using oil and natural gas: generating reliable, affordable electricity for lights, heat, air conditioning, computers, electric vehicles and countless other applications; manufacturing fertilizers, plastics, paints and pharmaceuticals; and even reducing CO2 emissions by replacing coal in electricity generation. EPA also ignores the real, obvious and enormous health impairment from millions more people rendered unemployed, poor and unable to heat their homes.

That is the critical point. But almost as important, the alleged, exaggerated, computer-conjured and illusory benefits from these SCM regulations accrue to the world as a whole – while the very real costs are incurred solely by American companies, consumers and taxpayers. EPA doesn’t mention that.

And to top it off, the mandated reductions in US methane emissions will be imperceptible amid the world’s enormous and rapidly increasing oil, natural gas and coal production and use. In fact, 59 nations are already planning to build more than 1,200 new coal-fired power plants – on top of what they and developed nations are already building.

China, India, Russia and Europe together emit more than five times the methane that the USA does, and the world just set new oil and natural gas consumption records. In fact, the net increase in petroleum consumption was 2.6 times the overall increase in renewable energy use.

Indeed, fossil fuels now account for 79% of total global energy consumption – compared to 0.7% for wind and solar energy combined. The much-touted figure of 19% global renewable energy cleverly hides the fact that 68% of that consumption total is wood, animal dung and hydroelectric energy. Even more astounding, wood and dung account for 13 times more energy worldwide than wind and solar combined!

India has said it will not ratify the Paris treaty anytime soon, and will continue using fossil fuels to bring electricity to people and businesses and improve living standards. Meanwhile, renewable energy spending fell 46% in Germany and 21% overall in Europe in 2015 from the previous year.

EPA’s SCC and SCM scam underscores the religious dogma that drives the Obama Administration’s climate change agenda and ideological determination to end hydrocarbon use in America. Perhaps worse, presidential candidate Hillary Clinton has bragged about putting still more coal miners out of work. She has also said she would ban drilling on all onshore and offshore public lands, and regulate fracking into oblivion on state and private lands. Senator Bernie Sanders will almost assuredly push her and the Democratic Party even further to the Left on energy policies.

These policies would put even more Americans out of work, landing them on welfare rolls and forcing them to depend on unsustainable government handouts that rely on taking more money from an ever-shrinking workforce. Americans would have to get used to the idea of having lights, AC and computers when increasingly expensive electricity is available – instead of when we need it. What a depressing future that would be for our children and grandchildren.

Email this author

Facebook Comments
Posted in Agriculture, Environment | Leave a comment