The U.S. Chamber of Commerce’s Institute for Legal Reform ranks Kentucky 40th among the states in the fairness of our litigation environment, down from 29th in 2008.
The Pacific Research Institutes’s Tort Liability Index ranks states on two sets of variables: output variables that affect tort liability, such as monetary tort losses and litigation costs, and input variables, such as award caps, substantive-law rules and procedural and structural items. Kentucky ranks 43rd for input variables and 36th for output variables in the study.
At the Kentucky Chamber of Commerce, we know that the entrepreneurial spirit is alive and well in Kentucky, but it is increasingly confronted with a litigation environment that is costing every Kentuckian an estimated $880 a year and driving up the costs of virtually every product or service we buy.
Frivolous and speculative litigation is expensive and a drain on the economy. Businesses would rather pay employees than lawyers, yet the ILR estimates that American small businesses spent $105.4 billion in 2008 on lawsuits, the very businesses that we depend on to create most of the jobs in Kentucky and the U.S.
Extendicare Health Services’ decision to lease all of its nursing centers in Kentucky and leave the state is just one example of how the litigation environment can impact a particular industry and the state’s economy as a whole.
In making the announcement, Tim Lukenda, president and CEO of Extendicare’s parent company, said that “the combination of a worsening litigation environment and the lack of any likelihood of tort reform in the state of Kentucky has made this the prudent decision for our company.”
An Aon Risk Solutions study released since the Extendicare announcement further illustrates the challenges facing long-term care facility operators. The Aon study examined loss rate trends, frequency and severity of litigation and Medicaid reimbursements rates related to liability costs. Aon’s independent analysts concluded that Kentucky’s long-term care liability costs are three times higher than the national average, despite the fact that Kentucky’s long-term care facilities rank above the national average for quality of care.
If we are going to begin the process of improving Kentucky’s reputation for having a poor litigation environment, we must look to lawmakers to support common sense solutions like a screening process for health care related cases.
Without change, I fear that there are more Extendicares in Kentucky’s future.
At our annual Business Summit in July, the Kentucky Chamber of Commerce released a comprehensive review of the key elements we believe make up the Commonwealth’s business climate with recommendations for steps we can take to improve our ability to attract news jobs and investment.
Among dozens of specific recommendations included in the “Ready for Jobs?” report are several that would improve Kentucky’s legal environment (you can download the report at kychamber.com/jobs). State and local wage mandates, safety regulations and other standards should not exceed federal requirements.
Kentucky should adopt reasonable limits on civil liability and permit caps on non-economic damages. Businesses challenging state actions should be allowed to file suit in the circuit court in the county in which they are located. There should be a two-year statute of limitations on wrongful termination or discrimination cases arising out of an employment relationship.
These recommendations represent common sense improvements that would deny no one his or her day in court or reasonable compensation for loss. However, they would go a long way to improving Kentucky’s reputation for having one of the worst legal environments for business in the nation.
Dave Adkisson is president of the Kentucky Chamber of Commerce.