The ProJo 7-to-7 blog has picked up an Associated Press report saying that Matt Brown has officially dropped out of the Rhode Island Democratic Senate primary.
[Open full post]The first two parts (part 1, part 2) focused on the how-we-got-here part of the Beacon Mutual story. This part will focus on the where-we-are and the what-we-should-do.
1. Without unnecessarily disparaging Beacon Mutual�s initial generation of leadership, it must be understood that the creation of Beacon Mutual was not the most important part of reforming the workers’ compensation system in Rhode Island. There’s no way any single insurance company could have driven the major reforms that Governor Sundlun reported as early as 1994, unless you assume that the insurers who had been previously operating in Rhode Island were really eager to give their money away.
It was changes applied directly to state government — in the legal system and the bureaucracy, relating to claims processing and assessment — that allowed the functioning of a reasonable workers’ compensation system in Rhode Island. Beacon stepped into the reformed environment and performed, at least at the beginning, competently or better. But if Beacon were broken up, sold, liquidated, or otherwise changed in some way, other insurers could now step into the breech, and become as profitable as Beacon has been, minus the state subsidies. Beacon Mutual doesn’t have magic powers.
2. The most obvious reform now needed is the repeal of the 1996 law that eliminated the concept of the “residual” market and subsidized all of Beacon Mutual’s business through a tax break and an exemption from having to pay into the state�s insurance insolvency fund.
If this change occurred, one of two things would happen. We might see that the legal and bureaucratic reforms had completely eliminated the need for a residual workers’ compensation market — that a combination of Beacon Mutual and other insurers could now voluntarily cover everyone. Then we could move on to a discussion of whether Beacon should be fully privatized.
Alternatively, we might see some portion of employers still unable to enter into voluntary deals for workers’ compensation insurance. In that case, Beacon would write the policies for these employers using its residual market subsidies to offset the higher risks it was taking on. And Beacon would continue to pay a “price” for its subsidies in the form of an additional layer of government oversight.
I suspect the second outcome is the more likely one, though hopefully we wouldn’t see 90% of Rhode Island employers forced into the residual market as they were in the early 1990s.
3. I still can’t quite figure out exactly who gets rich in a privatization deal, and how they would do it. I know that some people suspect that this was the master plan all along. However it works, if the state is separating itself from something of value, it should do so through a sale and not a giveaway.
4. Rhode Island’s insurance insolvency fund is in trouble — it is itself insolvent — because of the exemption granted to Beacon Mutual. In essence, the insolvency fund has been raided to provide subsidies to Beacon. Now, according to the Projo, the non-Beacon 24% of the worker’s compensation market paying into the insolvency fund cannot provide enough to cover current costs…
The state’s insolvency fund was allowed to borrow up to $14 million a year from Rhode Island auto insurers to finance an anticipated shortfall of nearly $1 million in its workers’ compensation account under the compromise bill. The provision would last until the end of 2005; the bill also sets up a study commission to look at the issue.There are a few questions about the insolvency fund in need of answering. If the fund was already short in 2004, and Beacon is still not contributing to it, where does the fund get the money to pay a “loan” back? Doesn’t the current state of the fund mean that Rhode Island is just one small-time Joe Mollicone (a Molliclone?) away from a RISDIC-type disaster in workers’ compensation insurance? And, with no backup to Beacon Mutual, isn’t Rhode Island already back in the same position it was in 1991, where a single company could throw the entire system into chaos? [Open full post]
Insurance companies must contribute a portion of their annual premiums, up to a maximum of 2 percent, to the fund. But the state’s largest insurer, Beacon Mutual Insurance Co., which has 76 percent of the Rhode Island workers’ compensation insurance market, is not covered by the fund and therefore does not contribute.
A new Rhode Island College poll indicates that Senator Chafee holds a comfortable lead in both the GOP primary and the general election:
Chafee would beat challenger and Cranston Mayor Stephen P. Laffey 56 percent to 28 percent in the Republican primary. For that question, the poll sampled 107 people who said they would vote in the Republican primary. Because the sample is smaller, the margin of error rises to 9 percentage points.
The results of the Democratic primary were not as clear cut, though former Attorney General Sheldon Whitehouse leads a three-way field with 37 percent. He is followed by Secretary of State Matthew Brown, with 21 percent, and Carl Sheeler, 8 percent. The margin of error for the Democratic primary is also 9 percentage points, with 117 people who said they would vote in the Democratic primary sampled.
But the poll indicated the outcome of the Democratic primary may be academic: Chafee would beat Whitehouse 51 percent to 32 percent and would beat Brown 53 percent to 28 percent. That is based on the full sample, with the 5-percentage-point margin of error.
Similarly, Laffey would lose, regardless of his Democratic opponent. Brown would win 48 percent to 29 percent and Whitehouse would win 50 percent to 27 percent.
This is the first public poll that attempted to sample for the GOP primary and–in that light–it’s interesting to note that the percentage of support for Senator Chafee and Mayor Laffey are consistent for both the GOP primary and the general election. This is good news and bad news for Mayor Laffey. Mayor Laffey has a solid 28-30% core both within the GOP and statewide, which means he is appealing to some independents out there. Nonetheless, the bad news far outweighs the good for Mayor Laffey. He still has some work to do to appeal to the GOP primary voters, whether they are Republican or not.
UPDATE: Here is a link to the actual poll document from the RIC Bureau of Government Research and Services (PDF).
Here are some of the interesting internals:
45% of the respondents were male
55% of the respondents were female
(For below, Dem=Democrat Primary Voter, Rep-Republican Primary Voter)
East Bay – 10% of total, 9% Dem, 10% Rep
Western RI – 5% of total, 2% Dem, 4% Rep
Blackstone Valley – 16% of total, 19% Dem, 16% Rep
Providence Metro – 34% of total, 32% Dem, 33% Rep
Providence – 11% of total, 22% Dem, 4% Rep
Washington County – 13% of total, 10% Dem, 19% Rep
Newport County – 10% of total, 6% Dem, 14% Rep
I report……
At the behest of Congress, President Bush has offered a few solutions to the current gas crisis, including an investigation into whether the oil companies have engaged in price gouging. This last lays at the heart of the current debate. Bill O’Reilly certainly chalks it up to a sort-of-conspiracy and is particularly suspicious of the oil futures market, which he believes is probably the biggest factor in determining the price at the pump. Here’s how the oil futures market works.
Gasoline retailers determine the prices they charge, but they often take their cue from the price of crude and gasoline that’s reached at the New York Mercantile Exchange. Oil and gasoline producers sell their products at the exchange so they can lock in a price months before they’re ready to deliver it. Speculators take the risk that prices will drop between the time the oil or gas is sold and when it is actually delivered, but reap the reward if prices rise. Through these active futures markets, benchmark prices are determined for crude, gasoline, heating oil, natural gas and other commodities.
O’Reilly explains:
Gasoline supplies are at an eight-year high according to OPEC. There is plenty of gas selling on the open market, more than enough to meet the worldwide demand.
So rising gas prices are not a supply-and-demand issue.
What the American oil companies are doing is exploiting the uncertainty in the world. Every time the nutty Iranian government threatens to kill the Jews or the Americans or whoever, speculators bid up the paper price of a barrel of oil.
These speculators operate in the so-called commodities markets. They gamble on where the price of oil and other tangible assets will be months from now. These Vegas-type people sit in front of their computers and bid on “futures” contracts.
Every time the oil company executives, guys like Lee Raymond, see these people bidding up oil “futures,” they order their retail gas station owners to jack up prices to you. Supply and demand? — my carburetor, this has nothing to do with the free market.
Mac Johnson counters O’Reilly and traces the real rise in price as being a rise in the price of crude oil due to normal supply-and-demand economics. The free-marketer in me is inclined to side with Owens.
But I do often marvel at how quickly gas stations raises prices on the news of an increase in price on the futures market and how slow they are to lower it when the price on the futures market decreases. When the price goes up, they explain, it’s because, well, the price is going up and they need their prices to reflect that. But when the price goes down, well, you see, they have to sell the inventory at a price so they can still make a small profit.
That being said, in addition to the long term benefit of developing alternative energy sources, the real short-term solution is to expand the area in which we can drill domestically (ANWR and other federal lands), thus making us less dependent on foreign–and more unstable–sources of oil.
The key event in the transformation of Beacon Mutual from the Rhode Island’s workers’ compensation insurer of last resort to a virtual monopoly occurred in 1996. That year, the state legislature acted to block private workers’ compensation insurers from returning to Rhode Island. (For part 1 of the story, click here.)
In the early 1990s, Rhode Island reformed its workers’ compensation system in two ways. First, the state reformed the administrative and legal practices governing worker’s compensation claims. In a very short period of time, the amount of compensation awarded by Rhode Island, which had been amongst the highest in the nation, fell into line with national averages. Second, the state created the Beacon Mutual insurance company to fill the void left by several large insurance companies who had departed from Rhode Island because they were unable to do business under the strain of losses incurred under the old workers’ comp system.
The success of Beacon Mutual showed that it was possible to turn a profit selling reasonably priced workers’ compensation insurance in Rhode Island under the new rules. Private insurers who had left the state prepared to return.
The state legislature, however, wasn’t overly keen on allowing back the insurers who had left the market. Legislators claimed they didn’t want the state to find itself in the position it had found itself in at the end of 1991 when a decision by a single out-of-state company could — and did — throw the entire workers’ compensation system into chaos. There was also probably a punitive attitude involved; legislators didn’t feel compelled to roll out a red carpet for insurance companies who had abandoned Rhode Island in a time of crisis.
Whatever the reason, on May 29, 1996, the state legislature changed the nature of Beacon Mutual, insulating the company from competition. The original concept behind Beacon Mutual was that the state needed to provide some compensation to the insurer that would be taking on the employers that no private insurers were willing to take on. The competitive advantages granted by the state — a tax break and an exemption from paying into Rhode Island’s insurance insolvency fund — would offset the higher costs of providing policies to high-risk employers.
The 1996 changes to the law erased the distinctions between Beacon Mutual’s clients. Beacon’s policyholders would no longer be divided into a “voluntary” pool of employers able to shop for insurance with other companies and a “residual” pool of employers unable to make a deal with a private insurer because their businesses were considered high-risk. The tax breaks and insolvency fund exemption, originally applied only to Beacon’s residual pool policies, would now apply to all Beacon Mutual policies.
The 1996 changes virtually guaranteed that Beacon could always charge lower prices than its competitors for the same insurance product. Private insurers had to subtract taxes, insolvency fund payments, and administrative costs from their premiums before banking reserves. Beacon Mutual had only administrative costs to subtract. As a result, private insurers had to charge higher rates in order to offer coverage equal to Beacon’s, restricting their ability to compete; what Rhode Island employer would want to pay a private insurer for the same coverage they could get from Beacon Mutual at a lower (because subsidized) rate?
Of course, we know now that Beacon Mutual didn’t use its advantages purely to lower its rates. Beacon set its prices just low enough to discourage competition, while still building up more money than needed to run an honest insurance business. Beacon Mutual used its advantages in state subsidies to pay for things like a sweetheart insurance deal for former Beacon board chairman Sheldon Sollosy and granite countertops installed in the home of former Beacon President Joseph Solomon. But the problems with Beacon Mutual extend beyond just the usual corruption…
Coming in Part 3: The big-picture problems with Beacon Mutual…
The story of how Beacon Mutual began is a familiar one — Rhode Island paying too much into a broken, unsustainable system, in this case, the workers’ compensation system.
At the start of the 1990s, there were about eight private insurers providing workers’ compensation insurance to Rhode Island, the largest being Liberty Mutual with about 25% of the total market share. Workers’ compensation was divided into two categories. There was a “voluntary” market where insurance companies directly entered into contracts with employers. There was also an “assigned-risk” pool, comprised of companies deemed too risky to insure. The state would assign insurance companies operating in Rhode Island the task of writing insurance policies for the employers in the assigned-risk pool. Insurers regularly lost money on their assigned-risk pool commitments while beneficiaries complained that benefits paid on assigned-risk policies weren’t enough to live on.
By 1990, the ratio of employers in the voluntary pool to employers in the assigned-risk pool was seriously out of balance. Liberty Mutual, for instance, was insuring only 155 companies through the voluntary market, while insuring about 2,900 through the assigned-risk pool. The assigned risk pool had become this large because, statistically speaking, Rhode Island had become a very risky place to work. Rhode Islanders were getting injured more often than workers in the rest of the country and staying out of work for longer when injured. They were also paid more for their injuries than the national average.
To cover the costs of Rhode Island’s assigned risk pool, the National Council on Compensation Insurance asked for a 123% rate increase in the state. When it was not granted, Liberty Mutual announced it would pull out of Rhode Island on December 31, 1991. The pullout would have required the remaining insurers to assume responsibility for Liberty’s 2,900 assigned risk policies. Instead, most remaining insurers also left Rhode Island to avoid incurring huge financial losses.
The creation of Beacon Mutual was part of the response to this. Beacon took over insuring the assigned risk pool (now called the “residual market”). Because it would be taking on the entire burden of the high-risk residual market, the state granted Beacon some competitive advantages. Beacon was given a tax-break and an exemption from paying into the state’s insolvency fund. The insolvency fund is insurance on insurance, a pool of money that insurers contribute to so that there will still be money available to pay claims if an individual insurance company goes under. Since Beacon Mutual didn’t have to pass insolvency fund or taxation expenses along to its customers, it could offer lower premiums than it otherwise would. Beacon would also be allowed to compete in the voluntary market, but its tax breaks and exemptions applied — on paper — only to its residual market policies.
Creating Beacon Mutual wasn’t the only workers’ compensation reform measure. The state streamlined the administrative and legal procedures associated with workers’ comp. In just a couple of years, Rhode Island became a much safer place to work. Here’s Governor Bruce Sundlun touting some of the successes in a 1994 Projo op-ed…
The state’s costs are down $ 4 million – 17 percent just between fiscal 1992 and fiscal 1993. The state’s workers’ compensation rolls have already been reduced 25 percent from 1200 to 900 employees….Here’s the weird and amazing part — the state government of Rhode Island did something right! Rhode Island employers were able to afford workers’ compensation isurance AND the process reforms once again made worker’s comp insurance a profitable business, so much so that private insurers made plans to return to the state. In 1994, Liberty Mutual announced its intention to return to the Rhode Island workers’ comp market. In 1995, ITT Hartford, at the time the 3rd largest workers’ comp insurer in the country, also announced its intention to start doing business in Rhode Island.
Workers’ compensation injuries that occurred in December 1990 cost Rhode Island more than 50,000 days of work lost in the first six months of 1991, at a cost of over $ 2,000 per injury. Last December’s injuries caused only 35,000 work days lost in the first six months of 1993.
Not only did we save 15,000 productive work days, the average cost per claim fell from over $2,000 to $1,510. The annual number of claims involving time lost from work has dropped from an average of 15,000 claims between 1987 and 1990, to 10,000 claims a year today.
Even when related to changing statewide employment levels, the frequency of workers’ compensation claims is down 25 percent….
Particular credit must go to the Workers’ Compensation Court. The court has seen 9,355 petitions filed in the first three quarters of 1993. This is down from 11,860 petitions in the like period of last year. Of these 9,355 petitions, the court has made a final disposition of and closed more than 8,000 petitions within 50 days of filing.
Until recently, it took an average of five months before petitions even got their first hearing. The court’s speed in disposing of these cases saves employers millions of dollars in unnecessary costs, and eliminates unfair gamesmanship both by employees and employers taking advantage of delays.
Yet we know that the private insurers never came back, and Beacon Mutual maintained its near monopoly in the now-profitable workers’ comp business in Rhode Island. What happened?
Coming in part 2: What did happen… [Open full post]
Among the weighty phrases thrown around in our public discourse, few are as provocative or poorly understood as “social justice” and “inequality.” A perspective on social justice was previously offered here.
With a H/T to Cafe Hayek, David Schmidtz’s article When Inequality Matters offers a philosophical perspective on the issue of inequality. (Note: His definition of “liberal” is the classical definition going back to prior centuries, not today’s definition.) This is not a casual read, but is one worth re-reading several times.
[Open full post]Everyone cares about inequality. Caring about inequality, though, is not enough to make inequality matter. Unless we have the right sorts of reasons to care, equality does not matter, at least not in the way justice matters. So, why care about inequality?
If the question has no simple answer, part of the reason is that equality is multi-dimensional…
Of the many dimensions along which people can be unequal, presumably some do not matter. Moreover, not all dimensions can call for amelioration, given that to ameliorate along one dimension is to exacerbate along another. The dimensions that do matter, though, may turn out to matter for the same reason, so even given that inequality is multi-dimensional, the reason to care about it may yet be relatively simple. Here are two possibilities.
1. The dimensions of equality that matter are dimensions where moving in one direction (letting wives have bank accounts, say) is liberating while moving in the other direction is oppressive.
2. The dimensions of equality that matter are dimensions where moving in one direction (toward equality of income, say) fosters prosperity while moving in the other fosters destitution.
My assumption here is that for an inequality to matter, it must make a difference…Simply calling a given inequality ‘unjust’ (some people paying more than others pay in taxes, say, or having more left after paying) is not a reason…we make good on the promise when we offer reasons why that particular inequality matters enough to warrant being called unjust.
Inequality That Matters: Toward Liberation
…The point of the liberal ideal of political equality is not to stop us from becoming more worthy along dimensions where our worth can be affected by our choices, but to facilitate our becoming more worthy.
Liberal political equality is not premised on the absurd hope that, under ideal conditions, we all turn out to be equally worthy. It presupposes only a traditionally liberal optimism regarding what kind of society results from giving people (all people, so far as we can) a chance to choose worthy ways of life. We do not see people’s various contributions as equally valuable, but that was never the point of equal opportunity, and never could be. Why not? Because we do not see even our own contributions as equally worthy, let alone everyone’s…In everyday life, genuine respect (to some extent) tracks how we distinguish ourselves as we develop our unique potentials in unique ways.
Traditional liberals wanted people – all people – to be as free as possible to pursue their dreams. Accordingly, the equal opportunity of liberal tradition put the emphasis on unleashing human potential, not equalizing it…
…Anderson suggests that when redistribution’s purpose is to make up for bad luck, including the misfortune of being less capable than others, the result in practice is disrespect…
Political equality has no such consequence…
Liberal egalitarianism has a history of being, first and foremost, a concern about status, not stuff. Iris Marion Young calls it a mistake to try to reduce justice to a more specific idea of distributive justice…Young sees two problems with the “distributive paradigm.” First, it leads us to focus on allocating material goods. Second, while the paradigm can be “metaphorically extended to nonmaterial social goods” such as power, opportunity, and self-respect, the paradigm represents such goods as though they were static quantities to be allocated rather than evolving properties of ongoing relationships.
…The proper function of our network of evolving relationships is not to keep us in our static place but to empower us to aspire to a better life. Even more fundamentally, the point is to empower us to become as worthy as we can be along dimensions where our worth is affected by the choices we make about what sort of life is worth living…
In a race, equal opportunity matters. In a race, people need to start on an equal footing. Why? Because a race’s purpose is to measure relative performance. Measuring relative performance, though, is not a society’s purpose. We form societies with the Joneses so that we may do well, period, not so that we may do well relative to the Joneses. To do well, period, people need a good footing, not an equal footing. No one needs to win, so no one needs a fair chance to win. No one needs to keep up with the Joneses, so no one needs a fair chance to keep up with the Joneses. No one needs to put the Joneses in their place or to stop them from pulling ahead. The Joneses are neighbors, not competitors.
Inequality That Matters: Toward Prosperity
Here is a truism about the wealth of nations: Zero-sum games do not increase it. Historically, the welfare of the poor always – always – depends on putting people in a position where their best shot at prosperity is to find a way of making other people better off. The key to long-run welfare never has been and never will be a matter of making sure the game’s best players lose. When we insist on creating enough power to beat the best players in zero-sum games, it is just a matter of time before the best players capture the very power we created in the hope of using it against them. We are never so unequal, or so oppressed, as when we give a dictator the power to equalize us. By contrast, the kinds of equality we have reason to care about will be kinds that in some way facilitate society as a positive sum game…
One of the great sources of inequality (more precisely, inequalities of wealth and income) is the division of labor. If we truly were on our own, producing something as mundane as a slice of pizza would be out of the question. Even getting started…acquiring iron ore (with our bare hands) and turning it into an oven in which to bake the dough…would be out of the question. Without division of labor, the Joneses would go nowhere, so keeping up with them would be unavoidable. At the same time, the division of labor makes us many thousands of times more productive than we otherwise would have been. Compared to that, the income inequality that division of labor fosters is inconsequential. In summary, the kind of equality that is liberating is also the kind that historically has been a key to human prosperity…namely, acknowledging people’s right to use their own judgment about how to employ their talents under prevailing circumstances, as free as possible from encumbrances of a race-, sex-, or caste-defined socioeconomic roles.
From the Goodness of Equality to the Rightness of Equalizing
David Miller notices a difference between saying equality is good and saying equality is required by justice…Not everything that matters is a matter of justice.
…In the real world, to take from one person and give to another does not only alter a distribution. It also alters the degree to which products are controlled by their producers. To redistribute under real-world conditions, we must alienate producers from their products. The alienation of producers from their products was identified as a problem by Karl Marx, and rightly so; it should be seen as a problem from any perspective.
…The liberal ideal is free association, not atomic isolation. Further, the actual history of free association is that we do not become hermits but instead freely organize ourselves into “thick” communities. Hutterites, Mennonites, and other groups moved to North America not because liberal society is where they can’t form thick communities but because liberal society is where they can.
…We do not start from scratch. We weave our contribution into an existing tapestry of contributions, and within limits, are seen as owning our contributions, however humble they may be. That is why people contribute, and that in turn is why we have a system of production.
…When we do reflect on the history of any given ongoing enterprise, we feel grateful to Thomas Edison and all those who actually helped to make the enterprise possible. We could of course resist the urge to feel grateful, insisting that a person’s character depends on “fortunate family and social circumstances for which he can claim no credit” and therefore, at least theoretically, there is a form of respect we can have for people even while giving them no credit for the effort and talent they bring to the table. One problem: this sort of respect is not the kind that brings producers to the table. It is not the kind that makes communities work…
…What about inequalities?…Unless an inequality (of talent, say) is ours to arrange, theories about what would be fair are moot. A truly foundational theory about how inequalities ought to be arranged would not start by imagining us coming to a bargaining table with a right to distribute what other people have produced. A truly foundational theory would start by acknowledging that there is a prior moral question about which inequalities are ours to arrange.
Earlier this week, Brown University President Ruth Simmons discussed education in a lecture before the Urban League of Rhode Island. Here is a part of her remarks, as reported by Tom Mooney in the Projo…
“How often do you talk to people who just can’t bear the thought that their tax dollars are going to help children across town? It’s appalling and we must call it what it is. The notion that we can request the resources in society for the privileged few and leave everybody else behind is a notion that must be called to account.”President Simmons is far too quick to assume that sinister motives must lie behind a public unwillingness to send their money “across town”. America’s experience with public education over the past 40 years has made people, quite reasonably, wary of surrendering ever increasing amounts of money to the control of rigid, underperforming bureaucracies.
There are better ways to deliver education than through the current system dominated by local-government monopolies, but the alternatives are blocked by people who cannot bear the thought of trying them. How often do you talk to people who can’t bear the thought that tax dollars will be spent in the form of vouchers? How about people who can’t bear the thought that that parents, and not bureaucrats, will decide where to spend tax dollars through a public school choice program? And how often do you talk to people who can’t bear the thought that tax dollars might help create a network of charter schools?
The answer to all of these questions, if you are talking to the school committees and interest groups that control public education, is quite often.
Don’t confuse a lack of support for a rigid, government-knows-what’s-best-for-you (when it clearly doesn’t) system of education with a lack of support for public education in general. And before accusing people of being unwilling to pay for education, allow them a full range of funding options to choose from. That is, if you can bear the thought of it. [Open full post]
To add some additional color commentary to Andrew’s coverage of the Rhode Island lead paint trial in Today’s Lead Paint Filing and The Lead Paint Trial Continues, here are excerpts from the February 27 Wall Street Journal editorial Motley Legal Crew (available for a fee):
[Open full post]Even as its asbestos and silicosis scams are unraveling, the trial bar is looking for its next industry to loot. It may have found it last week in a state court in Providence, Rhode Island, where a jury found three paint companies liable for creating a “public nuisance” by selling lead paint many decades ago. The mere presence of lead paint — whether or not it was safely contained — was deemed a danger to public health.
There are so many screwy aspects to this case that it’s hard to know where to begin. The jurors heard no evidence about an injured party, nor were they informed of any specific house or building that constituted the “nuisance.” As for the defendants, Judge Michael Silverstein instructed the jury that it wasn’t necessary to find that Sherwin-Williams, NL Industries and Millennium Holdings had actually manufactured the paint present in Rhode Island or that they had even sold it there.
Oh, and did we mention that at the time the companies may or may not have sold lead paint in Rhode Island it was an entirely lawful product? “The fact that the conduct that caused the nuisance is lawful does not preclude liability,” Judge Silverstein said. Lead paint was banned for residential use in 1978.
The legal “reasoning” at work in Rhode Island comes courtesy of Motley Rice, the South Carolina law firm that won hundreds of millions of dollars in contingency fees for its litigation against tobacco companies and is now seeking new deep pockets. It marketed its lead-paint strategy to the state government, which agreed to pay the trial lawyers 16 2/3% of whatever settlement is reached. Sheldon Whitehouse, who was attorney general at the time, is already trumpeting the verdict as part of his campaign for the Democratic nomination for the U.S. Senate.
The potential Rhode Island jackpot looks to be enormous. Judge Silverstein could order the paint companies to fork over millions, or even billions, of dollars in clean-up costs. That’s not including the possibility of punitive damages…
There is also the not-so-little matter of public policy, and who has the authority to make decisions about the 300,000 or so buildings in Rhode Island that contain lead paint. Judge Silverstein’s abatement orders are likely to be in direct conflict with the guidelines set down by the U.S. Centers for Disease Control, the Department of Housing and Urban Development, the Environmental Protection Agency and the state Health Department.
The recommended and sensible maintenance policy of all these agencies stresses painting over lead paint to keep it from peeling or flaking. Maintenance works, as can be seen by the dramatic drop in the prevalence of lead poisoning among children in Rhode Island. The state department of health reports only about 1,600 cases a year, mostly in low-income families. The state knows their addresses. A better way to help these children would be to go after landlords who don’t maintain their properties properly…
The bizarre tort theory in Rhode Island is terrible news for the paint business and the thousands of people it employs, and it has potential ramifications for other industries that make lawful products that years later turn out to have health or safety problems. It also demonstrates once again that “liability” in America has become completely untethered to either legal precedent or basic fairness.
According to both the Projo’s 7-to-7 blog and NBC-10, the three paint manufacturers found liable for what could amount to billions of dollars in damages in the Rhode Island lead paint trial have filed suit in Rhode Island Superior Court asking for either a dismissal of the case or for a new trial to be held. This is a separate filing from the filing based on contingency fee issues reported earlier this month.
A joint press release issued by NL Industries, Millennium Holdings, and Sherwin-Williams details what they believe to be grounds for overturning last month’s verdict. The most compelling arguments are the defendants’ claims that the state never proved how much lead paint, if any amount at all, was sold by each company in Rhode Island…
Each defendant should have had a separate trial. The state consistently blurred evidence among defendants, resulting in an unfair trial to each;The other arguments are concerned with the basic premise of the case…
The state evaded a dispositive motion by asserting that it was not relying on a “market share” liability theory. At trial, however, the state presented national “market share” data rather than any proof that the defendants’ lead pigments are present in Rhode Island today and contributing to an alleged public nuisance. The use of market share data conflicts with Rhode Island Supreme Court precedent and doesn’t show that any company was a substantial factor contributing to the alleged nuisance;
The state defeated numerous summary judgment motions and succeeded in striking defendants’ affirmative defenses by assuring the court that this was not a product liability case. The state then turned around at trial and presented a product liability case, stripped free from any product-related defenses;
The state defeated summary judgment on the Manufacturer Immunity Act by contending that this case was not about the manufacture or sale of a product. But the state presented a case at trial premised solely and exclusively on evidence concerning manufacture and sale of a product;
The state failed to connect the evidence it promised — such as defendants’ advertising, marketing or sales activity — to the state of Rhode Island.
The jury did not have to find that the defendants had done anything wrong;…and with assorted technical legal errors that may have been made…
By presenting a fictitious public nuisance theory, the state defeated defendants’ efforts to join property owners, conduct property-specific discovery, and hold property owners responsible for not maintaining their properties. The court compounded the error by failing to instruct the jury about the responsibility of property owners to properly maintain their property,
Opening and closing arguments given by counsel for the state were so inflammatory and prejudicial that a new trial is necessary;[Open full post]
The State impermissibly sought to hold defendants liable for exercising their First Amendment rights to belong to trade associations, express their opinions and communicate with public officials;
The state convinced the court to delay its agency ruling for almost a year, promising additional evidence to legitimize the state’s use of Lead Industries Association (LIA) evidence. No such evidence ever materialized at trial. It was only after the LIA information had been conditionally admitted that the state conceded that it had no further evidence, and the court finally ruled in defendants’ favor. The incurable evidentiary damage, however, already had been done. The state then compounded this error by arguing “LIA” and agency issues during its closing arguments
