Georgia Governor Brian Kemp emphasized on Thursday that limiting lawsuits is essential for curbing the increasing costs of insurance. However, the situation is more complex than it appears.
Potential changes could lead to reductions in liability insurance for commercial property owners and businesses, but the impact on other types of insurance, such as auto insurance, remains unclear. Some studies suggest that while tort reform may bolster insurers’ earnings, it does not necessarily translate into lower policy premiums for consumers.
This is a key concern for Kemp as he prioritizes this issue in the current legislative session. Among his proposals are revisions to the standards that define business liability for injuries on their premises, ensuring that claimants seek only compensation for out-of-pocket medical expenses, and limiting the use of misleading figures presented to jurors to justify higher damages.
“From grocery stores to healthcare facilities, small businesses, and everyday Georgians, we are hearing a unified call for urgent tort reform,” Kemp stated during a press briefing. He argues that the escalation in insurance rates is attributed to a surge in unfair lawsuits and excessive jury awards.
Kemp also plans to introduce structural modifications to the litigation process. He wants juries to be informed of whether seat belts were used during car accidents and if third-party funders were involved, an approach that was implemented by several other states last year.
However, the existence of unfair lawsuits and large jury awards as significant contributors to insurance costs is disputed. Legal expert Kenneth Klein notes that evidence of a nationwide crisis in litigation linked to rising insurance prices is not well-documented, stating, “I searched for data that supports the claim but found none.”
In contrast, insurance industry professional Mike Iverson indicates that insurance companies prefer predictable risk assessment when setting rates. There has been a trend of companies opting out of certain coverage types, making insurance access more challenging for businesses.
Notable cases, such as a nearly $43 million jury award following a shooting in an Atlanta CVS parking lot and a $31 million judgment against a mobile home park in Jonesboro, highlight the potential financial risks that businesses face. According to John King, the Georgia Insurance Commissioner, businesses in areas deemed high crime by insurers are particularly hard hit by escalating rates, affecting various sectors, including trucking and apartment ownership.
After discussing the matter with the Georgia Chamber of Commerce, Kemp has urged King to compile relevant data in 2024 to support legislative action. Critics of the proposed reforms stress that few jury awards reach those extreme amounts and that insurance companies continue to turn a profit. They advocate for greater transparency on how insurers establish their pricing.
“Insurance companies often cite a case or two to justify rate increases or reduced coverage,” stated Joanne Doroshow from the Center for Justice & Democracy.
Evaluating the effects of tort reform on insurance premiums in other states is challenging due to varying factors and reform strategies. While some states have experienced benefits, the extent to which insurance companies pass these savings onto consumers is inconsistent.
One common measure discusses caps on non-economic damages, which are not included in Kemp’s proposals. Furthermore, a ruling by the Georgia Supreme Court in 2010 declared such caps unconstitutional.
Other elements that influence insurance rates encompass inflation, severe weather events, and the costs associated with labor and materials. The insurance market naturally experiences cycles of tighter coverage in response to rising rates.
Data from the National Association of Insurance Commissioners reveals that insurers in Georgia were less profitable in 2022 compared to many other states, although over time, these fluctuations tend to fall within normal parameters.
King has found that claims and the amount paid out for those claims have generally escalated, especially in litigation-involved cases. He observed an increasing percentage of claims resulting in maximum payout amounts.
However, the Georgia Trial Lawyers Association contests King’s findings. Risk consultant David Stegall notes that Georgia’s considerable accident rate corresponds with the number of claims made, arguing that both claims and payouts have remained stable or even decreased when adjusted for demographic growth and inflation.
Notably, while Georgia drivers face higher car insurance costs—between 11% and 68% more than residents in other states—they are over 200% more likely to be involved in an accident.
Kemp has assured that his proposals would still enable residents to hold businesses and medical professionals accountable for negligence, though defenders of the existing system have their reservations.
“The governor’s assertion that restraining consumer rights will decrease insurance costs is misguided and detrimental,” remarked Representative Tanya Miller, a Democrat from Atlanta.
