Opponents Warn Non-Economic Damages Bill Could Cost Businesses and Consumers

It’s Never a Good Time to Eliminate These Caps, But It’s Hard to Think of a Worse Time Than Now

Annapolis — This morning the Judiciary Committee in the Maryland House of Delegates held a briefing on non-economic damages, related to House Bill 113. 

A broad, diverse coalition of businesses and providers oppose removing caps on these damages, which would likely increase costs across a wide range of products and services in the state. Marylander budgets are already strained after years of inflation and the state is facing a budget deficit and potential tax hikes. It is never a good time to remove caps on non-economic damages, but it’s hard to think of a worse time than now.

The state should not be make it harder and more risky to do business. Plaintiffs’ attorneys typically seek 30% to 40% of awards for mental anguish and emotional pain and suffering. Removal or increase in caps for non-economic damages can attract more litigation that burdens the legal system and causes price inflation across much of the economy due to its burden on business.

There is no cap on civil verdict economic damages, which can be measured by medical bills and lost wages, and these expenses are paid by insurers.

A non-economic damages cap was first enacted in Maryland in 1986 at $350,000. The state was at risk of losing insurers at that time. This cap has been adjusted over the years by an annual escalator and now sits at $950,000. Maryland chose to cap non-economic damages because pain and suffering are difficult to quantify. Putting a reasonable cap on damages is the best public policy to balance a need for injury recovery with the avoidance of excessive awards.

Some states do not have caps on non-economic damages. But Maryland’s tort laws are broader than most states, according to the Maryland Chamber of Commerce, so removing Maryland’s caps would expand liability across a broad cross section of the business community and consumers.

If these caps are removed, it is likely that insurance rates will rise across a wide range of business sectors. Businesses will pass on much of that cost to consumers. Businesses will look to move out of the state to more conducive business climates. Out of state businesses looking to relocate to Maryland will likely reconsider.

In addition, removing the caps could expose the Maryland Transit Administration and its Transportation Trust Fund to greater liability and financial instability because of transit related lawsuits. That was the finding of the nonpartisan Department of Legislative Services in a fiscal note they produced about a similar piece of legislation last year. Eliminating caps on non-economic damages could vastly increase costs for the MTA, depleting its Transportation Trust Fund by requiring it to pay out higher and higher lawsuit amounts. The MTA also flagged that eliminating caps could impact the MTA’s access to excess insurance or deductible amounts.

Maryland should say no to eliminating caps on non-economic damages. That’s the best way to protect the family budgets of taxpayers, the health of the state’s business climate, and the state budget.