NYC Pays $735 Million in Settlements; Lawyers Cheer

By: Michael Seinberg

For those of you keeping score, Manhattan trial lawyers have hit it out of the park and into orbit. According to the City of New York, the city government will spend $735 million this year to settle lawsuits and pay out awards for suits that claim negligence, police abuse, property damage, improper arrests, collisions with fire trucks, potholes that cause accidents, and slip and falls.

“It’s a huge problem for the city and trial lawyers will say it’s only justice, but it’s also a matter of some people considering a case before a New York jury the same as winning the lottery,” said E.J. McMahon, a research fellow for the Manhattan Institute’s Empire Center for New York State Policy.

To put this massive outlay into perspective, $735 million is the largest aggregate settlement figure in the city’s history – a 32% increase from the previous year, and almost SIX TIMES what Los Angeles pays per capita to handle similar issues.

One of the major reasons that New York pays out so much more per capita than major cities in California, Illinois, and Texas is that all three states impose limits on intangible “non-economic” damages, such as pain and suffering, which helps deter jackpot justice cases.  Most recently, Pennsylvania enacted “fair share” liability reform, ensuring that defendants like city governments are not forced to pay huge settlements when they are found only minimally responsible for an injury. Unfortunately for taxpayers, New York has not enacted any meaningful liability reform in almost three decades – largely due to lobbying efforts by wealthy trial lawyer interest groups.

While $735 million is a frightening sum, what is perhaps even scarier is the breakdown on just where that money goes.  About $119 million covered police misconduct and civil rights violations, $130 million went to malpractice claims from the city’s 11 public hospitals and on it all goes. Because NYC runs its own school district, the city is liable for all school-related lawsuits as well.

New York City, home to some 8 million people, is self-insured perceived as having endlessly deep pockets. But the reality is that lawsuits hit taxpayer where it hurts – in their wallets. New York City estimates its lawsuit costs will continue to rise to $815 million by 2016, dwarfing the annual budgets of entire city agencies. Now, more than ever, New York lawmakers must take action and enact rational limits on liability.

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