Monthly Archives: May 2013

McDonald’s Contribution to the Tort Reform Debate

The need for tort reform has been a central point in arguments about Obamacare and a huge talking point in debates between liberals and conservatives on all kinds of liability matters.  While there are many liability and medical malpractice cases that have fueled the debate, one stands out because now, long after both sides have made their points, it remains difficult to come to a clear conclusion.  

On February 27, 1992, Stella Liebeck, a 79-year-old woman, ordered a 49-cent cup of coffee from the drive-through window of a McDonald’s restaurant in Albuquerque, New Mexico. While sitting in the passenger seat of her grandson’s car, Ms. Liebeck tried to take the top of the coffee container to add some cream and sugar.  The coffee spilled setting off a chain of events that have reverberated through the years and the controversy over the case and its outcome has fueled the debate over tort reform for two decades as well as serving as an example for those purchasing commercial liability insurance. 

Simply stated the facts are Ms Liebeck bought the coffee, spilled the coffee, was burned, sued McDonalds and won a judgment of over $2 million.  Those unadorned facts led to a widespread notion that hers was a frivolous lawsuit.  Helped along by late night television and talk radio, it even helped spawn some of the synonyms we now hear for suits with little merit – “lotto litigation” and “jackpot justice”, for example. 

The bare facts would seem to support the scorn of late night comics; after all, what is not to understand about “hot” coffee?  Spilling it on oneself and then crying foul was the symbol of “it must be somebody’s fault.”  Yet, as the actual suit unfolded, it appeared there was much more to learn.  

First, McDonald’s kept its coffee heated to 190 F a temperature so high it can burn off skin and cause muscle and bone damage in just 2 seconds.  Other restaurants typically kept their coffee at about 160 F, a temperature that allowed seconds more margin of time to escape damage.  Next, while this initially sounded like one person making an outrageous claim, McDonald’s had 700 coffee burn claims filed against it before this suit.  They had paid out over $500,000 on previous burn injuries.  In testimony, McDonald’s Quality Assurance Manager acknowledged they were aware of the risk of serving dangerously hot coffee.  In short, McDonald’s knew its coffee was burning people all over the country.

As to Ms. Liebeck, Her medical bills were almost $200,000 and her injuries were extensive.  Her initial appeal to McDonald’s was not a “jackpot” suit, but for only $20,000 to help pay some of her bills.  McDonald’s refused to help her pay any of her medical bills.  With facts like these, the pendulum began to swing the other way, finally culminating in the documentary movie “Hot Coffee” which skewered the notion this was a frivolous lawsuit and undermined the whole tort reform argument.  

Forbes Magazine responded not long after with an article aimed at the movie itself noting among other things that the “700 complaints” McDonald’s received were out of 10 billion cups of coffee sold and suggesting there was little proof a ten degree reduction in temperature would have caused less damage.  In the end, Ms. Liebeck’s award actually was reduced from the $2.7 million that the jury awarded to a more modest $480,000. While the case itself is long over it still remains a contentious topic in discussions of tort reform.   

Disability Insurance Awareness Month 2013

This May will mark the 6th year that the LIFE Foundation has sponsored Disability Insurance Awareness Month, an effort to educate consumers about the need for disability insurance coverage. It appears some education may be necessary.  According to the Social Security Administration (SSA Fact Sheet Jan 2009) nearly one-third of Americans entering the work force today (3 in 10) will become disabled before they retire.  However, a 2011 research study reported in the Insurance Journal noted a minority (49%) of U.S. workers has short-term disability insurance and only 44% are covered by long-term disability insurance. These numbers represent a drop over prior year surveys.  

While people commonly believe most disability is caused by accidents or work injuries, the major causes of disability claims are surprisingly mundane.  Musculoskeletal disorders like arthritis, back pain and spine or joint disorders are the leading cause of disabilities with illnesses like cancer, heart attacks and diabetes also arising as major causes of long term disability according to the Council for Disability Awareness. When all is said and done, about 90% of disabilities are caused by illnesses, not accidents.  More than 30 million Americans between the ages of 21 and 64 are disabled. 

The Council notes, as well, that most of us underestimate our own risk of becoming disabled.  Almost two-thirds (64%) of wage earners rate their chances of being disabled for three months or more during their working careers at 2% or less; the actual odds for a worker entering the workforce today are about 30%. As in other health related areas, lifestyle factors play a big role.  For example, a 35 year old non-smoking male office worker who has a healthy lifestyle has a 21% chance of becoming disabled for 3 months or longer during his working career.  That same person, if obese and smoking would have a 45% chance of becoming disabled for 3 months or longer.

Most people are not equipped, financially, to manage an extended period without a paycheck.  Disability insurance replaces some – but not all – your income when you are disabled and no longer able to work. Five states, California, Hawaii, New Jersey, New York, and Rhode Island require employers to provide short-term disability. Twenty six weeks of coverage is the norm, though in California employers are obligated to offer 52 weeks.  Washington State does not have a requirement for employers to offer short term disability coverage and no state requires long term coverage.  Typical employer sponsored plans replace up to 60% of salary while individual policies can cover as much as 70% or 80% with benefits lasting either for a set term, like 5 years, or until retirement age. If you are covered under an employer paid policy, you will pay taxes on your disability income; if you pick up the premium yourself, benefits are tax free. 

A number of companies and organizations have created calculators that can help you learn about your risk for disability and decision tools to learn what you need in the way of coverage.  You can find a number of these tools at the Council for Disability Awareness website here.