GOVERNOR CORBETT SIGNS LAW ABROGATING JOINT AND SEVERAL LIABILITY IN PENNSYLVANIA
By: Gerald J. Valentini and Christopher Negrete
As we have previously reported, on June 27, 2011, the Pennsylvania General Assembly enacted SB-1131 (commonly known as the “Fair Share Act”) which ultimately will eliminate joint and several liability in most tort actions governed by Pennsylvania law. As we anticipated, Governor Tom Corbett promptly signed SB-1131 on June 28, 2011, and it became effective immediately. The provisions of SB-1131 have been incorporated as an amendment to 42 Pa. C.S. § 7102.
Under the new Fair Share Act, each liable defendant is responsible only for its proportionate share of the total verdict amount in the ratio of that defendant’s liability. Thus, a defendant who is found 25% liable will only be obligated to pay 25% of the total amount of the verdict (provided that the plaintiff is not deemed more than 50% liable). Under the prior law of joint and several liability, defendants who are found just 1% liable can be obligated to pay 100% of a verdict, even though another defendant’s liability may be much greater. To mitigate such a harsh application, the prior law permitted a defendant who paid more than its proportionate share of a verdict to seek contribution from other defendants who have not paid their proportionate share of the verdict. However, this right of contribution provided little solace to defendants who sought contribution from insolvent co-defendants. The new Fair Share Act prevents this outcome in most cases, so that a plaintiff would not be able to recover the entire verdict amount from just one of multiple responsible defendants. Rather, in most cases, a liable defendant will only be responsible for satisfying its own “fair share” of the total verdict amount.
However, we caution that the enactment of the new Fair Share Act does not instantly abolish joint and several liability in Pennsylvania. First, by its own terms, the law only applies to “causes of action which accrue on or after the effective date” of the law. Therefore, the new law only applies prospectively to new actions alleging tortious conduct that occurs on or after June 28, 2011 (i.e., the effective date). However, joint and several liability is still applicable to: (1) all existing tort cases that were pending as of the June 28, 2011; (2) any cases filed after June 28, 2011, that assert tortious conduct that occurred before the effective date; and (3) any case that falls into one or more of the five (5) exceptions enumerated in the Act.
The new Fair Share Act expressly retains joint and several liability in five specifically enumerated situations, including: (1) intentional misrepresentation; (2) intentional torts; (3) where a particular defendant is found to be more than 60% liable; (4) the release or threatened release of a hazardous substance under § 702 of the Pennsylvania Hazardous Sites Cleanup Act; and (5) violations of § 497 of the Pennsylvania Liquor Code. Where any of these five exceptions apply, a plaintiff is still permitted to recover the entire verdict amount from any one of multiple liable defendants. However, a defendant who ultimately pays more than its proportionate share of the verdict retains the right to seek contribution from any other responsible defendant for that defendant’s proportionate share.
The provisions of SB-1131 are largely identical to those of the previous Fair Share Act that was in effect from August 18, 2002 until September 28, 2006, when it was declared unconstitutional by the Pennsylvania Supreme Court in DeWeese v. Cortes, 906 A.2d 1193 (Pa. 2006). However, SB-1131 should not face the same constitutional challenges as the original Fair Share Act. The Pennsylvania Supreme Court overturned the original Fair Share Act only because it was appended to a bill addressing DNA testing of convicted sex offenders. The Court held that this manner of enactment violated the “single subject” requirement of Article III, § 3 of the Pennsylvania Constitution. Because SB-1131 was enacted as a stand-alone bill, rather than an amendment to completely unrelated legislation, it should avoid the same constitutional challenge.
Overall, the enactment of SB-1131 represents a victory for defendants in Pennsylvania and for the insurance industry as a whole. Efforts to block the “Fair Share Rule” in Pennsylvania have been strong for many years. However, the new Fair Share Act represents a significant reform that will ultimately bring about fairer results for defendants and their insurers in most cases.
If you would like more information, or would like to receive a copy of SB-1131, please feel free to call us at (215) 587-9400.