Subsection 5.1 Who is Innocent? 

 

A friend’s father came to the United States to visit relatives. When he was taking his granddaughter to school one morning, he was hit by a speeding motorcycle on the pedestrian crosswalk and died. This nearly seventy year old, healthy and robust man was killed for no reason. Of course he was innocent. Later his family found out the driver who hit him was an eighteen year old girl. She only had a $30,000 insurance coverage and no other assets. Although the evidence was conclusive and proved that the driver’s illegal driving methods caused the death, the family could only receive the remains of the grandfather and the small compensation. 

 

The story above is an unfortunate family affair. My friend lost a beloved family member, but because the offender did not have adequate insurance, his family did not even receive a proper compensation. The offender was poor and the victims could do nothing about it. This is common in the United States.

 

However, relatively speaking, people who have some financial resources who’ve committed one single accident, or are innocent but get tangled in a lawsuit and lose everything they are also very common in the United States.

 

Obstetric physicians  are the most typical examples of those who have insurance and become victims of legal action. Every year, because a child is born with defects, countless obstetricians are charged with malpractice. Actually, parents who sue doctors do not necessarily think the problem stemmed from the doctor doing a bad job, but they still have to put the blame on the doctors. This is because doctors have insurance. If the parents win the lawsuit, the doctor’s insurance company will be responsible for compensating the cost of bringing up the child. Who wouldn’t want someone else to be responsible for raising their child who has defects? As for the doctor’s reputation being harmed or whether the doctor was innocent, the parents suing cannot afford to care. 

 

Here is one of the most dramatic examples: In 1987, a high rise building in Connecticut suddenly collapsed. Its collapse killed twenty workers and was an unexpected tragedy. In the aftermath,  government agencies conducted an investigation and found out the sole reason the building collapsed was due to the construction company’s carelessness and shoddy work. As a result, the construction company declared bankruptcy. In order to end the lawsuit, the two judges in charge of the case decided to establish a forty-one million dollar compensation fund for the victims. This huge sum of money was  to  equally come from those who caused the collapse of the building including the government planners and engineers. The reason is simple. Even if they have no money, they have insurance which means they can still pay their share. For example the structural engineers (their insurance company) had to pay one million dollars to get out of the situation. Moreover, a building materials company had not begun to deliver materials but still must pay $250,000. The most innocent compensation contributor was the sandwich vendor who was selling sandwiches on the street next to the building that day; he ended up having to pay $75,000.

 

The judges in charge of the people paying compensations said to the innocent people who had to pay, “You have two choices. First, those who readily pay the compensation and take care of the matter will never be investigated again after the case is settled. Second, if the victim’s families are not given the compensation, they will continue the lawsuit over many years and the result is unknown. Your losses could potentially be even greater!”. After the two judges explained "the facts of life", all the parties agreed to obey. 

 

Everyone may think this case is very funny, but it is actually a very thought-provoking true story involving profound legal principles and societal philosophical problems. The judges dealing with the case had to put pressure on the offenders to squeeze out money for  twenty-some families of the victims so that they could receive a reasonable compensation. Their explanation to the offenders was truthful facts of reality. However, while this group of people were not involved in causing the building to collapse and did nothing wrong, they were still dragged into the case because they either had insurance or money to pay the compensation. Why should the victims be compensated? Who is innocent in the case? These are the questions we shall analyze. 

 

Subsection 5.2. When the Worker is in Trouble, The Boss Suffers 

 

Following the topic of who the innocent is, the phrase “When the worker is in trouble, the boss suffers” is not easy for foreigners to understand. We shall study an example to explain. A couple from Hong Kong went to California and bought a multiple unit building that they rented out. They hired a manager to mange the building. Later, the manager received accusations from eight different female tenants. They accused him of sexual harassment and using his position as manager to threaten them. After the jury trial, the plaintiffs won the lawsuit and the defendant had to pay $800,000.

 

The eight female plaintiffs involved in this case were obviously extremely happy to win. The problem was that even though the offender was the manager, under United States legal principles, the party liable for paying the $800,000 was not the “employee” but his boss from Hong Kong, who owned the property. If the boss bought an adequate of insurance, then the situation would be better. If the boss did not buy insurance or the insurance did not cover the entire amount, the boss would have to use his own money and possibly even have to auction off the property to pay the compensation. So we say, in the United States, it is not easy being the boss. 

 

The principle of “When the worker is in trouble, the boss suffers” did not begin in the United States but in fact originated from Britain’s Common Law hundreds of years ago. In Britain’s aristocracy hundreds of years ago, the owner had complete control over their subordinates, even the power of life and death. Thus if the subordinate committed a crime, the owner was responsible. This was actually quite reasonable. However in today’s democratic United States, the owner (boss) not only does not have complete control over his subordinates (workers), but he also definitely does not have the power to decide life or death. Therefore, American businessman often jokingly say, “The ones who enjoy life are the workers while the bosses are the ones who sell their souls”. For example in numerous Chinese restaurants, the most difficult and dirty work, such as dumping the restroom trash, is done by the owner, because he could not hire or ask his workers to do such a menial job. Nevertheless, when the worker misbehaves, the one who suffers is the boss. To protect themselves, bosses can only buy an adequate amount of insurance. However, when bosses buy adequate amounts of insurance, they often become targets of lawsuits. It is truly living between a rock and a hard place.

 

Subsection 5.3.  1% Ownership, but 100% Responsibility

 

Speaking of responsibility, each time a client asks me to draw up a general partnership for purchasing a business or real estate, I will be sure to first explain the legal meaning of the term “joint and several liability” to the client. Let me use an example: 

 

A and B formed a partnership business to manage a restaurant. The total amount of capital was $10,000. A accounted for $9,000 and B accounted for $1,000 of the $10,000. With this $10,000, they signed a lease as partners. Shortly after running the restaurant, business was bad and the partners owed the landlord $1,000. B told the landlord, “I only hold one-tenth of the partnership shares, if I pay $100, will I be released from my responsibilities?” The landlord’s lawyer replied with, “Sorry, the amount of shares you hold is a matter between you, your partner, and the partnership company. According to the law, the landlord can choose whether it is collective accountability or individual accountability. I have looked at your last credit report. Between the two of you, A is poor while you own a home. So, I would look only to you to recover the $1,000.  As for what happens after you pay $1,000, how you ask A to contribute his proportional share under the terms of the  partnership is a problem you two must solve on your own. We do not care”. 

 

“One share of ownership means complete responsibility” seems very unreasonable and inconsistent with the ratio. Therefore, I will definitely clearly and thoroughly explain this concept to those preparing to enter a business partnership. Something we have to pay more attention to is that this kind of legal responsibility not based on proportions has a wide range of applications that are not limited to the business world. Put another way, perhaps this is another “who is innocent” example. 

 

Subsection 5,4.  Compensation—-A Concept that is Beyond Common Sense in American Life

 

In English, the original word for “compensation” used to be "damages". This term literally means “loss” or “destruction” and is used widely in law. “Compensation” is also a commonly used term in law and has become an important concept in daily life in the United States. When an ordinary person experiences loss, he will often consider looking for compensation. Some lawyers who specialize in lawsuits involving claims will often post long standing advertisements in the newspaper about “educating” people to claim their compensations. 

 

In American law schools, the most basic subjects of civil law are contract law, real estate law, and torts. In fact, when taking legal action, the purpose cannot be separated from claiming compensation. 

 

The word “torts” originated from French meaning “fault” or “mistake”. In civil law, when you make a mistake, you must compensate the victim. In theory, this is a very simple and reasonable principle of justice. The most typical example of Torts is: a motorcyclist has a moment of carelessness and hits a pedestrian. As a result, he must compensate the injured pedestrian. However, if the motorcyclist has no income or assets, is poor, or if the victim’s injuries were far beyond what the motorcyclist could afford, what happens? If this is the case, it all depends on whether or not the motorcyclist has insurance. Another example: If the motorcyclist was working during the time of the accident, the litigants will sometimes throw the employer “under the bus” to make him their scapegoat. 

 

This kind of trend in which  those having insurance or assets suffer, regardless of reason, began in the 1960’s. At that time, the newest theoretical leader was California’s Supreme Court Justice  Traynor. In the previously mentioned driving accident example, Justice Traynor's explanation would be the following: Victims innocently injured in traffic accidents should be compensated. If the driver does not have insurance or assets, the law should assist the victim with obtaining compensation from the other parties (especially if they have insurance). Otherwise, a victim who is already injured unfortunately, yet will be left empty handed with no compensation. This is grossly unfair. 

 

Therefore, under Traynor's analysis, a victim’s misfortune, through legal and insurance systems, must be shared by the whole community while the motorcyclist who actually committed the mistake but cannot pay will escape responsibility.  This theory by Justice Traynor became very popular. However, this trend in the past few decades has had a serious social and economic aftermath that has caused a proliferation of lawsuits, high insurance premiums, and unreasonable compensations. 

 

Subsection 5.5.  Life and Death Depend on Fate. Wealth Depends on Insurance? 

 

Chinese people have a saying, “Life and depend on fate; riches and honors come from heaven”. In the United States, under some cases, this saying can be changed to “Life and death depend on fate; wealth depends on insurance”. We shall look at the following two extreme but true stories. 

 

A few years ago, a drunken man in New York City fell onto the tracks of the subway on his own, and the subway ran over his left hand. He then accused the subway corporation of this accident and the jury’s ruling was the corporation had to compensate this man over a million dollars. The jury’s reasons are as followed: The man got drunk and got into an accident on his own. While in the subway, the rules and regulations say you cannot eat or drink but they are not strictly enforced. Therefore, it is the subway corporation’s fault that the man drank alcohol and had an accident. Who ends up paying for this large compensation? Those familiar with the American system know that the insurance company is obviously the one who has to pay the compensation. The jury awarded such an astronomical figure for the compensation, because they know the insurance company can afford it. Just think, this drunken man received a sum of money he probably could never even dream of. He survived a great disaster and exchanged his left hand for over a million dollars. No wonder after he heard the judgment he shouted in court, “God bless America!”. 

 

Another example took place in San Francisco. A Chinese female junior in college who was twenty years old went traveling with friends in one of her friends’ car. The friend driving the car was speeding, darting left and right, and got into an accident. The female student and the other passenger immediately died, but the driver was unscathed. The female student’s mourning parents who had just retired hired a layer to seek compensation in court. They then found out the driver was also a twenty year old student with no assets, job, or income and only an insurance coverage of $100,000. After some preliminary investigation, the insurance company agreed to pay the $100,000 on behalf of the driver. However, this money had to be split between two families, so each family only ended up with $50,000. 

 

The parents of the deceased could not accept this and protested by saying, “So two promising young lives are only worth $100,000? This $100,000 is also only from the insurance company. In other words, the perpetrator does not even have to pay a little bit of her responsibility!”. They insisted the driver receive an appropriate punishment. Even if she could not afford to pay, she should still be “brought to justice”. The lawyer hired by the parents objectively advised them not to fight a lawsuit for the following reasons: 

 

First, there was no police that witnessed the accident and there was no ticket given on the spot. While governmental departments estimate that the driver was speeding at the time of the accident, they have no evidence to charge her. The driver also was not given any criminal offenses, so no one, including the government or prosecutor, can “bring her to justice”. The families can only file a civil lawsuit to fight for  compensation. There is no way to put her in jail or convict her of any criminal charges. 

 

Second, the insurance companies will pay $100,000. Not filing any lawsuit can ensure that the two parties receives this compensation. Otherwise, they could spend money on litigation fees but still not be guaranteed winning the lawsuit. Additionally, if the jury sympathize with the driver and rule her not responsible for the accident, then the insurance company will not even pay the previously mentioned compensation. 

 

Third, even if the judge or jury rule that the driver needs to pay a large sum of money, in return, the plaintiff will only receive a piece of paper with the judgment. The defendant has no money. While her parents have a few assets, under the United States law, parents do not have to pay any reparations for their children. 

 

Fourth, even if the court imposed a really large compensation, the defendant does not have the money. Does she have to repay it back later? Theoretically, it is possible, but Americans all know the law of bankruptcy. If the plaintiff pressed too hard, then she will declare bankruptcy. According to bankruptcy law, after a person declares being bankrupt, their past debts, including judgments, are all nullified in one stroke. 

 

These poor parents not only lost their daughter, but also had to experience a great deal of cultural shock. They cried out in sorrow and asked, “Why do people who make mistakes not get punished? Why is compensation not based on the victim’s loss but on the defendant’s ability to compensate?”.

 

The two stories above confirm the points made in my introduction. Sometimes in civil lawsuits, the poverty-stricken person can be "invincible"  just as the rich is able to hire the best lawyer and experts to give him an advantageous position in a lawsuit. These two kinds of people represent the two extremes. These two extremes exist simultaneously in the American legal system.

 

Insurance and liability lawsuits reinforce each other. Poverty-stricken people have nothing and are less likely to be sued. Generally when lawyers who handle claims accept cases, they initially do not look at whether their potential client has money, but whether the other side has money or insurance. Also, in the United States, those who have a regular income, a home, or savings will definitely buy insurance.