A new report assessing the impact of removing noneconomic damage caps in Colorado was released this week by the Colorado Chamber of Commerce in partnership with the American Property Casualty Insurance Association (APCIA).
Noneconomic damage caps are the portion of damages awarded in civil cases that attempt to compensate for an injured person’s emotional distress and suffering related to an accident. These are separate from economic damages, which seek to restore an injured person to their original financial condition. Removing noneconomic damage caps has recently been the focus of several ballot initiatives and legislative proposals in Colorado.
The report found that the removal of the caps would create a $2.1 billion annual loss in state GDP and result in the loss of 15,500 jobs.
“At the Colorado Chamber, we’re working to position our state as a leader in economic growth and opportunity,” Colorado Chamber President and CEO Loren Furman said. “Efforts to remove noneconomic damage caps would directly impact our competitiveness as a state, making us an even more expensive place to live and do business. This $2.1 billion cost would be felt by everyone, from increased prices of goods and services to reduced business activity. We will continue to oppose measures that threaten our economic climate and the livelihoods of Coloradans.”
The potential economic and fiscal losses would represent a reduction in economic output due to excessive civil justice costs of $357 per person and $921 per household. Further, the reduction in business activity would result in a loss of $101.9 million in tax revenue for the state and $78.3 million to local governments.
“Colorado businesses and consumers are already struggling to make ends meet given inflation-fueled escalating prices. Removing the caps on non-economic damages will make everything worse,” Lyn Elliott, APCIA vice president for state government relations, said. “Removing these caps will incentivize more lawsuits and encourage excessive verdicts which will only intensify Colorado’s declining legal and fiscal environment. Unleashing more cost increases makes things harder for small businesses and consumers already overwhelmed and making difficult decisions.”
The report stated that excessive noneconomic damage awards in the tens or hundreds of millions of dollars can have devastating impacts to businesses and the global insurance market. In addition, removing noneconomic damage caps could negatively affect the state’s economic development.