Tort costs in the United States grew more slowly in 2003 than they did in the two preceding years, but that’s not necessarily a sign the legal system and legislative reforms are finally reining in the increases. Those conclusions can be drawn from the study U.S. Tort Costs: 2004 Update by the Tillinghast business of Towers Perrin, which provides a brief but remarkable picture of rocketing tort costs over the past 50 years.
A few facts from the study:
- Tort costs in the past 50 years grew more than a hundredfold. The gross domestic product grew by a factor of only 37. The population grew by a factor of less than two.
- Costs relative to population changed from $91 per person in 1950 to $845 in 2003 (adjusted for inflation based on Consumer Price Index).
- Tort costs grew by just 5.4 percent in 2003, compared with 14.7 percent in 2001 and 13.4 percent in 2002.
- In addition to long-term trends, several factors could contribute to tort cost increases taking off again: the prior two years were higher due in large part to a re-evaluation of asbestos claims, which could recur if asbestos reform measures are not implemented; some analysts believe the insurance industry still underestimates liabilities by as much as $60 billion; and class actions continue to play a major role in litigation.
The full study is currently available at http://www.towersperrin.com/tillinghast/publications/reports/Tort_2004/Tort.pdf
Apparently there’s some upset over the validity of the Tort system study. Critics suggest that Tillinghast used a poor choice of expense statistics to create their study, resulting in findings that have no bearing on the actual cost of today’s U.S. Tort system or Tort trends in general. See Insurance Journal article, Tillinghast Tort System Cost Study Under Fire, for more information.