Tort Costs in U.S.

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