U.S. Tort Costs Rise: No Surprise
The global consultants Towers Perrin have released their 2008 Update on U.S. Tort Cost Trends. This represents the 12th study of U.S. tort costs published by Towers Perrin. The first study was completed in 1985.
This study takes no position on whether tort costs are too high or too low. (MassTortDefense votes too high.) Its stated purpose is to attempt to quantify the costs.
The study's definition of tort cost is largely governed by traditional liability insurance coverages. Thus, it understates the true cost of torts. For example, it has excluded things like the tobacco settlements with the state AG's. It also does not appear to cover punitive damages. Certain indirect costs are also omitted, such as those associated with litigation avoidance. These costs range from potentially unnecessary and duplicative medical tests ordered by doctors as a defense against possible malpractice allegations, to the disappearance of certain products or whole industries from the marketplace because of high product liability cost.
Key results:
- U.S. tort costs increased by 2.1% in 2007.
- This is the largest increase in personal tort costs since 2003.
- The increase in personal tort costs was at least partly the result of a rise in auto accident frequency, the first such rise since 1999.
- The U.S. tort system cost $252 billion in 2007, which translates to $835 per person or $9 per person more than in 2006.
- Since 1950, growth in tort costs has exceeded growth in GDP by an average of approximately two percentage points.
Towers is forecasting growth in U.S. tort costs of 4.0% in 2008, with higher growth (5.0%) in 2009 and 2010. There are several issues that will impact the future trends in U.S. tort costs, including:
the change in administration as well as shifts in the U.S Congressional makeup. This may well lead to modifications in the federal government’s behavior and attitudes toward litigation.
Other emerging issues noted by the report: global warming and obesity continue to be potential areas for significant tort costs, they say, as well as claims related to data security breaches.
