Tort Liability Annual Report Released by Think Tanks

The Pacific Research Institute (PRI), a free-market think tank based in San Francisco, and the Manufacturers Alliance/MAPI, a public policy and economic research organization based in Arlington, VA, announced last week the release of their 2010 U.S. Tort Liability Index, a measure of which states impose the highest and lowest tort costs and risks.

According to the report, Alaska, Hawaii, and North Carolina lead the pack with the best rankings, while New Jersey, New York and Florida bring up the rear. Again, the states with the worst performance had the highest monetary tort losses and tort litigation risks, meaning they had more costly and riskier business climates due to larger plaintiff awards, larger plaintiff settlements, more lawsuits, or some combination of the three.

Direct tort costs account for almost 2 percent of GDP in the United States, which is the highest in the world, not surprising to our readers. Such high costs cause businesses to divert revenue, that could hire workers, to fight lawsuits. But all our readers ultimately shoulder the burden through higher prices and insurance premiums, lower wages, restricted access to health care, less innovation, and higher taxes to pay for court costs.

The Best Tort climates, according to the report:

Alaska
Hawaii
North Carolina
South Dakota
North Dakota
Maine
Idaho
Virginia
Wisconsin
Iowa


The Worst climates, according to the report:

New Jersey
New York
Florida
Illinois
Pennsylvania
Missouri
Montana
Michigan
Connecticut
California
 

States were also ranked according to their tort rules and reforms to reduce lawsuit abuse and limit tort costs and risks, such as award caps, or venue reforms to stop “litigation tourism."  Oklahoma, Texas, Ohio, Colorado and Mississippi did well on the tort reform scale in this report. The states with the least favorable tort rules for defendants, according to the analysis, are Rhode Island, New York, Pennsylvania, Minnesota and Illinois. 

This report can also be contrasted with the Chamber of Commerce report ranking state liability systems, and the ATRA report of the "most unfair jurisdictions."

Chamber Releases State Liability Systems Ranking Study

The Institute for Legal Reform of the U.S. Chamber of Commerce has released its 2010 State Liability Systems Ranking Study.  The study was conducted for the U.S. Chamber to explore how reasonable and balanced the states’ tort liability systems are perceived to be by U.S. business. Participants in the survey were comprised of a sample of 1,500 in-house general counsel, senior litigators or attorneys, and other senior executives who indicated they are knowledgeable about litigation matters at companies with at least $100 million in annual revenues.

The 2010 ranking builds on seven previous surveys in which all 50 states were ranked by those familiar with the litigation environment in that state.  The State Liability Systems Ranking Study basically aims to quantify how corporate attorneys view the state systems.  Overall, more than two in five (44%) senior attorneys view the fairness and reasonableness of state court liability systems in America as excellent or pretty good, up slightly from the last survey in 2008 (41%).  A majority
(56%) view the systems as only fair or poor. Two-thirds (67%) report that the litigation environment in a state is likely to impact important business decisions at their companies, for instance, where to locate or do business, an increase from 63% in 2008 and 57% in 2007.

Respondents were asked to give jurisdictions a grade (A, B, C, D or F) in each of the following areas:

  • Having and enforcing meaningful venue requirements;
  • Overall treatment of tort and contract litigation;
  • Treatment of class action suits and mass consolidation suits;
  • Damages;
  • Timeliness of summary judgment or dismissal;
  • Discovery;
  • Scientific and technical evidence;
  • Judges’ impartiality;
  • Judges’ competence; and
  • Juries’ fairness.

These elements were then combined to create an overall ranking.

The worst jurisdiction in the survey was Chicago/Cook County, Illinois,  followed by Los Angeles,
California, the state of California in general, the state of  Texas in general, and Madison County, Illinois.  Your humble logger's home turf of Philadelphia was ranked 13th worst.

The best? Survey says:

1. Delaware
2. North Dakota
3. Utah
4. Nebraska
5. Iowa