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.”