Louisiana Record

Tuesday, August 20, 2019

Tort costs are harming businesses and individuals in every state, Institute for Legal Reform study says


By Carrie Bradon | Oct 28, 2018

WASHINGTON, D.C. — Huge inefficiencies in the U.S. tort system are posing as a major burden on the average American family, says a new study by the Institute for Legal Reform, an affiliate of the U.S. Chamber of Commerce.

The institute's study looks at data from 2016 and finds that the total costs and compensation paid out in the tort system amounted to $429 billion, or 2.3 percent of the U.S. gross domestic product.

According to the study, only 57 percent of the total was paid out as compensation for plaintiffs; the remaining 43 percent was spent on the costs of litigation, insurance and risk transfer.

The institute says that although the tort system was designed to compensate for harm suffered and prevent future harm from taking place, the amount of money being paid out on a yearly basis had gotten out of control because "the costs and compensation paid in the tort system are not routinely measured and reported."

The report looks at liabilities related to personal injury, property damage, commercial negligence, automotive accidents, consumer and investor protection, labor and employment, civil rights, anti-trust concerns, and more.

Across the country, the average cost and compensation per household was $3,329, the report says. Louisiana had a higher-than-average per household total, at $4,015, though less than the $6,257 high of Washington D.C. and New York's $6,066.

Florida was recorded with the highest percentage of its gross domestic product tied up in tort system costs, at 3.6 percent, while Alaska, Washington and Wyoming had the lowest at less than 1.8 percent each.

The institute argues that the high tort system costs are harmful for the country's economy.

“The risk of frivolous or abusive litigation can discourage the development and sale of new products and can slow innovation; high liability costs can also make businesses in the United States less competitive internationally,” the study says.

The excessive tort system costs also lead to lower worker productivity and employment when employers are held liable under the tort system, the institute says.

While the tort system allows individuals who have been harmed physically or otherwise to seek compensation that they rightly deserve, it also must be brought into check if the states are ever expected to be paying less toward these costs, it says.

The Institute for Legal Reform and Louisiana Record are both owned by the U.S. Chamber.

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Organizations in this Story

U.S. Chamber Institute for Legal Reform (ILR) U.S. Chamber of Commerce

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