U.S. Tort Costs Dip In 2005, Analysis Shows

Higher growth predicted for 2006.

U.S. tort costs reached $261 billion in 2005, for a growth rate of approximately 0.5% and down significantly from the growth rate of 5.7% in 2004 and 5.5% in 2003, according to the "2006 Update on U.S. Tort Cost Trends." The study from the Tillinghast business of professional services firm Towers Perrin points out that the $1.1 billion increase over tort costs in 2004 is the smallest since 1997.

"It's difficult to say whether tort reform measures have impacted this slowdown in tort costs growth," says Russ Sutter, Tillinghast principal. "We have yet to see what, if any, impact the class-action reform legislation that was passed in February 2005 will have on future class-action claims -- as well as whether the newly elected Democratic Congress will have an impact."

Insured asbestos losses expanded by $7 billion in 2005, lower than increases of $7.3 billion in 2004, $10.2 billion in 2003 and $12.4 billion in 2002, the study says.

Looking ahead, the company forecasts growth rates in U.S. tort costs of 3.5% in 2006 and 4.5% in the two years after that. "The findings have shown that the trend toward more moderate increases in tort costs appears to be holding in 2006; however, continued lawsuits in the pharmaceuticals industry and obesity-related litigation, as well as asbestos claims and the backdating of options in U.S. corporations have the potential to change things going forward."

TAGS: Legislation
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