Study: Tort Claims Climb

Jan. 13, 2005
In 2002 tort costs in the U.S. translated into $809 per U.S. citizen or $233 billion. That's a $27.4 billion increase over 2001, according to the U.S. Tort Costs: 2003 Update by Tillinghast - Towers Perrin. Additionally, costs could soar to $1,000 per ...

In 2002 tort costs in the U.S. translated into $809 per U.S. citizen or $233 billion. That's a $27.4 billion increase over 2001, according to the U.S. Tort Costs: 2003 Update by Tillinghast - Towers Perrin. Additionally, costs could soar to $1,000 per citizen by 2005. The study, which tracks the cost of the U.S. tort system back to 1950, also found that the biggest contributor to the rise in tort costs was liabilities linked to asbestos claims ($11 billion). Other contributing factors: class action lawsuits and large claim awards, an increase in the number and size of shareholder lawsuits against boards of directors, an increase in medical cost inflation leading to higher costs of personal injury claims and medical malpractice lawsuits. Other findings:

  • As of 2002, U.S. tort costs accounted for 2.23% of GDP, the highest cost-to-GDP ratio since 1990.
  • While the cost of the U.S. tort system has increased a hundred-fold over the last 50 years, GDP has grown by a factor of only 35, and population has grown by a factor of less than two.
  • Tort costs increased by a total of 30% in the last two years -- the largest two-year increase since 1986/1987.
"The spike in tort cost growth during the past two years is like nothing we've seen in the last 15 years," says Jeanne Hollister of Tillinghast. "In the past, the government and industry responded with tort reform measures, public opinion campaigns against excessive jury awards, a greater focus on safety and risk management, and changes in insurance company claim practices. The current surge in tort costs may lead to similar reactions in the near future."

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