The U.S. litigation system, if left unchecked, will destroy the American spirit of enterprise and drain the U.S. economy. This is the stark warning issued today by the Chairman of Lloyd’s of London in an address to the Chicago business community. The U.S. is the largest international market for Lloyd’s underwriters, accounting for over a third of Lloyd’s premium income.
Speaking to the Union League Club of Chicago, Lord Levene called for a change in the law to stop a culture in which businesses are more prepared to cease trading than face the risk of litigation and individuals are living in fear of being sued.
The cost of the U.S. tort system has increased one hundred fold over the last fifty years and at current levels, tort costs are equivalent to a 5 per cent tax on wages. By 2005, it is estimated to rise further still — to $298 billion.(i) Lord Levene encouraged Congress to act against the awarding of excessive damages.
He said, “The U.S. system of civil litigation has spawned an American pastime, something that ranks alongside catching a game of baseball or basketball: going to court to sue other people, or companies, or organizations, or the Government. And as more and more people have gone to court, not only has the cost of doing so risen, but so too has the cost of insuring oneself or one’s company against litigation. To a foreigner like me, the drain that this system has on the U.S. economy is unbelievable.”
He continued, “When you read that companies have been sued for not warning customers that the coffee they are selling is hot, you begin to wonder what we cannot be sued for. On the plains of Wyoming, an obstetrician has shut his practice, not because of lack of demand — far from it — but because he found it impossible to pay for his insurance premium. As a result, the local rural hospital has faced added pressure — and pregnant women have had to travel further.(ii)
“That type of story strikes at the very heart of the American spirit for enterprise. We now have a system in which doctors cannot deliver babies for fear of being sued, and cannot afford to pay for the insurance cover. In such an environment, what hope is there to keep the spirit of risk-taking alive, to fuel the appetite for innovation and creation?
“We need to strike a balance, where individuals do have a means of redress, and where risk-takers have a safety net should things go wrong, but are not dragged into court at the merest slip. I am delighted that this issue is firmly back on the political agenda. I hope that Congress does act against excessive damages. I hope too that frivolous or groundless class actions, which reward the lawyer more than the plaintiff, become a thing of the past.
“Of all the challenges we face, the culture of litigation is one that we can tackle and solve. It is a culture which, if left unchecked, threatens to sap the American will. In the dark days of the Depression, Franklin D. Roosevelt memorably told Americans that ‘the only thing we have to fear is fear itself.’ We cannot allow ourselves to create a culture in which you have everything to fear, unless you are covered by insurance and have a good attorney.”
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