AIA Says 2002 Rise in U.S. Tort Costs Reinforces Need for Civil Justice Reform

December 18, 2003

The recent release of Tillinghast – Towers Perrin’s study of 2002 U.S. tort costs finds total system costs totaling $233 billion, up 13.3 percent from 2001, further reinforcing the need for additional, significant civil justice reforms at the state and federal levels, according to the American Insurance Association.

The 2002 numbers translate into a “tort tax” of $809 for every U.S. citizen, $87 more than in 2001, or; looked at another way, accounts for 2.23 percent of Gross Domestic Product (GDP).

“Clearly, the U.S. civil justice system is placing a tremendous cost burden on our entire economy, businesses and consumers alike,” said David Snyder, AIA vice president and assistant general counsel. “The costs are being paid not just in terms of money, but also through the costs of closed businesses and medical practices, lost jobs, higher prices, innovations not tried and day-to-day operations unproductively altered.

“What’s worse, we’re not even close to achieving the goals of a properly functioning tort system: to adequately compensate legitimate tort victims and deter bad actors,” said Snyder. According to Tillinghast, the U.S. tort system returns less than 50 cents on the dollar to people it is designed to help and only 22 cents to compensate for actual economic loss.

Not surprisingly, included among the top factors fueling 2002’s rise in tort costs were asbestos litigation exposure, class action lawsuits, and medical malpractice litigation. “These are all areas of the current lawsuit system that were the focus this year of key federal and state legislative initiatives by AIA and others in the business and insurance community, and will be again in 2004,” said Snyder.

“The debate over the future of the U.S. tort system has been comprehensively joined in the past year, not just through legislation, but also through federal court decisions, as in this year’s landmark U.S. Supreme Court decision in Campbell v. State Farm, which set clearly defined limits on the determination of punitive damage awards as well as increased public attention to and participation in state judicial elections,” added Snyder. “As the evidence of the unfairness and costs of our out-of-control legal system continues to mount, 2004 holds the promise of advancing significant civil justice reforms.”

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