Tort costs eating away more personal wealth

By Ann Knef | Mar 17, 2006

Lisa Rickard House payment? Groceries? Investment? What would the average person do with an extra $997?

Lisa Rickard

House payment? Groceries? Investment?

What would the average person do with an extra $997?

While a recent report shows that U.S. tort costs have reached an all-time high and result in a $886 per person "tort tax," the disturbing news for West Virginians is that they're actually paying more in lawsuit costs built into goods and services than the average American.

"Just think what a typical household could do with that much more in their bank account," said Steve Cohen, executive director of West Virginia Citizens Against Lawsuit Abuse.

An annual report issued by the Tillinghast business of Towers Perrin found that U.S. tort costs reached a record $260 billion in 2004.

"U.S. Tort Costs and Cross Border Perspectives: 2005 Update" also predicts that this number will continue to increase over the next three years at approximately 6.5% per year due to recent trends in pharmaceutical litigation and potential litigation costs resulting from Hurricane Katrina.

At $997 per person, Cohen said that West Virginians pay more than $100 per person in tort costs above the national average.

"This shows how a legal system with scales of justice out of balance really hits home," he said.

The report also showed that tort costs grew by 5.9% in 2004, a slightly faster pace than in 2003 (5.5%).

Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform, said she was not surprised at the "bloated" cost of the U.S. tort system.

"Over the past year, we saw a federal judge uncover possible fraud in more than 10,000 silicosis lawsuits ... we saw a string of prosecutions due to massive fraud involved in the Fen-Phen litigation craze ... we saw state attorneys general deputize countless private plaintiffs' attorneys to target American employers ... and we saw an Illinois plaintiffs' attorney so awash in lawsuits that he actually sued himself by accident," said Rickard.

"America's civil justice system was created to ensure access to the courts for those who have truly been injured or wronged, and some of the $260 billion is made up of these cases," she said.

"Unfortunately, our courts are also being used as a legal roulette wheel by opportunistic plaintiffs' attorneys seeking to strike it rich at the expense of American businesses and the hard-working men and women they employ."

According to the report, growth rates for medical malpractice costs and asbestos claims showed signs of lessening. The impact of asbestos litigation totaled approximately $5 billion in 2004, which was less than each of the last three years. Medical malpractice tort costs totaled $28.7 billion in 2004, up from $26.5 billion in 2003.

"This report once again demonstrates the price every American pays for an out-of-control civil justice system that increases the costs of goods and services, impedes access to health care, and stifles state economies," said American Tort Reform Association President Sherman Joyce. "Without additional reforms at both the state and federal levels, we will continue to see this trend of constantly increasing tort costs."

The study also predicts that pharmaceutical litigation could play a large role in determining tort costs over the next several years with more Vioxx cases likely being decided in 2006 and 2007.

One of the first Vioxx cases in Brazoria County, Texas, resulted in a $253 million verdict against Merck. In addition to costs associated with pharmaceutical litigation, potential liability claims as a result of Hurricane Katrina could send tort costs soaring over the next several years.

"While some areas of tort costs such as asbestos and medical liability are beginning to lessen, personal injury lawyers are always looking to exploit new avenues for lawsuit abuse," Joyce said.

"Continued vigilance on the part of lawmakers, the judiciary, and state citizens is necessary to ensure fairness in the civil justice system."

Rickard said she expects the report to be assailed by attorneys who have a financial stake in civil litigation.

"The plaintiffs' bar will no doubt attack this latest report," said Rickard.

"Yet," she said, "we challenge them to provide a more accurate analysis of a tort system in which as many as 80 percent of claimants in asbestos suits aren't even sick; in which only a quarter of settlements in medical liability cases actually goes to victims; and in which the reputation for lawsuit abuse in some states has become so poor that jobs are being destroyed and economic growth has been stunted."

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