Costs related to tort litigation in the U.S. continue to rise, with little being done to bring them in line. Practical, pro-growth reforms will cut costs and restore fairness to our broken system.
Tort litigation imposes a significant financial burden on the economy and consumers. Major corporations are frequently targeted by rent-seeking attorneys specializing in mass tort lawsuits, often aimed at companies that provide medications, medical devices and essential products. Small businesses are also heavily affected, frequently finding themselves unable to sustain the cost of mounting a legal defense.
Whether the business is large or small, the expense, wasted time and fear of damage to their public image encourage blameless defendants to settle before going to court. Of course, it’s consumers who ultimately lose, as litigation costs are passed along in the form of higher prices.
Research sponsored by the U.S. Chamber of Commerce has put a dollar amount on tort costs, and it is distressingly high. The chamber’s Institute for Legal Reform (ILR) estimated costs and compensation in the tort system were a staggering $529 billion in 2022, equivalent to 2.1 percent of total annual GDP and amounting to $4,207 per household. The ILR found that commercial liability costs were growing at a rate of 8.7 percent annually, which would push them over $900 billion by 2030, if present trends are allowed to continue.
A recent study estimated that 4.8 million jobs were eliminated as a result of our nation’s litigious environment. That’s an enormous economic hit attributable to excessive tort litigation.
Tort costs are felt throughout the economy. They include not only the direct costs of litigation but also broader ripple effects. In healthcare, the fear of medical malpractice lawsuits causes doctors to focus on practicing defensive medicine. The result can lead to precautionary measures, such as unnecessary tests and procedures, to protect physicians from lawsuits. Litigation risks reduce industrial research and development investments, which slows down innovation and entrepreneurship. Insurance premiums rise across industries, as carriers must factor in the cost of excessive litigation.
Tort litigation is a necessary part of a functional legal system that holds blameworthy defendants accountable for their actions and fairly compensates plaintiffs who have suffered harm. However, the scenario we are facing today is decidedly out of whack. Too many suits are driven not by the legitimate intent to make injured parties whole, but by the aspirations of profit-motivated attorneys and their financial backers.
Addressing this costly issue will necessitate effective legislation and changes in judicial policy that will help reduce the number of meritless claims, provide more transparency regarding third-party litigation funding actions, and ensure that scientific testimony presented by plaintiff witnesses is accurate and unbiased. There are several reform bills floating around at the federal level aimed at curbing lawsuit abuse.
A few states have taken legislative action to correct some of the imbalances in the tort system, but much more work needs to be done. Congress needs to step up and take a leadership role by passing laws that will provide uniform protections nationwide.
The time for comprehensive tort reform is now. The excessive costs of the current system are a drain on the nation’s resources, and addressing this issue is essential for fostering a healthier, more dynamic economy.
