Cost to Consumers

Cost to Consumers and Taxpayers

• The U.S. tort system costs every man, woman and child in the U.S. a yearly a “tort tax” of $835—that’s $3,340 for a family of four! (The 2008 Update on U.S. Tort Cost Trends, Tillinghast-Tower Perrin, December 2008)
• American tort litigation is costing the nation almost 2% of gross domestic product annually. (The 2008 Update on U.S. Tort Cost Trends, Tillinghast-Tower Perrin, December 2008)
• In the past 50 years, direct U.S. tort costs have risen more than 100-fold while population has not even doubled and economic output has risen by only 37-fold. (U.S. Tort Liability Index 2008 Report, Pacific Research Institute, 2008)
• Excessive tort costs amount to about $589 billion – equivalent to a 7% tax on consumption or a 10% tax on wages. (U.S. Tort Liability Index 2008 Report, Pacific Research Institute, 2008)
• America’s tort system costs 30 times the National Institutes for Health’s budget to cure deadly diseases, 27 times federal spending on Homeland Security, and 13 times Department of Education funding. (Pacific Research Institute, Jackpot Justice: The True Cost of America’s Tort System, 2007)

Cost to Our Children

• While concern grows about an obesity epidemic among American children, fear of litigation has led schools from Massachusetts to California to remove tall slides, swings and teeter-totters from playgrounds and even ban children from playing games like tag at school recess. “No running” signs have even been posted at school playgrounds in Broward County, Florida. Willett Elementary in Attleboro has banned tag, touch football and other “chasing” games that might “pose the risk of injury as well as liability to the school.” (“Tagged Out” The Sun Chronicle, October 17, 2006; “Our View on Children’s Welfare: All Work and No Play… Makes Kids Fat and Passive” USA Today, November 28, 2006)
• Four out of five (82%) recently surveyed educators believe that an atmosphere of defensive teaching currently exists, due to the current legal climate. Nearly two-thirds of teachers (63%) and principals (64%) believe that the increased potential for legal challenge by students or parents has hurt their ability to do their job. Roughly half of teachers indicate that their willingness to participate in extracurricular activities (55%), maintain order in the classroom (58%), or create a good learning environment (48%) has been affected to some degree by fear of legal challenge. (Evaluating Attitudes Toward the Threat of Legal Challenges in Public Schools, Harris Interactive, March 10, 2004)

Cost to Health Care Providers and Patients

• PricewaterhouseCoopers calculates that medical liability concerns increase annual health care spending by $124 billion in 2006 dollars. The additional cost of liability-based health care costs adds 3.4 million Americans to the rolls of the uninsured. (“Jackpot Justice: The True Cost of America’s Tort System,” Pacific Research Institute, March 27, 2007)
• Ten percent of every dollar spent on health care is attributed to the costs of liability and defensive medicine. (“The Factors Fueling Rising Healthcare Costs 2006” PriceWaterhouseCoopers, January 2006)
• An estimated $50 billion per year is spent on unnecessary test procedures designed primarily to guard doctors and hospitals against malpractice claims. (Fear of Litigation Study, Conduced by Harris Interactive, Final Report, April 11, 2002)
• Nationwide, 45% percent of hospitals reported that the professional liability crisis has resulted in the loss of physicians and/or reduced coverage in emergency departments. (American Hospital Association, Professional Liability Insurance Survey 2003)
• Almost 80 percent of Americans concerned that frivolous lawsuits have made it harder for them and their families to get affordable health care coverage. (Sick of Lawsuits National Survey, Conducted by Public Opinion Strategies, August 16-18, 2005)
• Quality and access to health care is being threatened in many states. The American Medical Association has identified 20 states as presently facing a medical liability crisis. ("Mass. Named State in Medical Liability Crisis," American Medical Association, June 14, 2004)
• Women in almost half of the states in the country are experiencing disruptions in obstetrical care. The American College of Obstetricians and Gynecologists' has identified 23 states where medical liability problems threaten women's access to physicians delivering their babies, a figure that is up from 16 states two years ago. ("ACOG's Red Alert on OB-GYN Care Reaches 23 States," American College of Obstetricians and Gynecologists, August 26, 2004)
• The impact of lawsuits on the health care system has encroached on critical doctor-patient decisions, such as deciding on course of treatment. More than 90% of high-risk medical specialists said that liability pressures were important in their decision to stop providing certain services. (American Medical Association Survey, PR Newswire, April 3, 2003)

Cost to Our Economy and Small Businesses

• A majority of senior attorneys (63%) report that the litigation environment in a state is likely to impact important business decisions. (State Liability Systems Ranking Survey, Harris Interactive, March 19, 2008)
• Fear of litigation is among the top issues listed by senior executives who manage internationally owned U.S. businesses whereas U.S.-owned companies that operate in other advanced economies do not express the a similar concern. (The U.S. Litigation Environment and Foreign Direct Investment, U.S. Department of Commerce, October 29, 2008).
• There is the perception that, at least in some contexts, other countries’ legal systems are more predictable and that the legal costs of doing business are substantially less. These perceptions exist even though the overall high quality of the U.S. legal system is also well recognized internationally. (The U.S. Litigation Environment and Foreign Direct Investment, U.S. Department of Commerce, October 29, 2008).
• Small businesses bear 69 percent of business tort liability costs but take in only 19 percent of business revenues. (Tort Liability Costs for Small Business, Institute for Legal Reform , May 17, 2007)
• The cost of the tort system to individual small businesses is $20 per $1,000 of revenue. In other words, a small company with $1 million in annual revenues will pay, on average, $20,000 in annual tort related costs. (Tort Liability Costs for Small Business, Institute for Legal Reform , May 17, 2007)
• Small businesses pay $20 billion of their tort costs out of pocket, as opposed to insurance. (Tort Liability Costs for Small Business, Institute for Legal Reform , May 17, 2007)
• Very small businesses, those with less than $1 million in revenues, pay $31 billion in tort liability costs, but take in only 6 percent of business revenues. (Tort Liability Costs for Small Business, Institute for Legal Reform , May 17, 2007)
• Small businesses typically spend about $5,000 to settle one legal dispute—about 10 percent of a small business owner’s average salary. (“Use of Lawyers” National Federation of Independent Business National Small Business Poll, Vol. 5, Issue 2, 2005)
• In a recent survey from the National Federation of Independent Business (NFIB), liability costs rank second only to healthcare costs as problems facing small businesses. Four years ago, liability costs ranked No. 13 on their problem list. The U.S. Chamber of Commerce estimates that U.S. small businesses spend $88 billion per year on litigation costs. (Houston Business Journal, December 18, 2006)
• Small businesses are responsible for three-quarters of all new jobs created in the U.S economy. More employee benefits could be provided or jobs created if the average small business didn’t have to spend over $17,000 a year on an out of control lawsuit system. (ILR/NERA Report “Tort Liability Costs for Small Business,” June, 2004)
• Lawsuits and liability insurance cost American businesses $128.8 billion each year. An estimated 4.4 million U.S. small businesses pay more than half of those costs but take in only 25 percent of business revenue. Because many small businesses don’t have the money to buy insurance, they are hurt the most by lawsuit abuse. These very small businesses on average pay 44% of tort liability costs out of their own pocket. ((ILR/NERA Report “Tort Liability Costs for Small Business,” June, 2004; Lawsuits costly for U.S. small businesses, Washington Times, June 9, 2004)
• Foreign companies are shunning the United States in large part due to the U.S. culture of litigation. European stock markets have now surpassed American stock markets in aggregate market capitalization for the first time since World War I. A recent study conducted by McKinsey and Company identified lawsuit abuse as one of the most crucial problems threatening New York as a financial center. A survey of chief executive officers cited in the study found that fully 85% of chief executives preferred the litigation environment in London to New York. (“Blocking Markets” New York Sun, April 19, 2007; “Litigation Puts Wall Street’s World Status at “Tipping Point” Financial Times, April 6, 2007)