October 24, 2018

Costs and Compensation of the U.S. Tort System

This study looks at the total cost of torts paid in the U.S. tort system in 2016, using data on liability insurance premiums and estimates of the liability exposure of businesses and individuals that are uninsured or self-insured. The authors find that in 2016, the total costs and compensation in the system amounted to $429 billion.

That figure was equivalent to 2.3 percent of U.S. gross domestic product, or $3,329 dollars per household in America. But for that cost, Americans are getting a system that is extremely inefficient at delivering justice. Only 57 percent of the money spent in the tort system goes to plaintiff compensation, and that’s before contingency fees are subtracted.

ILR’s paper also illustrates that tort costs vary widely from state to state, ranging from just over $2,000 per household in the least expensive states like Maine and South Dakota, to over $6,000 in New York.

These findings provide a stark reminder of the deep structural flaws in America’s tort system, both at the national level and from state to state. This research and its reliable, transparent methodology should serve as a foundation for continued research into improving the performance of that system.

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