The US still far exceeds the tort costs of other industrialised nations.
Tort costs in the United States reached a record $260bn in 2004, up about $14.4bn from a record set in 2003, according to the “US tort costs and cross-border perspectives: 2005 update” from the Tillinghast business of Towers Perrin.
The report analyses data from 1950 through 2004, with projections through 2007. US tort costs grew at a slightly faster pace in 2004 (5.9%) than in 2003 (5.5%), but still well below the high average growth of 14% seen in 2001 and 2002. Asbestos claims contributed to the surge in tort costs earlier this decade, but were less of a factor in 2004. Insured asbestos losses, which totalled approximately $5bn in 2004, were less than in each of the prior three years.
The report predicts an increase in the tort costs over the next few years, with the total rising to nearly $315bn by 2007 as they expand more rapidly than the general economy. The Bush Administration has referred to earlier Tillinghast's calculations in its proposals for tort reforms, contending that the cost of torts is a significant obstacle to economic growth.
The study also examined tort costs in several other industrialised nations and found that US tort costs exceed those other countries' by a sizeable margin, when measured as a ratio to economic output (measured by GDP). The US had a 2.2% ratio of tort costs to GDP, compared with Germany (1.1%), Japan (0.8%) and the UN (0.7%). “Our comparison of international tort costs was somewhat surprising, since we had been hearing anecdotally that tort cost trends in the US were making their way overseas. We saw a greater disparity in tort costs than we were expecting between the US and other countries,” said Steve Lowe of Tillinghast.
Some critics say that Tillinghast's calculations include salaries of insurers' CEOs, costs which cannot be attributed to the tort system. Further, payments that don't involve the legal system, such as claims from auto accidents, are included.