States Ranked in Expansively
Updated Economic Study:
Economic Performance Tied Directly to Health of
Legal System
Terrific barometer
for CEOs considering business locations and
expansion in tough economy, says AJP President Dan
Pero
WASHINGTON, DC — The American
Justice Partnership Foundation (AJPF) praised the
newly released
U.S. Tort
Liability Index: 2008 Report, published
by the California-based
Pacific Research
Institute (PRI), as “one of the best
new tools to help corporate leaders – and state
lawmakers and judges – better understand the direct
link between a state’s legal system and its economic
health.”
The new study, which follows on PRI’s
groundbreaking
2006 Index,
provides new analysis on all 50 states based on
multiple variables of empirical data measuring both
inputs (what states have done to reform their legal
systems) and outputs (the cost/risk factors
currently facing states based on their legal
systems).
“The 2008 study confirms the
predictions made by the 2006 study – when states
take action to reform their tort lawsuit systems,
they better position themselves for economic growth
by lowering tort costs,” said
Dan Pero,
AJP president. “CEOs and corporate planners now have
a better tool to assist them with tough decisions
about where to add jobs and expand operations,
particularly during this time of economic
uncertainty.”
“The fact is, enacting and protecting
basic legal reforms directly impacts the bottom line
for businesses in terms of costs, risks, and
prospects for future investment,” Pero added.
The new study, authored by
PRI’s Dr.
Lawrence J. McQuillan and
Hovannes Abramyan, is a significant
refinement of the 2006 study, and now includes two
state rankings lists.
|
Output Rankings:
Ranks states based on cost/risk analysis,
reviewing hard tort costs and losses in
discreet categories. According to McQuillan,
the output ranking is “a good snapshot of a
state’s current status in terms of liability
risks and tort health.” |
|
Best
Output State in 2008: North Dakota; Worst
Output State: Florida |
|
Input Rankings:
Ranks states based on tort and other legal
reform measures “on the books.” According to
McQuillan, the input ranking is “a solid
predictor of a state’s future performance on
the output side, because the more willing a
state is to enact reforms and then
protect them through the legislature and
courts, the better the economic indicators
will become over time.” |
|
Best Input
State in 2008: Colorado; Worst Input State:
Rhode Island. |
The empirical data examined in the
study includes: the extent of monetary tort losses
in each state, including specific categories such as
homeowners’ tort losses, farm tort losses, and
automobile-related losses; the existence of caps on
certain damage awards; the enactment of substantive
legal reform efforts by state legislatures; the
adoption of procedural and structural reforms to
discourage lawsuit abuse; and a more general
analysis of the litigiousness of each state.
The PRI
study resulted in an index score for each state to
arrive at the two overall state rankings. The data
reveals the previously hidden and obscure strengths
and weaknesses of the civil-justice system in each
state.
New State Ranking Category
Based on the composite analysis from
both rankings, the study places the states in four
categories – Saints, Sinners, Salvagables, and
Suckers.
|
Saints: States that have enacted
aggressive legal reform measures, protected
those measures in the legislature and courts
and, as a result, are well-positioned to
experience economic benefits. |
|
Top Saints in 2008:
Alaska, Mississippi, Ohio, Tennessee, and
Utah |
|
Sinners: States that have
relatively high monetary tort losses and/or
risk of litigation, and relatively weak tort
laws on the books. These states are
poorly positioned for future growth. |
|
Worst Sinners in 2008:
California, New York, Illinois, and
Massachusetts |
|
Salvageables: States that have
moderately high monetary tort losses and/or
risk of litigation, yet have moderate to
strong tort rules – typically as a result of
recent reforms. |
|
Top Salvageables in 2008:
Colorado, Florida, Georgia, Michigan, and
Texas |
|
Suckers: A new category for 2008,
these are states that have weak tort rules
on the books because they currently have low
to moderate tort losses and/or risk of
litigation and, therefore, “foolishly
believe that they are not vulnerable and
reforms are not needed,” according to the
study. |
Sucker States for 2008:
Iowa, North Carolina, Virginia, and New
Mexico |
“Reforms Need Time to Work”
In an interview with AJPF, McQuillan
points out that “behind the data are fundamental
concepts that CEOs and others in decision-making
positions should consider. First, when legal reforms
are enacted, it will take two to five years for the
positive effects to filter through the system in the
form of reduced insurance rates, lower employment
costs, and the like.”
“Second, the plaintiffs’ lawyers will
attempt to knock down the reforms through lawsuits
and lobbying,” said McQuillan. “A flurry of lawsuits
challenging legal reform measures creates
uncertainty in the system. Insurance rates are not
likely to come down in a time of uncertainty. Then
the lawyers come back and say the reforms were not
needed and had no effect. It’s a self-fulfilling
prophecy and a deliberate political strategy .”
“Finally, when one state in a region
of the country enacts legal reforms, that puts a
tremendous amount of pressure on neighboring states
to follow, due to the highly competitive nature of
state economics,” McQuillan added. “In today’s
challenging economy, jobs and growth are
all-important, and state leaders know that.”
Audio Interview with Lawrence McQuillan on 2008 Report
