|
Costs to: Consumers
-
“It is argued that the excessive costs of this tort system
are borne by the American public. Undoubtedly, the legal
liability of tort law is carried by private firms. If the
distribution of tort costs is random, tort costs increase
the costs of a firm and decrease the profits of a firm in a
manner analogous to the corporate income tax. Most
economists think that the brunt of the corporate tax is
shifted to the consumer through higher prices or to the
worker if wages are reduced as a result of a decrease in
demand for the taxed item.”
(KRC: Nicolaides,
“U.S. Tort Reform and the Implications…” July 2004, p.
5, citing Tillinghast-Towers Perrin, U.S. Tort Costs: 2003
Update, Trends and Findings on the Costs of the U.S. Tort
System, 2003, p. 14)
-
“Like the corporate income tax, the litigation costs imposed
on businesses are passed on to consumers through a “tort
tax” that businesses add to the price of goods or services
to cover litigation costs”.
(KRC: Nicolaides,
“U.S. Tort Reform and the Implications…” July 2004, p.
5, citing Tillinghast-Towers Perrin, U.S. Tort Costs: 2003
Update, Trends and Findings on the Costs of the U.S. Tort
System, 2003, p. 14)
-
A
poor tort system, on the other hand, imposes excessive costs
on society, not the least of which is foregone production of
goods and services. PRI conservatively pegged excessive
tort costs at $589 billion in 2006, equivalent to a
7-percent tax on consumption or a 10-percent tax on wages.
This imposes an annual “excess tort tax” of $7,848 on a
family of four. Not only is the U. S. tort system
excessively costly-wasting resources each year equal to the
annual output of Illinois-it also applies to a very
inefficient method of compensating injured parties.
(McQuillan, Abramyan, and Archie, Jackpot Justice, p.
35. See pp.30 and 31 for a discussion of the five sources of
excessive tort costs)
Costs to: Families
-
“The annual price tag, or “tort tax,” for a family of four
in terms of costs and forgone benefits is $9,827. “(KRC:
Pacific Research Institute, "JACKPOT JUSTICE…”
p. 28) Note: Includes both direct AND indirect
costs.
-
The average American family of four pays a “tort tax” of
$3,280 a year.
(
KRC: Washington Legal Foundation, “Conversations
With …", Hantler, p. 3) Note: includes only
DIRECT costs. See above for both direct and indirect
costs.
-
“For an American family of average income, tort costs could
pay for more than three months of groceries, six months of
utility payments, or eight months of health care costs.”
(KRC:
Hantler, “Seven Myths…”, p. 6 )
-
“Tort reforms passed in the states between 1981 and 2000
prevented approximately 22,000 net accidental deaths from
occurring.”
(KRC:
Pacific Research Institute, "JACKPOT JUSTICE…”
p.15, citing Paul H. Rubin and Joanna M. Shepherd, “Tort
Reform and Accidental Deaths,” Emory Law and Economics
Research Papers , Nos. -5-17 (February 20, 2006)
-
The
average person pays for lawsuit abuse in many ways: higher
product prices, higher insurance premiums, higher taxes,
reduced access to health care, lower wages, lower returns on
investments in capital and land, and less innovation.
(KRC:
USTLI, Why Legal Reform Is Important, page 49)
Costs to: Employees
-
“For tens of thousands of loyal employees (soon perhaps
hundreds of thousands) who are building savings through
ESOPs and 401(k)s, punitive judgments leave them “Enron-ed.”
From asbestos alone, one could conclude—contrary to ATLA’s
assertion—that the tort system in America is dysfunctional
in the extreme.”
(KRC:
Hantler, “Seven Myths…” p.7, citing Steven
Hantler, Toward Greater Judicial Leadership on Asbestos
Litigation, Address before The Federalist Society’s National
Lawyers Convention (2002), in Asbestos Litigation and The
Role of The Courts (The Federalist Soc’y for L. & Pub.
Pol’y Stud., April 2003) at 5)
-
“It is estimated that asbestos bankruptcies have resulted in
the loss of 60,000 jobs. Even employees of bankrupt
companies, who have retained their jobs are injured by
asbestos liability, as many employees of these companies
have lost 25% of the value of their pensions. Moreover,
financial markets are closed to companies that could be
subject to bankruptcy caused by asbestos liability,
resulting in “capital costs” of $2.4 billion and 30,000 jobs
every year.
(KRC: Nicolaides,
“U.S. Tort Reform and the Implications…” July 2004, p.
5, citing Patrick M. Hanlon, “Asbestos Legislation: Federal
and State”, SJ031 ALI-ABA, p. 553-554)
Costs to:
Corporations
-
“[T]he plaintiffs’ bar has fundamentally changed the
litigation landscape in ways that threaten American
companies.” “[M]ore than just legal fees and verdicts are
at stake -- share value, brand equity and even a company’s
business model are also on the line.”
(KRC:
Hantler, “New Core Competencies”, p 19, “The
Trial Bar’s Secret Playbook”, p. 10)
-
Campbell et al. found that industries operating under
“liability-increasing reforms” such as comparative
negligence had less productivity growth: 5.1 percent less in
the amusement and recreation sector and 2.9 percent less in
the transportation sector.
(Thomas J. Campbell, Daniel P. Kessler, and George B.
Shepherd, “The Link between Liability Reforms and
Productivity: Some Empirical Evidence,” Brookings Papers
on Economic Activity; Microeconomics 1998, pp. 104-148)
-
“Why do so many large companies get pulverized in huge
lawsuits that turn into media circuses and government agency
investigations? [I]t’s because these companies do not fully
understand the trial bar’s playbook. Plaintiffs’ attorneys
are playing an elaborate game of three-dimensional chess;
companies are playing a game of checkers.”
(KRC:
Hantler, “New Core Competencies”, p 21)
-
“Lawsuits are now tried before shareholders and customers in
the court of public opinion. This is a much more
sophisticated – and dangerous – game. In fact, Trial
Lawyers, Inc. now conducts briefings for financial analysts
on its litigation portfolios against companies. Why? It
seeks to drive those companies to the settlement table or
risk losing share value.”
(KRC: Hantler,
“The Mounting Assault By Trial Lawyers, Inc.”, p. 7)
-
“After all, the public, and an important subset, jurors, are
predisposed to distrust business. Trial lawyers latch onto
this distrust, portraying their clients as unwitting victims
of corporate greed who deserve sympathy and help.
Implicitly, the trial lawyers’ message to jurors is that
helping the little guy will cost no one but the big, rich
corporation.”
(KRC:
Hantler, “New Core Competencies”, p 21)
-
To
put the loss and premium costs in perspective, for all
states combined they accounted for about $500 billion in
2006, roughly equal to 4 percent of U.S. gross domestic
product (GDP). The payouts for tort losses and insurance
premiums associated with state tort cases increased 60
percent in inflation-adjusted dollars during the decade from
1996 through 2005.
(KRC: TLT,
Authors calculations using data from A. M. Best Company)
-
“It is no accident that polls show the American public has a
high level of distrust for corporations – a phenomenon that
predates recent corporate scandals. It is not by
happenstance that people believe that companies place
profits ahead of safety and honesty. And it is no mere
coincidence that, primed with this misinformation, juries
are all too willing to vote for eye-popping damage awards.
Make no mistake: This is a well-orchestrated public
relations campaign by the trial bar and its surrogates –
self-anointed consumer and safety advocates – to undermine
public confidence in corporations and distort our legal
system.”
(KRC: Hantler,
“New Core Competencies”, p 21)
-
“Already vilifying corporations in the media has played a
role in influencing public perception of a lack of corporate
malfeasance. According to a 1998 public opinion survey, 62%
of Americans believe a corporation’s “no comment” about a
lawsuit means that company is covering up wrongdoing. In
addition, 48% of Americans are less likely to buy a
company’s products when that company is accused of
wrongdoing in a lawsuit.”
(KRC: Hantler,
“Trial By Newswire”, p 21)
-
The
Pacific Research Institute estimated the cost of
tort-related net accidental deaths to be $7.51 billion in
terms of forgone output in 2006.
(KRC:
McQuillan, Abramyan, and Archie, Jackpot Justice, p.
19)
-
On
the other hand, misdirected or excessive liability costs
cause companies to spend resources on settling lawsuits,
paying damage awards, paying higher insurance premiums, and
hiring additional lawyers-resources that might otherwise
have been spent on product and process improvements.
(KRC: USTLI,
Why Legal Reform Is Important, page 51)
-
The
Pacific Research Institute concluded that the suppression of
product R&D and process R&D due to excessive liability
resulted in lost sales of new products of more than $367
billion in 2006 alone.
(KRC:
McQuillan, Abramyan, and Archie, Jackpot Justice, p. 27)
Lawsuit Abuse Costs Contents
|
Previous
Page |
Next Page |
