In recent years, the rising costs of lawsuits in America have become a significant concern for businesses and individuals alike. The U.S. tort system, which provides a legal framework for individuals to seek compensation for harm caused by others, has seen its costs escalate at an alarming rate. According to the U.S. Chamber of Commerce Institute for Legal Reform's 2024 update on tort costs, these expenses amounted to a staggering $529 billion in 2022, representing 2.1% of the U.S. GDP and $4,207 per American household. This highlights the growing financial burden that the tort system places on the economy.
The tort system plays an important role in compensating victims and deterring irresponsible behavior. However, the costs associated with it have been rising faster than both inflation and GDP growth. From 2016 to 2022, tort costs grew at an annual rate of 7.1%, outpacing the average annual inflation rate of 3.4% and GDP growth of 5.4%. This rapid increase is largely driven by commercial liability, which has been growing at an even faster rate of 8.7% per year.
Tort Costs in America: Data Center
A major factor contributing to the escalating costs is the manipulation of the legal system by some plaintiffs' attorneys who prioritize personal gain over justice. These attorneys often employ aggressive tactics to secure large settlements or verdicts, which can inflate the overall costs of litigation. Additionally, the rise of third-party litigation funding has further exacerbated the situation. Outside investors finance lawsuits in exchange for a share of the proceeds, encouraging more litigation and higher settlement demands, which drive up costs.
Driving Legal Reform: Enhancing Transparency and Accountability
The U.S. Chamber of Commerce has been actively addressing these challenges through various initiatives. One such effort is the Institute for Legal Reform's advocacy for civil justice reform, which aims to reduce the costs and inefficiencies of the legal system. By promoting legislative changes and supporting legal principles that limit excessive litigation, the Chamber seeks to create a more predictable and fairer legal environment.
Moreover, the Chamber's broader initiatives highlight the impact of rising costs on Americans. For instance, the Chamber's efforts to combat regulatory micromanagement and promote free enterprise are closely tied to the issue of tort costs. Excessive regulations and litigation can stifle economic growth and increase the cost of doing business, ultimately affecting consumers through higher prices and reduced choices.
The Chamber also emphasizes the importance of transparency and accountability in the legal system. By advocating for the disclosure of third-party litigation funding and opposing abusive class actions, the Chamber aims to curb practices that contribute to the rising costs of lawsuits.
Bottom Line
In conclusion, the rising costs of lawsuits in America, driven by the inefficiencies of the tort system and the actions of some plaintiffs' attorneys and litigation funders, pose a significant challenge to the economy. The U.S. Chamber of Commerce is at the forefront of efforts to address these issues through civil justice reform and other initiatives that promote a fair and efficient legal system. By reducing the financial burden of litigation, the Chamber seeks to promote an environment that encourages innovation, investment, and economic growth, ultimately benefiting all Americans.
