FactMyth

MYTHBUSTER! Litigation, Costs and Insurance 

The U.S. economy is booming, corporate profits and executive salaries are at record levels, most injured Americans do not file lawsuits, liability costs for businesses are minimal, and the premium-gouging practices of the insurance industry have been widely exposed. With these facts in mind, it may be hard to understand why "tort reform" remains on the national agenda.

One major reason is the large number of industry-sponsored "think-tanks," PR and lobbying firms driving this cruel effort. They are backed by multi-millions of dollars from the same insurance, tobacco, pharmaceutical, oil, HMO and other corporate interests wanting to escape liability for wrongdoing. Their message, which often focuses on anecdotal "oddball" cases, has created a false perception that the system is overflowing with frivolous consumer lawsuits. Here are the facts:

Contrary to popular myth, very few injured Americans file lawsuits.
Only 10 percent of injured Americans ever file a claim for compensation, which includes informal demands and insurance claims. Only two percent file lawsuits. Compensation for Accidental Injuries in the United States, Rand Institute for Civil Justice (1991).

Between 44,000 and 98,000 Americans die each year (and 300,000 are injured) due to medical errors just in hospitals. Yet eight times as many patients are injured as ever file a claim; 16 times as many suffer injuries as receive any compensation. National Academy of Sciences Institute of Medicine, To Err is Human, (1999); Harvard Medical Practice Study (1990). 

The number of personal injury ("tort") lawsuits is steadily dropping, while "contract" suits (businesses suing businesses ) are on the rise. Tort suit filings dropped 9% between 1989 and 1997; contract suits went up 9% between 1995 and 1997. Tort suits now comprise only 7.5% of all cases filed in U.S. state courts. National Center for State Courts (1997).

Liability costs for businesses are minuscule and dropping. 
Annual insurance and claims costs for U.S. businesses were only $5.25 for every $1,000 in revenue in 1997. Moreover, these costs have been declining significantly – down 37% over the last five years. Ernst & Young and the Risk & Insurance Management Society (1998).
Products liability insurance costs, per $100 of a retail product, are only 16¢ – a tiny fraction equaling less than 2/10 of 1 percent. Adjusted for inflation, products liability insurance costs have fallen about 75 percent over the last decade. Consumer Federation of America (1998).

Tort law limits do not reduce insurance rates. The only study ever conducted of the impact of tort restrictions on insurance rates in every state in the country finds absolutely no correlation between enactment of "tort reform" and insurance prices. Some states without "tort reform" have experienced low rate increases while other states with major "tort reform" laws have seen very high rate increases relative to national trends. Premium Deceit --the Failure of "Tort Reform" to Cut Insurance Prices, Citizens for Corporate Accountability & Individual Rights (1998)
 

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