Lawsuit Abuse Impact

An effective legal system is critical to advancing free enterprise. Unfortunately, many lawsuits in this country lack merit or are downright abusive. Making matters worse, the lawyers who bring these types of suits tend to be the real beneficiaries—not their clients.

What You Need to Know:

Excessive Tort Costs Affect Everyone

America has the costliest legal system in the world. In fact, in 2016, costs and compensation paid in the U.S. tort system reached $429 billion.That figure was equivalent to 2.3% of U.S. gross domestic product, or $3,329 per household. This per household cost is even higher in certain states.

The U.S. Tort System Is Hugely Inefficient in Compensating Victims

Not only do the high tort costs drain the U.S. economy, America's litigation addiction provides little redress for injured parties. Economists have found that only 57% of the money spent in the tort system in 2016 went to plaintiff compensation, and that's before contingency fees are subtracted.

Lawsuit Abuse Takes a Disproportionate Toll on Small Businesses

A study of tort liability costs for small businesses indicates that litigation costs small businesses in America over $105 billion per year. These small businesses bear 81% of business tort liability costs but take in only 22% of revenue.

Because small businesses do not often have significant resources to defend themselves in drawn-out, costly litigation, being named in a frivolous lawsuit could mean a small business must close its doors for good. One in three small business owners have been sued or threatened with a lawsuit, according to a national opinion survey of voters by Penn Schoen Berland and Public Opinion Strategies.

Lawsuit Climates Matter and Drive Critical Business Decisions at Home and Abroad

Perceptions of the fairness and reasonableness of a state's liability system can influence business decisions about where to conduct, expand, or constrict operations or sales. According to the U.S. Chamber Institute for Legal Reform's 2019 Lawsuit Climate Survey89% of respondents felt that a state's litigation environment is likely to impact important business decisions at their companies.

The effects of lawsuit abuse extend beyond America's borders. High liability costs make U.S. businesses less competitive internationally. One study found that liability costs in the U.S. decrease manufacturing cost competitiveness by at least 3.2%. These factors have the potential to discourage foreign direct investment by making the U.S. less attractive to foreign capital.

The U.S. has one of the most robust legal systems in the world. However, America's tort system suffers from structural flaws and inefficient or unbalanced laws—both at the national and state levels—and American consumers are paying the price. Policymakers must take note and enact commonsense reforms to improve America's lawsuit climate.

We invite you to join the legal reform discussion by subscribing to the U.S. Chamber Institute for Legal Reform's news updates.


Suggested Resources

  • 2019 Lawsuit Climate Survey: Ranking the States

    2019 Lawsuit Climate Survey: Ranking the States

    September 17, 2019

    The 2019 Lawsuit Climate Survey: Ranking the States was conducted for the U.S. Chamber Institute for Legal Reform by The Harris Poll to explore how fair and reasonable state liability systems are perceived to be by U.S. businesses Read More

  • Costs and Compensation of the U.S. Tort System

    Costs and Compensation of the U.S. Tort System

    October 24, 2018

    The tort system cost Americans $429 billion in 2016. That's the principal finding from ILR's new research, which arrives at that shocking figure by examining data on liability insurance premiums and estimates of the liability exposure of businesses and individuals that are uninsured or self-insured. The research also indicates that only 57 percent of the $429 billion went to plaintiff compensation. The rest went to lawyers' fees and other expenses. Read More

All Results for Lawsuit Abuse Impact

  1. From the President's Desk: Americans Agree: Congress Should Protect Employers from COVID-19 Lawsuits

    May 08, 2020 | Blogs

    Business owners have taken the biggest economic punch of their lives these last few weeks. Now, as they are thinking about how to reopen, a major concern is lawsuits.... Read More

  2. ILR National Survey: COVID-19 Liability

    May 05, 2020 | News

    Americans across the political spectrum believe that employers must have protections from COVID-related lawsuits as they make decisions about how to safely and sustainably reopen their businesses, according to a new national survey released by the U.S. Chamber Institute for Legal Reform. ... Read More

  3. U.S. Chamber Institute for Legal Reform Poll Shows Clear Majority of Americans Support Protecting Employers from Coronavirus Lawsuits

    May 05, 2020 | Press Release

    Americans across the political spectrum believe that employers must have protections from COVID-related lawsuits as they make decisions about how to safely and sustainably reopen their businesses, according to a new national survey released today by the U.S. Chamber Institute for Legal Reform. ... Read More

  4. From the President's Desk: Timely, Targeted, Temporary Liability Protections Are A Must

    May 01, 2020 | Blogs

    Just a few weeks ago, one of the biggest issues businesses across the country grappled with was a shortage of workers in the strongest employment market in history. Today, those concerns seem like a lifetime ago. Now businesses---from family farms and corner coffee shops to big box stores---grapple with a new reality: protecting their workers and customers amidst a global pandemic. ... Read More

  5. California Chamber Adjusts Argument Against Coffee-Causes-Cancer Lawsuits

    April 23, 2020 | News

    In March, the California Chamber filed an amended complaint that it hopes will help business owners who are facing lawsuits associated with the state's Proposition 65, according to a report in Legal Newsline.... Read More

  6. Nuclear Verdicts, Litigation Trends Drive Spike in Trucking Insurance

    February 21, 2020 | News

    The trucking industry is facing a "potentially life-threatening" rise in insurance costs that is directly linked to an "astronomical increase in litigation," according to Insurance Business Magazine.... Read More

  7. In the News Today - August 8, 2019

    August 08, 2019 | News

    ILR Releases New Research Detailing Litigation Threat to Louisiana Economy... Read More

  8. Litigation vs. Restoration: Addressing Louisiana's Coastal Land Loss

    August 08, 2019 | Research

    The oil and gas industry is a fundamental driver of Louisiana's economy, but it is currently threatened by an unprecedented number and variety of coastal land loss litigation. This paper documents the history of the oil and gas industry in Louisiana, the inconsistent pressures being exerted by landowners and the state, and the array of litigation against it. The paper also calls on state and local officials to collaborate with companies to restore the state's coastline, rather than engaging in costly litigation that detracts from true remediation and restoration efforts.... Read More

  9. Florida AOB reform legislation moves “farther in the process than any reform efforts have before”

    April 08, 2019 | News

    As the Florida House prepares to debate Assignment of Benefits (AOB) reform this week, realtors' advocacy group Florida Realtors voiced its support for House Bill 7065 and Senate Bill 122. Both of those bills promise to reduce insurance premiums for policyholders by cracking down on AOB abuse, writes the Florida Record.... Read More

  10. In the News Today - March 29, 2019

    March 29, 2019 | News

    Judge Allows Advertising Suit Against Nestle to Advance; "Climate Litigation Can Backfire And Harm Cities"... Read More