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.

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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 threesmall 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 2017 Lawsuit Climate Survey, 85% 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

Research
  • 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

  • 2017 Lawsuit Climate Survey: Ranking the States

    2017 Lawsuit Climate Survey: Ranking the States

    September 12, 2017

    The 2017 Lawsuit Climate Survey: Ranking the States was conducted for the U.S. Chamber Institute for Legal Reform by Harris Poll to explore how fair and reasonable the states' liability systems are perceived to be by U.S. businesses. Read More

All Results for Lawsuit Abuse Impact

  1. In the News Today - August 8, 2019

    August 08, 2019 | News

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

  2. 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

  3. 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

  4. 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

  5. Florida's Highest Court Mulls Chance to Address Assignment of Benefits Abuse

    March 28, 2019 | News

    The Florida Supreme Court is currently weighing whether insurers can implement policy provisions to restrict abusive assignment of benefits (AOB) practices.... Read More

  6. Georgia High Court Ruling Curbs 'Gotcha' Bad Faith Cases

    March 14, 2019 | News

    Earlier this week, Georgia's Supreme Court ruled that an insurer can't be sued for failing to settle a claim against its policyholder within policy limits unless the insurer received a valid settlement offer, Law360 reports.... Read More

  7. Stop Fraud, PROTECT Asbestos Victims

    March 14, 2019 | Blogs

    Fraud and abuse have become entrenched in the nation's asbestos bankruptcy trust system. Lawmakers must act to fix it.... Read More

  8. In the News Today - March 8, 2019

    March 08, 2019 | News

    "What to Do If Your Small Business Gets Sued and How to Reduce the Threat"... Read More

  9. Waking the Litigation Monster: The Misuse of Public Nuisance

    March 06, 2019 | Research

    Local governments are increasingly teaming up with contingency fee lawyers to influence public policy issues through litigation, largely through attempts to expand the public nuisance doctrine. ILR's research outlines the origins and development of public nuisance litigation, shows the ongoing efforts of activists and attorneys to morph this theory into an all-purpose cause of action, and calls on courts to reject expanding judicial authority inappropriately into the legislative and executive branches. ... Read More

  10. Containing the Contagion: Proposals to Reform the Broken Securities Class Action System

    February 25, 2019 | Research

    Record-high numbers of securities class action filings are swamping the protections that Congress created in 1995. In fact, the likelihood that a public company will be sued has never been greater, and the bulk of these lawsuits show the classic signs of litigation abuse. However, solutions are at hand. This research proposes regulatory and legislative action to contain the securities litigation contagion.... Read More