By Michael Arnold Glueck
This is the column I’ve longed to write.
Most of us have known intuitively that excessive lawsuits hurt individuals, families, schools, mom and pop businesses, corporations and the country in the aggregate.
For 15 years I was a member of the board of an Orange County citizens group that alerted the electorate about the dangers of the “lawsuit tax” or “tort tax.” Many editors and readers, in agreement with our premise, would often ask if there was additional data that proved our point.
Now it is available from a number of sources including the Association of American Physicians and Surgeons.
An overly expensive liability system increases the cost of risk-reducing goods and services.
If comprehensive tort reform had been adopted, more than 77,000 additional people would be alive and contributing to the work force, conclude researchers Lawrence J. McQuillan and Hovannes Abramyan, in a study released by the Pacific Research Institute.
The static cost of litigation (damage awards, lawyers fees and administrative costs) amount to $328 billion per year, much higher than previous estimates from a Tillinghast-Towers-Perrin study.
There’s more. Litigation changes behavior, and these dynamic costs amount to some $537 billion per year, researchers conclude. These include defensive medicine ($124 billion), job productivity losses from reduced access to medical care ($39 billion), the impact of forgone research and development and lost sales of new products.
The loss to the economy of $865 billion ($328 plus $537 billion) per year constitutes an annual “tort tax” of $9,827 on the average family of four, according to a March Wall Street Journal story.
The tort tax is 27 times more than the federal government spends on homeland security and 30 times what the National Institutes of Health dedicate to research deadly diseases.
America’s tort costs amount to 2.2% of GDP, compared to 0.7% for the U.K., 0.8% for Japan and 1.1% for Germany.
In addition, lawsuits against corporations generate an annual loss of $684 billion in shareholder value.
Trial lawyers love to run ads in the county’s throwaway glossy magazines to perpetuate the myth that they are the knights in shining armor that save the poor and defenseless from the beasts in the forest. In truth, by the time they take their 40% off the gross amount of an award,plus expenses,precious little goes to the truly injured.
In fairness, there is no argument that many lawsuits are legitimate, justified and should be filed. However, there needs to be a more efficient system to screen out the weeds of greed and allocate a more reasonable percentage of awards to the truly harmed.
Cut or cap damages, limit the formation of classes and contingent fees and we would go a long way towards solving the problem.
The hard data is now available. It’s time to change the rules of legal engagement and combat.
Glueck comments on medical-legal issues and is a visiting fellow in Economics and Citizenship at the International Trade Education Foundation of the Washington International Trade Council.
