Filed Under:Markets, Litigation

2010 Tort Costs Up, Driven by Deepwater Horizon

NU Online News Service, Jan. 27, 1:19 p.m. EST

U.S. tort costs climbed by 5.1 percent in 2010, driven by the April 2010 Deepwater Horizon drilling platform explosion and oil spill, according to a new Towers Watson study.

In its “2011 Update on U.S. Tort Cost Trends,” Towers Watson says that without the Deepwater Horizon event, tort costs would have decreased by 2.4 percent for the year.

“In total, theU.S.tort system cost $264.6 billion, which translates to $857 per person, versus $820 per person in 2009,” Towers Watson says in a statement. The firm adds that personal tort costs totaled $96.7 billion, while commercial tort costs were $168 billion.

The 2011 report analyzesU.S.tort costs from 1950 through 2010, with projections through 2013.

Towers Watson says overall economic growth in 2010 was 4.2 percent, and so the ratio of tort costs to gross domestic product rose in 2010 for the second consecutive year after five years of a decline in the ratio. “Since 1950, growth in tort costs has exceeded growth in GDP by an average of approximately two percentage points,” according to Towers Watson. 

Russ Sutter, Towers Watson consultant and author of the report, says in a statement that the “weakU.S.economy continued to have an influence on tort costs, which would have shown a decline minus the Deepwater Horizon event. The decline is most notable in the commercial auto line of business, perhaps the most economically sensitive coverage with a tort component.”

Sutter says insured commercial auto tort costs in 2010 were $16.5 billion, the lowest since 2000, when costs were $16.1 billion, and 19 percent lower than in 2004, when costs were $20.4 billion.

“Personal automobile-related tort costs showed a 1.1 percent increase in 2010, and we expect a slightly higher increase in 2011,” Sutter says. “We are also seeing higher asbestos costs being recognized byU.S.insurers.”

The asbestos costs, he says, are still below the peak years of 2002 and 2003.

“Medical malpractice trends continue to be mild, despite recent challenges and overturns of reforms that were implemented previously, and we do not see this changing in 2011,” Sutter continues. “The increasing employment of physicians by hospitals may also exert some downward pressure on medical malpractice tort costs through more coordinated patient care and claims defense.”

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