Lloyd's Head: Tort System Sapping U.S.
By Lisa S. Howard, International Editor
NU Online News Service, April 10, 10:37 a.m. EST, Chicago?Runaway U.S. litigation activity, if left unchecked, will destroy the United States' spirit of enterprise and its economy, Lloyd's chairman warned the business community here.
Speaking to the Union League Club of Chicago, Lord Peter Levene urged tort reform because, he said, a growing number of companies would rather go out of business than face the risk of litigation and the high cost of insurance.
The cost of the U.S. tort system has increased a hundred-fold over the last 50 years, and at current levels, tort costs are equivalent to a five percent tax on wages, said Lord Levene in a statement released by Lloyd's, describing his speech. By 2005, these costs are expected to rise further?to $298 billion, he added.
Lord Levene encouraged Congress to act against the awarding of excessive damages.
He said civil litigation in the United States has become a national pastime. "[A]s more and more people have gone to court, not only has the cost of doing so risen, but so too has the cost of insuring oneself or one's company against litigation," he said.
"When you read that companies have been sued for not warning customers that the coffee they are selling is hot [the famous case against McDonald's], you begin to wonder what we cannot be sued for," Lord Levene said. "On the plains of Wyoming, an obstetrician has shut his practice, not because of lack of demand?far from it?but because he found it impossible to pay for his insurance premium."
As a result, pregnant women have had to travel further to a rural hospital, he said.
(In separate comments, during a press conference at the Risk and Insurance Management Society, Lord Levene commented that a case similar to the McDonald's coffee lawsuit was filed in Britain but was thrown out of court, with the judge stating that a person would expect his coffee to be hot and would complain if it wasn't.)
"We now have a system in which doctors cannot deliver babies for fear of being sued and cannot afford to pay for the insurance cover," he said during his Union League speech.
In such a litigious environment, he questioned how it will be possible to keep the spirit of risk-taking alive and fuel the appetite for innovation and creation.
"We need to strike a balance, where individuals do have a means of redress, and where risk-takers have a safety net should things go wrong, but are not dragged into court at the merest slip," he emphasized.
Lord Levene expressed hope that Congress acts against excessive damages and that frivolous or groundless class actions, which reward the lawyer more than the plaintiff, become a thing of the past.
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