Study: Tort Costs Still Edging Up, Albeit More Slowly

Study: Tort Costs Still Edging Up, Albeit More Slowly

NU Online News Service, Jan. 17, 3:22 p.m. EST?The annual growth in U.S. tort costs saw a "dramatic reduction" in 2003?thanks in part to a slowing trend in commercial lines and asbestos costs?but tort expenses could still approach $1,000 per U.S. citizen by 2006, according to a new study.[@@]

The report from Stamford, Conn.-based Towers Perrin's Tillinghast consulting unit found that U.S. tort costs grew by 5.4 percent in 2003 to $245.7 billion. On a per-U.S. citizen basis, that translates into $845 per person.

In its study, Tillinghast defines U.S. tort costs as incorporating three components: benefits paid or expected to be paid to third parties, defense costs and administrative expenses.

The 5.4 percent increase in tort costs in 2003 indicates a slowing trend?in 2002, the costs were $233.2 billion, a 13.5 percent rise from the previous year, and in 2001, tort expenses were $205.5 billion, up 14.7 percent from the year before.

The reduction in 2003, according to the Tillinghast report, is reflective of more moderate tort cost trends in commercial lines of insurance, where asbestos-related costs accounted for large increases in tort costs during 2001 and 2002.

Insured asbestos losses made up $8.6 billion of the overall 2003 tort costs, showing a slowing trend from 2002, when asbestos losses were $10.2 billion. But despite this slowing down, Tillinghast noted that recent asbestos losses are still far higher than those in 2000 ($2.2 billion) and 2001 ($5.5 billion).

The Tillinghast study also noted that medical malpractice tort costs continue to outpace increases in overall U.S. tort costs. In 2003, medical malpractice tort costs were $26.5 billion, up from $24.4 billion in 2002. This escalation in medical malpractice costs has contributed to the increase in U.S. health care expenses, the report said.

Despite the report findings of moderating growth in U.S. tort costs, Tillinghast forecasts that the absolute tort figure continues to rise and that without "sweeping structural changes," annual increases would be in the 5-to-8 percent range for the next several years. Such yearly increases could bring tort costs to $1,000 per each U.S. citizen by 2006, according to Tillinghast.