'04 Tort Costs Set Record At $260B

U.S. civil litigation costs reached a record $260 billion in 2004, an increase of $16 billion over 2003, according to figures released by a consulting firm.

The Stamford, Conn.-based Tillinghast business of Towers Perrin found the cost of the activity grew at a slightly faster pace in 2004 (5.9 percent) compared to 2003 (5.5 percent), but was below the high growth rates seen in 2001 and 2002, which averaged 14 percent each year.

In 2004 the 5.9 percent growth rate in tort costs was below the overall U.S. economic growth of 6.6 percent as measured by the Gross Domestic Product, Tillinghast said.

Since 1950, growth in costs associated with lawsuits has exceeded gross domestic product growth by an average of 2 percent to 3 percent, the report asserted

Asbestos injury litigation was less of a factor in 2004 than in previous years in the decade, totaling about $5 billion in the year, which was less than in each of the prior three years.

Tillinghast principal Russ Sutter said there were several years when insurance companies significantly increased their cost estimates for asbestos-related liabilities. "Our studies indicate that asbestos-related tort costs are still a major issue," Mr. Sutter said. "However, there were fewer upward reevaluations during 2004."

Medical malpractice lawsuit costs totaled about $28.7 billion in 2004, up from $26.5 billion in the previous year. But that represents a slowing from the average annual increase of 11.7 percent in such costs that has been recorded since 1975. "The growth rate of medical malpractice costs continues to lessen," Mr. Sutter said. "Some of the moderation may be attributable to various state reforms enacted during the past decade."

Commercial tort costs have continued to outpace tort costs since 1990, the report said, even after removing the asbestos factor.

Mr. Sutter said commercial interests will play a major role in future tort reform battles facing consumer advocates and the trial bar. "Consumers will sit on the sidelines and may be confused by the whole matter," he said. "This is in direct contrast to past debates where personal lines costs were rapidly increasing," he said.