The Frivolous Case for Tort Law Change

Publication Date: May 2005

Publisher: Economic Policy Institute

Author(s): Lawrence Eisenbrey; Lawrence Chimerine

Research Area: Law and ethics

Type: Brief

Abstract:

A key proponent of the view that the tort system has large negative effects on the economy is Tillinghast-Towers Perrin, a company whose clients include most of the world's largest insurance companies. Tillinghast (or TTP) has for many years published a report on what it claims to be the costs of the U.S. tort system.

The TTP reports are one-sided. TTP admits that the tort system has benefits (e.g., the peaceful resolution of disputes, deterrence of unsafe products and practices) but does not estimate their magnitude. It even suggests that "compensation for pain and suffering is seen as beneficial to society as a whole." But TTP makes no attempt to measure the benefits of the tort system and offers no insight into whether the tort system's costs outweigh its benefits (TTP 2004, 10).

This paper examines the major problems with TTP's estimate of tort costs and challenges the assertions on the economic effects of the tort system made by TTP and, in turn, by the Council of Economic Advisers. It finds that CEA has presented no evidence that the tort system can properly be blamed for excessive liability insurance premiums, reduced wages or employment, lower corporate profits or productivity, reduced research and development, or a failure to introduce new products. Most important, it concludes that the tort law changes advocated by the president will not have any substantial positive effect on national employment, research and development, productivity, or job creation.