Even the WSJ Agrees: The Chamber’s Tort “Tax” is Bogus
This WSJ Law Blog post speaks for itself:
How Much Are Frivolous Lawsuits Really Costing You?
What Is Lawsuit Abuse Costing Your Family?” asked a full-page ad that ran this week in several major newspapers, including The Wall Street Journal. The alleged answer: $3,520 a year.
The ads, paid for by the U.S. Chamber Institute for Legal Reform, a Washington, D.C., pro-business group, also ran in the Chicago Tribune and the Washington Post, and appear on WSJ.com.
The dollar figure comes from an annual estimate of tort costs by the Tillinghast arm of consulting firm Towers Perrin, which in turn is based on insurance data from A.M. Best. Tillinghast adds together the money paid to third parties as a result of tort claims; money spent by insurance companies to investigate and defend claims; and administrative expenses to handle claims. The group said the total cost in 2005, the latest year available, was $260.8 billion; that works out to about $880 per person, or $3,520 for a family of four.
But Russ Sutter, a Tillinghast principal and primary author of the study, told me the firm’s numbers are being misrepresented by the U.S. Chamber Institute. The ads make the dubious assumption that every lawsuit in the tort system is frivolous. Mr. Sutter said his group didn’t try to evaluate the merit of individual lawsuits, but simply set out to calculate the cost of the entire tort system. “The way they use it makes it sound like the $3,520 is all for abusive lawsuits,” he told me. Furthermore, the ad “assumes all the costs we tabulate in our study are due to lawsuits. That’s a bit misleading” — because other costs associated with insurance are also included. (keep reading)