U.S. tort costs increased by 5.9% in 2004, reaching $260 billion, according to a study by consulting firm Tillinghast. This was an increase on the 5.5% growth in tort costs in 2003. Total insured tort costs in 2004 are estimated to be $182 million.
Tillinghast predicts tort costs will increase about 6.5% a year for the next three years. But these levels of tort cost growth are less severe than near the beginning of this decade. Tort costs rose 14.7% in 2001 and 13.4% in 2002.
"The study showed that the moderation in growth of tort costs first seen in 2003 continued in 2004," says Russ Sutter, principal at Tillinghast. "This came after significant increases in 2001 and 2002. I'm not sure that is anything more than the cyclical nature of tort costs. Historically, there haven't been too many times when tort costs have grown by between 13% and 15% for more than two years running. And some of the reforms implemented earlier in the decade, particularly on the medical malpractice side, may be having an impact."
Medical malpractice tort costs were $28.7 billionn in 2004, up from $26.5 billion in 2003. This was a small increase compared with historical rises – medical malpractice costs have increased by 11.7% annually since 1975, compared with 9% for all other tort costs.
The study also says asbestos was less of a problem in 2004 than in previous years. Insured asbestos losses in 2004 were about $5 billion, down from $8.6 billion in 2003.
Commercial tort costs are growing faster than personal tort costs, according to the study. Commercial tort cost increases have averaged 5.9% annually since 1990 and 11.6% since 1999. By comparison, personal tort costs have increased annually by an average of 3.7% since 1990, and 5.0% since 1999. Sutter says reductions in damages from motor accidents have led to the moderate growth of personal costs.
The 5.9% increase in tort costs in 2004 was less than the 6.6% increase in GDP. Since 1950, tort cost growth has exceeded GDP growth by an average of between two and three percentage points.
Tillinghast predicts tort costs will increase about 6.5% a year for the next three years. But these levels of tort cost growth are less severe than near the beginning of this decade. Tort costs rose 14.7% in 2001 and 13.4% in 2002.
"The study showed that the moderation in growth of tort costs first seen in 2003 continued in 2004," says Russ Sutter, principal at Tillinghast. "This came after significant increases in 2001 and 2002. I'm not sure that is anything more than the cyclical nature of tort costs. Historically, there haven't been too many times when tort costs have grown by between 13% and 15% for more than two years running. And some of the reforms implemented earlier in the decade, particularly on the medical malpractice side, may be having an impact."
Medical malpractice tort costs were $28.7 billionn in 2004, up from $26.5 billion in 2003. This was a small increase compared with historical rises – medical malpractice costs have increased by 11.7% annually since 1975, compared with 9% for all other tort costs.
The study also says asbestos was less of a problem in 2004 than in previous years. Insured asbestos losses in 2004 were about $5 billion, down from $8.6 billion in 2003.
Commercial tort costs are growing faster than personal tort costs, according to the study. Commercial tort cost increases have averaged 5.9% annually since 1990 and 11.6% since 1999. By comparison, personal tort costs have increased annually by an average of 3.7% since 1990, and 5.0% since 1999. Sutter says reductions in damages from motor accidents have led to the moderate growth of personal costs.
The 5.9% increase in tort costs in 2004 was less than the 6.6% increase in GDP. Since 1950, tort cost growth has exceeded GDP growth by an average of between two and three percentage points.
