Towers-Perrin, the global professional services firm, has been analyzing the costs of the U.S. civil justice system for decades, going back to data from 1950. Its latest analysis is out, and as the news release reports, the good news of lower tort costs was fleeting.
After a decline of 5.6% in 2006, U.S. tort costs rose 2.1% in 2007. According to the study, the $5.1 billion increase was due primarily to growth in the frequency of automobile accidents. Although tort costs rose last year, their impact on the economy lessened — the fourth consecutive year of a decline in the ratio.
Towers Perrin anticipates a rise in U.S. tort activity over the next several years, beginning in 2008, due to factors such as the subprime mortgage debacle and the worldwide financial crisis. Potential defendants include mortgage brokers, appraisers, investment banks and others.
Yes, there’ no misfortune that benefit from a cash-seeking lawsuit.
The full study is available as a .pdf file, “2008 Update on U.S. Tort Cost Trends.” The executive summary commentary on the litigation that will flow from the “credit crunch” is quite interesting:
Credit crunch — Springing from the subprime mortgage crisis in 2007 and continuing through 2008, the credit crisis has led to significant litigation activity, particularly on a class action level. As of year-end 2007, most of this activity was in the directors and officers area. For 2008 and beyond, we see the list of potential defendants growing to groups such as mortgage brokers, appraisers and investment banks, as well as peripheral defendants such as auditing firms and attorneys advising the targeted firms. The implosion and resulting government involvement in firms such as Bear Stearns, Lehman Brothers, Fannie Mae and AIG will undoubtedly lead to further litigation in 2008 and 2009. What remains unclear is how many dollars will change hands as a consequence of this litigation.
Forget economic stimulus packages, we’ll sue our way back into prosperity!
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