WASHINGTON — The burden of litigation costs in the U.S. has risen sharply, placing significant financial strain on both businesses and individuals. Recent data from the U.S. Chamber of Commerce Institute for Legal Reform reveals that in 2022 these costs reached a monumental $529 billion, or 2.1% of the nation’s GDP. This translates to an average of $4,207 per American household, spotlighting the heavy economic impact of America’s tort system.
The function of the tort system is critical in ensuring that victims can seek compensation and that there is a deterrent against negligent behavior. Nonetheless, ballooning expenses associated with this system are outpacing both inflation and overall economic growth. Between 2016 and 2022, annual growth of tort costs was recorded at 7.1%, which more than doubles the average annual inflation rate of 3.4% and surpasses GDP growth which stood at 5.4%.
A significant portion of these rising costs can be attributed to commercial liability, which itself has been increasing at an annual rate of 8.7%. This spike is further fueled by some plaintiff attorneys who manipulate the legal framework to prioritize personal financial gain, often adopting aggressive tactics that lead to larger settlements. Moreover, the introduction of third-party litigation financing has compounded these issues, with external investors funding lawsuits in exchange for a portion of the proceeds, thereby encouraging more litigation and higher settlement demands.
In response, the U.S. Chamber of Commerce has taken proactive steps through various initiatives aimed at civil justice reform. Their goal is to streamline the legal system by advocating for legislative changes and supporting judicial principles designed to curb excessive litigation. This is part of a broader effort to foster a more stable and equitable legal environment.
Tied to these reform initiatives are the Chamber’s efforts to address regulatory overreach. They argue that excessive regulation not only hampers economic growth but also raises operational costs for businesses, which can trickle down to consumers through elevated prices and limited options.
Part of the Chamber’s strategy involves enhancing transparency and accountability within the legal system. They champion the disclosure of third-party litigation funding sources and are vocal opponents of abusive class action practices. These measures are intended to temper practices that have led to inflated lawsuit costs.
The overarching issue of inflated litigation costs, propelled by inefficiencies within the tort system and exacerbated by certain legal practices, poses a formidable challenge to the U.S. economy. The U.S. Chamber of Commerce continues to lead the charge in civil justice reform, through measures that aim to reduce the financial impacts of litigation. This, they argue, is essential for creating a thriving environment that can foster innovation, attract investments, and spur economic growth, ultimately benefiting the broader American public.
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