While the cost of the tort system has apparently declined since 2004, thanks in part to reforms passed by Congress and by individual states, it is still a tremendous drag on the economy relative to other industrialized nations. A 2007 study by the Pacific Research Institute found that "America wastes $589 billion each year from excessive tort litigation," or an annual price tag to a family of four of $7,848.1 I do not entirely agree with the methodology of PRI, which I believe underestimates some aspects and overestimates others. But I independently arrive at a number in the same range of magnitude to theirs.
Our nation's tort system is substantially more expensive than that of other nations. Features unique to the United States--unbounded non-economic damages; a broader use of punitive damages; contingent fees of a percentage of recovery; the lack of loser-pays; extraordinarily broad discovery; class-action litigation; the use of speculative and non-scientific expert testimony in some state courts--raise costs tremendously. Yet, despite these increased costs, there is no evidence that the United States tort system provides marginal benefits relative to other nations. For example, New Zealand does not even offer the availability of private medical malpractice litigation, yet there is no evidence that medical care in New Zealand is of substandard quality due to the lack of fear of malpractice litigation. If anything, it is quite likely that the arbitrary nature of the American tort system has distorting effects that make it perform worse than that of other nations. . . .
Ted Frank is a resident fellow at AEI.