Tort Costs
in America
An Empirical Analysis of
Costs and Compensation
of the U.S. Tort System
November 2022
01
02
03
Chapter Chapter Chapter
1
2
3
3
4
Tort Costs Over Time
Tort Costs per
Tort Costs
Across States
Efficiency of the
Tort System
5
6
8
The U.S. Tort System
A Consistent
Tort Costs
11
12
14
16
21
Costs and
Compensation
of the U.S.
Tort System
Tort Costs
Over Time
Tort Costs per
Across States
Efficiency of
the Tort System
Contents
04 A B
Chapter Appendix Appendix
23
39 Endnotes
25
26
26
28
Tort Claims
Tort Liability
Compensation
for Common
Compensation
Liability
29
30
31
35
36
37
38
38
Commercial and
Liability
Efficiency of the
Tort System
Updates to
Important Caveats
Chapter 03
01
Executive
Summary
Chapter
Chapter 01
costs to the extent that
These national and
estimates provide a
reforms on the cost and
in liability costs across
impact of potential
excesses in the tort
system. A detailed
description of the data
in the appendices.
(the latest year for
•
and other claims;
•
accident claims; and
•
liability claims.
Tort Costs
Over Time
To provide comparative
analysis from 2020 back
to 2016 and explore the
development of tort costs
costs of the tort system
rate of six percent a year
over the period 2016 to
faster rate than personal
The American legal system is lauded for its underlying principles of
due process and equal justice under the law. But the costs of the legal
1
This study seeks to address
2
) using insurance
data and estimated self-insured costs.
2016 2017 2018 2019 2020
Commercial Liability
358
245
Chapter 01
or medical professional
liability. This rate exceeds
2.8 percent over the same
in the tort system has
has been exacerbated by
Table 1
direct economic tort
Tort Costs per
We estimate that U.S.
consistently since 2016.
Tort Costs
Across States
variations across states.
• Tort system costs in
the most expensive
least expensive states.
See Table 3 for full results, explanation of calculations, and sources.
Differences in totals are the result of rounding.
Chapter 01
than 1.5 percent).
• Tort system costs per
Tort System
the tort system is relatively
compensation to claimants.
Compensation to claimants
only represents 53 percent
costs and other expenses.
describe in detail the
recent trends in tort costs.
Sources: Bureau of Economic Analysis; United States Census Bureau.
2.20% $3,800
1.95%
2.15%
1.90% $3,200
2.10% $3,600
1.85%
2.05%
1.80% $3,000
2.00% $3,400
1.75%
1.70% $2,800
2016
Costs as % of GDP
Average Costs per Household
2019
Total Tort Costs as % of GDP Average Tort Costs per Household
2017 20202018
Chapter 03
02
Introduction
Chapter
Chapter 02
The tort system may be
important economic roles
responsible behavior.
The U.S. Tort System
the tort system has been
liability costs than other
3
differences in liability costs
the comprehensiveness
the existence of loser-pays
extensiveness of private
action mechanism.
4
Excessive costs of the
tort system can adversely
and liability risks that are
referred to as “externalities.”
•
development and sale of
5
• The perceived liability
risk of different
6
costs in the U.S. decrease
Chapter 03
“ [W]e nd for every
dollar paid in
compensation to
claimants, 88 cents
were paid in legal
and other costs.”
competitiveness by at
least 3.2 percent
7
and
direct investment.
8
•
the tort system have
9
and these
effects can be severe
10
costs across states and
they have been explained
in part by differences in
of the competence of
11
Chapter 02
Chapter 02
every dollar received by
costs.
12
every dollar paid in
.
13
This raises the important
compensate claimants.
A Consistent
Tort Costs
estimates of tort costs for
the entire United States and
for each state. This research
of the U.S. tort system in
2016.
14
15
claims and enforcement
actions. The costs of the
the market-determined
as policyholders are
bear the transferred
liability risks.
United States to develop a
consistent and transparent
commercial marketplace.
estimate of tort costs the
16
The liabilities
costs to the extent that
certain tort claims are
17
While the
are consistently estimated
trends and to compare tort
incorporate the impact of
private settlements on tort
• liability for personal
and in some cases
• liability related to
•
liability;
Chapter 02
•
certain environmental
liabilities;
•
liability;
•
• investor protection liability;
• labor and employment
liability;
•
non-discrimination
protections); and
•
Liability costs covered
by the commercial
directly estimated from
the costs
MarketStance
®
estimates U.S. commercial
18
We apply loss ratios and
ratios from the National
Commissioners (NAIC)
to the estimated liability
are paid in compensation
Chapter 03
An additional advantage
of relying on insurance
data is that our
estimates incorporate
the impact of private
settlements on tort
costs, which are missing
from studies that rely
only on public records
of adjudicated cases.
Chapter 02
Chapter 03
03
Results
Chapter
Chapter 03
We estimate that the aggregate tort costs in the U.S. amounted to $443
As shown in Figure 2
Costs and
Compensation
of the U.S.
Tort System
tort costs that correspond
all other commercial and
personal liabilities. We
report tort costs as either
Table
across these dimensions
billion relate to liabilities
Medical Liability
Sources: MarketStance; NAIC.
Commercial/
Medical
Liability
Total
[A] [B] [C] [D]
-
-
-
Tota l
Sources and Notes:
Differences in totals are the result of rounding.
[A]: Includes general/professional liability and liability portion of individual homeowners’
exposure. Operating, professional, and self-insured segments are from MarketStance,
NAIC, and SERFF.
[B]: MarketStance, NAIC.
[C]: Includes personal and commercial auto liability.
[D] = [A] + [B] + [C]
Chapter 03Chapter 03
liability and professional
billion relate to medical
liability. Commercial
•
•
employment practices
errors and omissions
liability; and
•
a small fraction of the
in total tort costs.
3
billion relate to liability
“ We estimate that
the aregate tort
costs in the U.S.
amounted to $443
billion in 2020.”
Chapter 03
Tort Costs
Over Time
estimate tort costs for the
years 2016-2020. Total direct
economic tort costs by
Table 3 and 4.
2016 2017 2018 2019 2020
Commercial Liability
Medical
2.9
135.1
Sources and Notes:
MarketStance; NAIC; Bureau of Economic Analysis; Bureau of Labor Statistics.
Differences in totals are the result of rounding.
Tort economic costs include losses, direct defense costs and cost containment expenses, plaintiffs’ legal costs, and cost of risk
transfer. Average Annual Growth is the compound annual growth rate from 2016-2020: i.e., (value
2020
/value
2016
)
1/4
-1.
[4] = [1] + [2] + [3]
[7] = [5] + [6]
[8] = [4] + [7]
[10]: CPI is non-seasonally adjusted for all urban consumers; all items in U.S. city average. Base period: 1982-84=100.
[11] = [8] / [9]
Chapter 03
of 6.0 percent a year over
the period 2016 to 2020
than personal liability. This
same time period.
19
1.9 percent to 2.1 percent.
persisted in 2020 despite
costs of all tort liabilities that
relate to either claims made
Sources and Notes: MarketStance; NAIC; Bureau of Economic Analysis; Bureau of Labor Statistics.
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
2016
Billions ($)
20192017 20202018
Personal Homeowners Medical Liability Commercial Auto
Commercial General/Professional
Personal Auto
Chapter 03
policy year.
20
and expenses for liabilities
in losses and expenses
Tort Costs per
Across States
costs of the tort system per
21
state or territory based on
the physical location of the
be allocated to the location
22
MarketStance
other characteristics of each
operation. MarketStance
estimates of tort costs across
Chapter 03
“ The total national
tort cost gure of
$443 billion in 2020
amounts to $3,621
per household.”
Chapter 03
entirely explained by the
costs in the least expensive
Table 4 reports
tort costs in 2020 by state
State
General/
Commercial
Medical
Liability
Total
Costs
Tort Costs as %
Tort Costs per
AK
AL
AZ
CA
CO
CT
DC
DE
FL
GA
IA
ID
IL
IN
KS
LA
MA
MD
Chapter 03Chapter 03
Note: Homeowner (liability portion) is included under General/Commercial Liability.
State
General/
Commercial
Medical
Liability
Total
Costs
Tort Costs as %
Tort Costs per
ME
MI
MN
MO
MS
MT
NC
ND
NE
NM
OK
SC
SD
TN
TX
UT
WA
WI
National
Chapter 03
Table 5
expensive states in terms of
to 2.98 percent of the total
most expensive states in
terms of tort costs per
each of the 43.8 million
State
Total Tort Costs
Tort Costs as %
[1] [2] [3]
FL
LA
NM
DE
MT
MS
GA
SC
Sources and Notes:
[2]: Bureau of Economic Analysis, Gross Domestic Product by state: All industry total. Last updated: March 31, 2022.
[3] = [1] / [2].
Chapter 03
Chapter 03
State
Total Tort Costs
Tort Costs per
[1] [2] [3]
DE
FL
CA
CT
GA
LA
CO
MA
Sources and Notes:
Washington D.C. had the sixth largest tort costs per household but is excluded.
[2]: U.S. Census.
[3] = [1] / [2].
2.42.11.8
1.5
Tort System
compensation received by
and the cost of risk
transfer.
23
The cost of risk
transfer represents 21
offer a basis to assess its
of the portions of total
received by the claimants.
24
compensation that claimants
receive for their claims. Loss
25
Chapter 03
go toward compensating
Cost of
Claims
Other (Cost of
Compensation to
Chapter 03
attorneys.
26
We estimate
the portion of losses that
27
Table 7
data from the NAIC
costs are estimated to be
Claimant compensation is
Losses
Loss
Expense
Compensation
Total
Transfer
Total
(liability portion)
3.3
1.8
7.4
Tota l
Notes:
Differences in totals are the result of rounding.
[1] = [3] - [2]
[2] = [4] x (4/3)
[3] = [6] × (Incurred Losses / Earned Premiums)
[4] = [6] × (Incurred Losses / Earned Premiums)
[5] = [6] - [4] - [3]
[6]: Total estimated cost and compensation.
04
Conclusion
Chapter
Chapter 04
These tort costs exhibit
The tort system is relatively
compensation to claimants.
We estimate that only 53
in the tort system are paid
risk transfer costs.
costs and transparent cost
research and policy debate.
Chapter 03
Included
Categories of
Tort Claims
A
Appendix
costs for the entire United States and for each state. These estimates
Tort Liability
to seek compensation
from the person or entity
28
This
tort liabilities.
actions are typically
2930
While t
his
makes it
possible to estimate the
United States provides
civil remedies for harm
1.
2.
labor and employment
data are reported by line of
claims based on common
do not separately estimate
To the extent that both are
Compensation for
Appendix A
of liability that
31
in the tort system depends
on the type of claim.
may cover economic
32
In other
seek compensation for
•
claims arises from
•
These are claims that arise
to abide by the terms or
tort claims in connection
33
breach of contract.
•
34
.
•
•
provision of professional
•
and asbestos liabilities
across the United States.
35
environmental toxic torts
specialty environmental
These specialty lines are
Many environmental
of the tort system.
36
Appendix A
Compensation for
Civil liabilities can also
arise from a combination
liability claims can be
criminal liabilities are
•
•
deceptive practices acts;
•
discrimination protections;
•
37
and
•
and costs of compliance
of the tort system.
38
compensation liabilities are
Appendix A
Chapter 03
Methodology
B
Appendix
We estimate tort costs
the estimated tort costs for
(1) compensation paid
to claimants (covered
and settlements);
(defense costs and cost
claims); and
(3) the cost of risk transfer
(claims administration
the liability risks).
Since the price of liability
39
of risk transfer.
have several important
them to administer and pay
be less expensive for
a policyholder to pay a
40
liabilities that are self-
The cost of risk transfer is
Appendix B
Appendix B
in liability costs for self-
operate similarly to carriers
and often hire third parties
losses and perform their
certain direct and indirect
costs of the tort system.
direct economic cost of
the tort system does not
any positive effects that
the tort system may have
parties
.
Non-economic
(1) commercial liability and
medical professional
of tort costs for each of
Commercial
and Medical
Liability
of U.S. liability costs are
covered by commercial
of the market for liability
the tort costs for commercial
and medical professional
data on the cost of liability
and detailed information
MarketStance estimates the
that are retained either
in excess of carried limits.
MarketStance scales the
each state by domestic
collected by the National
Commissioners (NAIC)
liabilities (described in
described in more detail
Type of
NAIC Line
Commercial
(Liability)
Umbrella Liability
Excess Liability
Other Liability -
Umbrella Liability
Excess Liability
Cyber Liability
D&O Liability
Other Liability -
Claims Made
Cyber Liability
D&O Liability
1. The NAIC insurance lines in this table include the following types of insurance: 5.0002 Business Owners, 5.0003 Commercial
Package Policy, 5.0006 Commercial Farm and Ranch, 5.0007 Other CMP Policies, 17.0001 Commercial General Liability, 17.0002
Completed Operations, 17.0003 Comprehensive Personal Liability, 17.0004 Contractual Liability, 17.0005 Day Care Centers, 17.0006
Directors and Ofcers Liability, 17.0007 Elevators and Escalators Liability, 17.0008 Employee Benet Liability, 17.0009 Employers
Liability, 17.001 Employment Practices Liability, 17.0011 Environmental Pollution Liability, 17.0012 Fire Legal Liability, 17.0013 Kidnap
and Ransom Liability, 17.0014 Liquor Liability, 17.0015 Municipal Liability, 17.0016 Nuclear Energy Liability, 17.0017 Personal Injury
Liability, 17.0018 Premises and Operations (OL&T and M&C), 17.0019 Professional Errors and Omissions Liability, 17.002 Umbrella and
Excess (Commercial), 17.0021 Umbrella and Excess (Personal), 17.0022 Other, 17.0023 Veterinarian, 17.0024 Internet Liability, 17.0025
Provider Excess Stop Loss, 17.0026 Excess Stop Loss, 17.0027 Other Excess Stop Loss, 17.0028 Cyber Liability, 18.0001 Occurrence,
and 18.0002 Claims Made.
2. While aviation, ocean, and marine policies provide some liability coverage, they are relatively small lines and predominantly cover
property losses. Since NAIC data do not separately report the cost of liability coverage included in other lines, these liability costs
are excluded from our estimates.
Appendix B
Commercial liability costs
to state and federal
available. These data are
41
Table 8
protects doctors and
hospitals from liability
or death of patients.
42
MarketStance separately
professional liability
reported separately by
are interested in direct
calendar year.
43
the estimates of commercial
We also estimate the
fraction of tort costs not
rates.
44
data provide an estimate
of tort costs for those
are covered. At the smaller
limits. At the other end of
45
market. We rely on data and
Appendix B
interested in direct
that relate to
2020 calendar year.”
by MarketStance—a
—to
develop estimates of the
medical professional liability
costs. We do not estimate
these to be immaterial to
The key steps in the
based on total reported
information on the cost of
each state and identify
the risk factors that
These risk factors and
or hospital.
MarketStance estimates
data that affects liability
professional liability also
or hospital beds covered.
MarketStance models
•
•
• Umbrella and Excess
(Commercial)
•
46
•
Omissions Liability
Appendix B
• Directors and
•
Liability
•
• Cyber Liability
•
Liability
exposed to different types of
they retain. Many physician
47
MarketStance estimates
MarketStance calibrates its
MarketStance combines
48
MarketStance
part of the market.
estimated from the costs of
Table 9
Appendix B
by NAIC to estimate personal
they are the most likely
costs are not material.
49
the total earned liability
50
•
•
•
•
•
motorist;
• medical payments; and
• other liability.
that they can be exempt
retain some or all of the
earned for commercial
for Liability
States
Source: SERFF Filings.
Appendix B
estimated based on the
information on the fraction
liability that is retained.
51
Tort System
of the tort system to be
are paid to claimants as
compensation instead
claims. To assess the
the total tort costs are paid
estimates not only of the
and administer claims.
to claimants to resolve
their tort claims. In the
are typically paid on a
of tort costs that are
retained by claimants
as compensation for
from the reported losses.
approximately 33 percent
52
claims is reported in
as total reported losses less
•
•
• defense costs are
• cost of risk transfer is
losses and loss
of tort costs are paid as
have data to compare the
Appendix B
nearly half of costs in the
Updates to
estimates from 2016
estimates of medical
liability costs to rely on
53
commercial liability loss
54
analysis of non-employee
55
The
total tort costs in 2016 is
Important Caveats
for several reasons.
•
•
claims administration
costs and the cost of risk
costs for certain
captives operate similarly
to carriers and may hire
third parties to administer
for expected losses and
and indirect costs of the
•
economic cost of the tort
•
externalities of the tort
as certain torts that are
and toxic tort claims.
Appendix B
Chapter 03
Endnotes
1
2
3
International Comparisons
of Litigation Costs: Europe, the United States and Canada (U.S.
4
See generallyLitigation
Patterns in Automobile Bodily Injury Claims 1977-1997: Effects
of Time and Tort Reforms
determinants of tort costs across states. See
Determinants of State Tort Costs: The Predictive Power of the
Harris State Liability Systems Ranking Study (U.S. Chamber of
5
Punishing Robots: Issues in
the Economics of Tort Liability and Innovation in Articial
Intelligence.
6
7
How Structural Costs Imposed on U.S.
Manufacturers Harm Workers and Threaten Competitiveness
8
SeeThrough Their Eyes: How Foreign Investors
View and React to the U.S. Legal System (U.S. Chamber of
The U.S. Litigation Environment and
Foreign Direct Investment: Supporting U.S. Competitiveness by
Reducing Legal Costs and Uncertainty (Oct. 2008).
9
The Causes and Effects of
Liability Reform: Some Empirical Evidence
10
The Impact of Asbestos Liabilities on Workers in Bankrupt
Firms
11
See
Determinants of State Tort Costs: The Predictive Power of
the Harris State Liability Systems Ranking Study, available
at and
See
The Costs of Excess Medical Claims for Automobile Personal
Injuries
12
Tort Liability Litigation Costs
for Commercial Claims
13
See
14
Costs
and Compensation of the U.S. Tort System
15
®
provided research assistance.
16
17
18
19
20
reported. A claims-made policy only covers incidents that happen
21
22
See e.g.,
by States and Territories.
23
24
SeeCosts and
Compensation Paid in Tort Litigation 37
25
See e.g., Statutory Issue Paper No. 55 Unpaid Claims, Losses and
Loss Adjustment Expenses
26
See The Market for Contingent Fee Financed
Tort Litigation: Is it Price Competitive?
Contingent Fee Litigation in New York
City
27
SeeCosts and
Compensation Paid in Tort Litigation
28
29
30
Debunking the Myth that Insurance
Coverage Is Not Available or Allowed for Intentional Torts or
Damages
31
liability torts. Tor t
.
32
42 USC § 14505(1) and 42 USC § 247d-6d(e)(8). Also see
Non-Economic Damages in Personal Injury Cases.
.
33
and defamation.
34
Commercial
general liability insurance
.
35
and TCE.
36
See Asbestos
Claims Payments Show No Sign of Slowing Down Despite Drop
in Incurred Losses
37
38
environmental liability lines.
39
See National Association of Insurance Commissioners, 2016
Competition Database Report
see also Report on Protability by Line by
State in 2016
40
See On the Demand for
Corporate Insurance: Creating Value, Handbook of Insurance,
41
See e.g.,
42
See Claims, errors, and compensation
payments in medical malpractice litigation 2024-2033
43
44
45
Medical malpractice insurance report:
A study of market conditions and potential solutions to the
recent crisis
46
47
Medical malpractice insurance report:
A study of market conditions and potential solutions to the
recent crisis
48
does not separately model.
49
50
Auto Insurance Database Report 2014/2015
51
52
SeeCosts and
Compensation Paid in Tort Litigation
53
54
SNL Financial.
55
202.463.5724 main
