SAN FRANCISCO, March 28 (UPI) -- The U.S. legal system imposes a cost of $865 billion a year on the U.S. economy, or $9,800 a family, a San Francisco "free-market" think tank reports.

The costs associated with civil lawsuits, and the fear of them, is 27 times more than the federal government spends on homeland security; 30 times what the National Institutes of Health dedicates to biomedical research; and 13 times the amount the U.S. education department spends to educate children, the Pacific Research Institute says.

The institute's "Jackpot Justice! " study is the first to calculate both the U.S. legal system's direct and indirect costs, study author Lawrence McQuillan says.

Direct costs refer to damage awards, lawyer fees and defense costs -- as well as administrative costs from lawsuits arising after someone breaks a contract or violates a trust resulting in injury to another's person's body, property, reputation, legal rights and the like.

Indirect costs refer to the legal system's impact on research and development spending, the cost of so-called defensive medicine and the related rise in healthcare spending and reduced healthcare access, McQuillan says.

Lost sales of new products "from less innovation" amounts $367.1 billion, the study concluded.

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