Insurance Journal (San Diego, CA), March 14, 2008
Florida ranks the worst in terms of tort costs and litigation risks, while North Dakota ranks the best. In a separate ranking, Colorado has the best tort laws on its books, while Rhode Island has the worst.
The free-market think tank Pacific Research Institute has released its report comparing the legal climates of all 50 states, the U.S. Tort Liability Index: 2008 Report.
“In the competition for jobs and capital investment among the states, those states that suffer from high tort costs and litigiousness will continue to lose jobs and businesses to states with superior tort systems. PRI developed the Index as a tool for governors and state legislators to assess their tort systems and to enact laws that will improve the business climate of their states,” said Dr. Lawrence J. McQuillan, co-author of the study and director of Business and Economic Studies at PRI.
By merging the quantitative tort costs ranking with the tort laws ranking, the study divided the states into four groups: saints, sinners, suckers, and salvageables.
Here’s how the authors characterize the results:
Saints: States that have relatively low tort costs and/or few litigation risks and relatively strong tort rules on the books. These states are well positioned to contain their tort liability costs in the future if the rules are implemented as written. These states include Alaska, Mississippi, Ohio, Tennessee, and Utah.
Sinners: States that have relatively high tort costs and/or high litigation risks and relatively weak tort rules on the books. The sinners are likely to face high and rising tort liability costs in the future if lawsuit abuse continues unchecked. These states include Alabama, Arizona, Arkansas, California, Illinois, Maryland, Massachusetts, New York, Oregon, Pennsylvania, Rhode Island, Washington, West Virginia, and Wisconsin.
* Suckers: States that have weak tort rules on the books because they currently have relatively low tort costs and/or few litigation risks and, therefore, foolishly believe that they are not vulnerable and reform is not needed. These states include Hawaii, Iowa, New Mexico, North Carolina, North Dakota, and Virginia.
* Salvageables: States that have moderate to high relative tort costs and/or moderate to high litigation risks, yet have moderate to strong tort rules, probably as a result of recent reforms. These states include Colorado, Florida, Georgia, Indiana, Louisiana, Michigan, Missouri, Nevada, New Jersey, South Carolina, and Texas.
“While North Dakota may top our list in terms of low tort costs, the state lacks strong tort reform laws and could be the next target for trial lawyers looking to strike gold,” said McQuillan. “By the same measure, Floridians should take heart. Although their state presently has the highest tort costs and risks, Florida has among the best tort laws in America due to recent reforms. As a ‘salvageable’ state, Florida’s tort climate should improve as a result of its reforms.”
“On the other hand, some states are slow to reform. New York is a ‘sinner’ state in this edition of the Index as well as the last,” added McQuillan.
Best and Worst Tort Costs
In its quantitative ranking, the study uses 13 variables in two areas — monetary tort losses and litigation risks. These “output” rankings are free of any subjective influence. In addition to North Dakota, the top five states are Alaska, North Carolina, Iowa, and Virginia. At the bottom are Rhode Island, Pennsylvania, Montana, Illinois, New York, New Jersey, and last, Florida.
Best and Worst Tort Laws
The study uses 28 variables to examine which states have rules on the books that, if implemented and enforced, reduce lawsuit abuse and tort costs. These rules are controlled by voters, legislators, and/or judges, either directly or indirectly in each state. The states that have the best overall tort rules on the books, and that will be heading in the right direction if the rules are fully implemented, are Colorado, Texas, Ohio, Georgia, Indiana, Florida, and Michigan. At the bottom are Pennsylvania, Illinois, Maryland, New York, Vermont, and last, Rhode Island.
“Enormous resources are wasted today on the unnecessary and unproductive redistribution of wealth that occurs with excessive tort litigation,” said co-author Hovannes Abramyan, a PRI public policy fellow. “Meaningful tort reform translates into a better legal environment in which to invest human, physical, and financial capital — the ingredients for self-sustaining economic growth and prosperity. We hope that our rankings will encourage state officials and residents to enact tort reforms or to enforce and defend strongly those they have on the books.”