2010 Tort Liability Index Ranks States’ Tort Climate
—Alaska ranks best, New York and New Jersey worst—
San Francisco—The Pacific Research Institute (PRI), a free-market think tank based in San Francisco, and the Manufacturers Alliance/MAPI, a public policy and economic research organization based in Arlington, VA, announced today the release of the 2010 U.S. Tort Liability Index, a measure of which states impose the highest and lowest tort costs and risks. Alaska, Hawaii and North Carolina lead the pack with the best rankings, while New Jersey, New York and Florida bring up the rear. The Index, now in its third edition, was authored by Lawrence J. McQuillan, Ph.D., director of Business and Economic Studies, and Hovannes Abramyan, M.A., adjunct public policy fellow.
“Direct tort costs account for almost 2 percent of GDP in the United States—that’s the highest in the world,” said Dr. McQuillan. “These high costs impact American businesses when firms have to divert revenue to fight lawsuits. But all of us ultimately shoulder the burden through higher prices and insurance premiums, lower wages, restricted access to health care, less innovation, and higher taxes to pay for court costs.”
“If lawmakers want to put people back to work, without costing taxpayers another penny for so-called ‘stimulus’, they should enact needed lawsuit reform,” added Mr. Abramyan. “Job growth was 57 percent greater in the 10 states with the best tort climates than in the 10 states with the worst tort climates.”
The Best and Worst Tort Climates
- North Carolina
- South Dakota
- North Dakota
- New Jersey
- New York
The states with the worst performance had the highest monetary tort losses and tort litigation risks, meaning they had more costly and riskier business climates due to larger plaintiff awards, larger plaintiff settlements, more lawsuits, or some combination of the three.
States were also ranked according to their tort rules and reforms on the books to reduce lawsuit abuse and contain tort costs and risks, such as award caps, venue reforms to stop “litigation tourism,” or judicial-selection reforms to hinder the types of abuses engaged in by the likes of now imprisoned “Kings of Tort” Dickie Scruggs and Paul Minor. The Index found that, in the wake of its comprehensive lawsuit reforms enacted in 2009, Oklahoma now has the best tort rules on the books, followed by its neighboring state of Texas.
Saints, Sinners, Suckers, and Salvageables
The Index sorts states into four groups based on their ranking for outputs (tort costs and tort litigation risks) and inputs (tort rules and reforms on the books).
Saints: States that have relatively low tort costs and/or low tort litigation risks and relatively strong tort rules on the books.
Sinners: States that have relatively high tort costs and/or high tort litigation risks and relatively weak tort rules on the books.
Suckers: States that have weak tort rules on the books because they currently have relatively low tort costs and/or low tort litigation risks.
Salvageables: States that have moderate to high relative tort costs and/or tort litigation risks, yet have moderate to strong tort rules, usually as a result of recent reforms.
“Only five states made ‘Saint’ status, whereas 20 states were labeled ‘Sinners’,” said Dr. McQuillan. “This signals a dire need for further reform in many states. The goals of our tort system are to efficiently deter harmful events and fully compensate true victims, not to line the pockets of system abusers.”
To learn more about the 2010 U.S. Tort Liability Index, please visit www.special.pacificresearch.org/pub/sab/2010/tort_reform. To arrange an interview with authors Lawrence McQuillan or Hovannes Abramyan, please contact PRI’s Press Office at (415) 955-6136 or [email protected].
For 31 years, the Pacific Research Institute (PRI) has championed freedom, opportunity, and individual responsibility through free-market policy solutions. PRI is a non-profit, non-partisan organization. For more information, please visit our web site at https://www.pacificresearch.org/.
About Manufacturers Alliance/MAPI
Seventy-five years later, MAPI is still devoted to serving manufacturers through a focused program of economic research and peer learning. MAPI programs are targeted to and led by senior executives drawn from the more than 500 companies in its membership. To learn more, visit www.mapi.net.