Part one of a three-part series.
It’s a dangerous world. At least, that’s what the warning labels on common consumer products would lead us to believe.
The kitchen knife package cautions against juggling knives. The superhero costume warns that it does not impart the power to fly. Not to forget the electric thermometer that advises: “Do not use orally after using rectally.”
These absurd warnings prompt chuckles but they reveal a serious problem—the rampant abuse of our nation’s civil-justice tort system.
Companies put warnings on their products not because consumers are dimwitted but because personal injury lawyers are looking for any excuse to sue and drum up new business. Their frivolous lawsuits have turned courtrooms into casinos that cost Americans billions of dollars.
Companies have good reason to be worried, as a glance at the morning paper will attest. Last month, a Florida carnival worker settled a $2 million lawsuit against a McDonald’s restaurant for allegedly serving him a fried chicken sandwich that burned his mouth.
Fast-food restaurants will undoubtedly respond by warning customers that freshly fried food might be hot. But lawsuit abuse imposes more serious consequences than warning labels.
America’s tort system is the most expensive in the world, directly consuming 1.8 percent of GDP—about twice as much as any other industrialized country. Compared to our economic peers, America wastes about $590 billion each year on excessive tort costs.
These high costs impose a severe burden on American businesses. When companies divert resources to fight abusive lawsuits, they have less money for more worthwhile purposes such as hiring workers, offering health-care benefits, or developing new products, including life-saving medicines.
Lawsuit abuse also drives up prices for consumers, as companies pass along the costs associated with defending themselves in court. Each year, it costs every American about $2,000 to pay for excessive tort costs in the United States that other countries don’t incur.
This “tort tax” makes all goods and services more expensive and puts U.S. companies at a competitive disadvantage with the rest of the world.
Our sue-happy society makes its presence felt in other, less tangible ways. Faced with the risk of getting sued, many organizations—especially those without deep pockets—decide that it’s safer to stop offering certain goods and services.
Last month, a West Virginia county removed swing sets from school playgrounds because of lawsuits. In one case, a child jumped from a swing while playing “Superman” and broke an arm. The lawsuit cost the county more than $20,000.
On top of being absurd and costly, America’s tort system is hugely inefficient. Obviously, people harmed by a faulty product deserve fair compensation. But frequently, people who are injured receive mere pennies of those million-dollar payouts. Less than 15 cents of every tort-cost dollar goes to compensate injured victims while attorneys stuff their own pockets.
It might seem harmless—or humorous—that peanut manufacturers warn consumers that their packages “May contain nuts.” Or that makers of strollers warn parents to “Remove child before folding.” But meritless lawsuits that prompt these warnings clog courthouses, cost jobs, drive up prices, and limit our freedom. And that’s no laughing matter.
Our current jackpot-justice tort system works for lawyers—but is a bust for most others. By advancing commonsense legal reforms, policymakers can shut down this casino and put the odds back in favor of ordinary Americans.