Facts About Tort Liability And Its Impact On Consumers

Overall Impact: The United States Economy

The cost of the U.S. tort system for 2001 was $205 billion, or $721 per citizen.
U.S. tort costs increased 14.3 percent in 2001, the highest percentage increase since 1986.
U.S. tort costs are 2.04% of Gross Domestic Product (GDP).
The U.S. tort system is inefficient; it returns less than 50 cents on the dollar and less than 22 cents for actual economic loss to claimants.

Tillinghast-Towers Perrin. U.S. Tort Costs: 2002 Update, (New York, New York, 2002)

Empirical Evidence in the States

Texas: Tort Reform Spurs Economic Growth

In 1995 the Texas Legislature passed a series of bills to reform the state’s civil justice system. These bills addressed: limits on punitive damages, joint and several liability, sanctions for filing frivolous suits, limits on venue shopping and out-of-state filings, modifications to deceptive trade practices and medical malpractice reform.

According to the study, The Impact of Judicial Reforms on Economic Activity in Texas, the total cost of the Texas tort system in 2000 was $15.482 billion. Without reforms, it is estimated that the total cost would have been $25.889 billion. Of the $10.407 billion in total direct savings, approximately $2.777 billion may be attributed to improvements at the national level while $7.630 billion in savings were from reforms in Texas. Of the total savings, $2.542 billion went directly to benefit consumers.

The Perryman Group. The Impact of Judicial Reforms on Economic Activity in Texas Overall Economic Impact on State’s Economy. (August 2000)

Facts to Consider: Benefits to Consumers

It is estimated that reforms enacted in 1995 resulted in savings of $2.542 billion that directly benefits consumers.
$1.796 billion in annual cost savings from reduced inflation ($216 per household)
$7.056 billion in annual total personal growth income ($862 per household)
The net result was a savings of $1,078 per year to the typical Texas household.

The Perryman Group. The Impact of Judicial Reforms on Economic Activity in Texas Overall Economic Impact on State’s Economy. (August 2000)

Productivity & Employment: Positive Changes To The Tort System

Before federal legislation was enacted, production of single-engine aircraft had fallen 95% from the previous highs of the late 1970's. Plants were forced to close and over 100,000 jobs were lost.

General Aviation Manufacturers Association. A Report to the President and Congress, The Results of the General Aviation Revitalization Act (1996).

In 1986 Cessna Aircraft Company discontinued production of the single engine aircraft. Prior to the passage of General Aviation Revitalization Act (GARA), the CEO of Cessna pledged that if Congress enacted product liability legislation to protect the general aviation industry, Cessna would resume manufacturing small aircraft. Since the passage of GARA, Cessna has invested $55 million in facilities and equipment. It currently employs 650 people and plans to double that number in 1998.
Prior to the passage of GARA, Unison Industries held back from introducing a state of the art digital ignition system which it had developed in 1986. With the passage of GARA, the safer digital ignition system is now available to pilots and their passengers.

The Committee on Commerce, Science, and Transportation. Product Liability Reform Act of 1997. Report 105-32 pg 41. June 19, 1997.

According to the General Aviation Manufactures Association (GAMA), since the passage of GARA, general aviation lines have opened and expanded. More than 25,000 jobs have been created. And thousands of additional jobs have been created in other segments of general aviation industry.
GAMA reports that production of general aviation aircraft in the United States has more than doubled since 1994. As a result, the U.S. is once again the undisputed world leader in all aspects of general aviation manufacturing. Additionally, revenues from exports have more doubled since the passage of GARA.
As a result of GARA, investment in research and development by general aviation companies has grown by more than 150%.

Teacher Liability

Teachers are unable to be creative in their lesson plans, principals are no longer allowing school-sponsored activities and field trips, and students are losing out on educational experiences.

65 percent of those responding noticed a difference in general in the kinds of school-related programs offered because of liability concerns and costs;
20 percent of those responding reported spending 5-10 hours per week in meetings or documenting events in efforts to avoid litigation. Six percent of that number at 10-20 hours per week;
25 percent of those responding had lawsuits or out-of-court settlements in the last two years; and
57 percent of those responding reported that the suits affected school-related programs for students or teachers, among other findings.

The 107^th Congress passed the Teacher Protection Act (H.R.1) in December 2001. President George W. Bush signed the bill into law in January 2002.

The Teacher Protection Act, which was part of the President’s overall education reform plan:

Prohibits the award of noneconomic damages against teachers in excess of teachers’ proportion of fault;
Limits the availability of punitive damages against teachers by requiring clear and convincing evidence of willful or criminal misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed; and
Protects teachers from lawsuits for most acts committed in compliance with the law or school rules, such as enforcing discipline, grading students, or promoting school safety.

Research and Medical Products Kept off the Market

According to the Society for the Advancement of Women's Health Research, the number of companies that perform research on contraceptive devices has declined from 13 to 2, due to the fear of liability.
Liability concerns are keeping beneficial products such as Bendectin, the only anti-nausea medication ever approved by the FDA for use during pregnancy, off the market.

The Committee on Commerce, Science, and Transportation. Product Liability Reform Act of 1997. Report 105-32 pg 7. June 19, 1997.