Visit the Press Room for more breaking news

Contact Chris Mather, ATLA Director of Media Relations, (202) 965-3500 x369

New EPI Study Shows "Tort Tax" Is An Insurance Industry Fabrication

Study the Latest to Debunk "Crisis"

(Wednesday, May 18)—A major new report released today by the Economic Policy Institute (EPI) offers more evidence that the insurance industry is intentionally using faulty data to make claims that the tort system leads to increased economic costs.

EPI, a nonprofit, nonpartisan think tank based in Washington, analyzed in detail the alleged cost estimates of the U.S. tort system published by Tillinghast-Towers Perrin (TTP), a consulting firm whose clients include many of the world's largest insurance companies.

The 20-page study by economist Lawrence Chimerine and EPI vice president Ross Eisenbrey, entitled Frivolous Case for Tort Law Change, concludes that TTP's cost estimates are one-sided, inflate the impact of the tort system and ignore its benefits, and that corroboration supporting their numbers is weak or nonexistent. Earlier this year, BusinessWeek warned in an editorial that TPP's numbers were "a wild exaggeration."

"This authoritative study is just the latest to prove that special interests and the insurance industry are throwing up smokescreens to preserve their rising profits, no matter the cost to doctors and consumers," said Todd Smith, president of the Association of Trial Lawyer of America.

"This is yet another call for policymakers to acknowledge reality: The 'tort tax' is a phony invention of the insurance industry, and those that repeat this nonsense—including President Bush—have either been snookered by it, or they're just willing to use any argument, no matter how untrue, to undermine the rights of American families," continued Smith.

"The real costs of the legal system are created by those who cause injuries, not by those who are injured through no fault of their own by the negligence of others," Smith said.

Indeed, advocates of changes to the tort system have repeatedly touted TTP's estimates to allege that there is a civil liability "crisis" that justifies restricting the rights of average Americans to hold negligent corporations and individuals responsible. Even the President's own Council of Economic Advisers (CEA) has based policy positions on TTP's flawed data, devoting an entire chapter of its 2004 Economic Report of the President to tort liability.

However, EPI's careful examination discredits these myths and many others:

• Half of the "costs" that Tillinghast-Towers Perrin attributes to the tort system are actually transfer payments from wrongdoers to victims, which, the Congressional Budget Office agrees, are not true costs to society as a whole, as they "merely shift money from injurers to victims."

• A number of economic factors, not the tort system, have caused insurance premium increases in recent years.

• There is no basis for claims that tort law changes now being considered could result in more jobs.

• There is no evidence that the tort system has reduced real wages and caused job loss.

• Far from harming corporate profits, productivity, or research and development spending, the tort system has actually benefited all of these areas.

• TTP's "costs" includes insurance industry overhead, such as executive salaries, and auto payments when there are no lawyers involved.

"When a child is injured because Firestone refused to pull defective tires from the market, or a company like Enron decides to cook the books at the expense of shareholders, that's not harming the economy—that's the cost of corporate disregard for consumers. Americans would pay a far more devastating price if we didn't have a strong civil justice system to hold corporations accountable," said Smith.

Read the EPI report "Frivolous Case for Tort Law Change".

# # #

As the world's largest trial bar, ATLA promotes justice and fairness for injured persons, defends the constitutional right to trial by jury, and strengthens the civil justice system through education and disclosure of information critical to public health and safety. With 60,000 members worldwide, ATLA provides lawyers with the information and professional assistance they need to serve clients successfully and protect the democratic values of the civil justice system.