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Latest Insurance Industry Propaganda Seeks to Eliminate Corporate
Accountability
Tillinghast Towers Perrin Estimate of Cost of the Tort System is
“A Wild Exaggeration” and “Sketchy at Best” According
to Independent Analysis
(Monday, March 13, 2006 -Washington DC)—In response to
new propaganda from Tillinghast Towers Perrin (TTP), an insurance
industry consulting firm, Ken Suggs, President of the Association
of Trial Lawyers of America (ATLA), today issued the following statement:
“The civil justice system holds negligent corporations and CEOs
accountable when they endanger the public’s health and safety
to increase corporate profits – it’s no wonder they’ll
use phony studies to attack it.
“The real costs are created by those who cause injuries, not
by those who are injured through no fault of their own – the
truth is some corporations put their bottom line before the health
and safety of the public, and the civil justice system is the last
resort for Americans to hold them accountable.
“When a child is injured because Firestone refused to pull exploding
tires from the market, or when a company like Enron decides to cook
the books at the expense of shareholders, that's the cost of corporate
negligence and fraud – and without the civil justice system,
those costs would fall on victims or the taxpayers.
“This study is as valid as Enron’s quarterly accounting
statements.”
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Past “Tort Tax” Studies from Tillinghast-Towers
Perrin Have been Widely Discredited and called a “Wild Exaggeration”
Today, Tillinghast Towers Perrin (TTP), an insurance industry consulting
firm, will release an updated version of their study that purports
to measure the so-called “litigation tax” – the costs
associated with the U.S. tort system. If past editions of this study
are any indication, the updated version will contain the same flawed
methodology that led Business Week magazine to call a previous version
a “wild exaggeration.” Indeed, the Wall Street Journal has
reported that the updated study “include[s] payment that don’t
involve the legal system at all.”
- TTP Study Has Been Widely Discredited; Business Week Called
it a “Wild Exaggeration.” The 2005 edition of the
TTP study was widely discredited because it includes the cost of
the insurance industry – multimillion dollar salaries for insurance
CEOs, rent on office buildings, and administration overhead –
in the “cost” of lawsuits. Business Week editorialized
that the study “includes everything from payouts for fender-benders
to the salaries of insurance industry CEOs. It's a wild exaggeration.”[1]
And as Washington Monthly magazine has noted, the 2004 edition of
the TTP study didn’t even include costs associated with running
the courts: “…the insurance-industry consulting firm Tillinghast-Towers
Perrin (TTP), …includes in its definition of the ‘tort
system’ insurance company administrative costs and overhead
and the salaries of highly paid insurance company CEOs (Maurice
‘Hank’ Greenberg, chairman of AIG, one of the world's
largest insurance companies, makes $29 million a year). One thing
TTP doesn't include: court budgets, which makes its study seem a
lot more like an assessment of the insurance industry than of the
legal system.”[2]
- Congressional Quarterly Called Conclusions of TTP Study “Sketchy
at Best.” Congressional Quarterly Weekly magazine did an
entire story describing the evidence behind the figures cited by
President Bush in his call for legal restrictions “sketchy
at best.” They examined the “tort tax” figure and
found, “Nearly all the assertions about the growing cost of
the tort system are based on the figures from just one actuarial
and management consulting firm, Tillinghast Towers-Perrin, that
works for the insurance industry, which has a stake in limiting
lawsuits. … The company’s estimates of tort costs include
the insurance industry’s administrative expenses and payments
on claims that never involve courts or lawyers, such as auto collisions.”[3]
- TTP Admitted that Past Study Not a Reflection of the Tort System.
After being criticized for the methodology, TTP was forced to admit
in their 2005 edition that “the costs tabulated in this study
are not a reflection of litigated claims or of the legal system.”[4]
- The Study’s Primary Author Said Study Used in a Misleading
Way. Russ Sutter, primary researcher for the study, admitted
in 2005 that tort-reform advocates use the data “in a way that's
probably misleading.”[5]
- Analysis of Past Studies Revealed Flawed Data. A May 2005
report[6] from the Economic Policy Institute (EPI), a nonprofit,
nonpartisan think tank in Washington D.C. revealed that TTP's reports
are one-sided, exaggerating the impact of the tort system and ignoring
its benefits, and that evidence supporting them is shaky or nonexistent.
Claims that the tort system harms the U.S. economy do not square
with the data. In fact, there is a good deal of evidence to the
contrary. EPI's careful examination concludes that nearly half of
the “costs” of the tort system described in the Tillinghast
study are actually payments made to from wrongdoers to injured people
for lost wages, property damage, or medical care – costs that
are the result of injuries caused by the defendants and would be
borne by society one way or another, whether by government programs
or charities, or absorbed by the victims and their families.
- Wall Street Journal: New Version of TTP Study “Includes
Payments that Don’t Involve the Legal System at All.”
The Wall Street Journal previewed the new version of the TTP
report, and noted that it includes costs that are not part of the
legal system: “…critics of past years' studies -- and
there are many -- say the number and the projections that come with
it are deeply flawed. For instance, they include payments that don't
involve the legal system at all. Say somebody smashes his car into
the back of your new SUV and his insurance company sends you a $5,000
check to fix the damage. That gets counted as a tort cost in Tillinghast's
number. Critics say it's just a transfer payment from somebody who
wasn't driving carefully to somebody who has been legitimately wronged.
How is that evidence of a system run amok?”[7]
- Bush Administration Statistics Show that the Number of Federal
Tort Trials is Down Nearly 80 Percent Since 1985. This summer
the Bush Justice Department reported that the number of tort (personal
injury) cases resolved in U.S. District Courts fell by 79 percent
between 1985 and 2003. In 1985, 3,600 tort trials were decided by
a judge or jury in U.S. District Courts. By 2003, that number had
dropped to less than 800.[8]
- The Number of State Tort Trials is Decreasing. According
to the most recent statistics from the Bureau of Justice Statistics,
the number of tort trials at the state level has decreased. These
statistics were compiled as part of the Bureau’s survey of
state civil justice systems in the nation’s largest 75 counties.
Among these counties, the number of tort trials decreased 31.8%
between 1992 and 2001.[9] [“Civil Trial Cases and Verdicts
in Large Counties, 2001”, Bureau of Justice Statistics, 4/04]
--------------------------------------------------------------------------------
[1] “How Partisanship Puts Big Solutions Out Of Reach,”
Business Week editorial, 3/14/05
[2] “False Alarm,” Stephanie Mencimer, Washington Monthly,
October 2004
[3] “‘Tort Reform’ Battle: A Simple Case of Complexity,”
Congressional Quarterly Weekly, 1/29/05
[4] “U.S. Tort Costs: 2004 Update,” Tillinghast-Towers
Perrin at 4
[5] “Tort issue creates a tussle,” Kansas City Star, 5/18/05
[6] “The frivolous case for tort law change; Opponents of the
legal system exaggerate its costs, ignore its benefits,” Lawrence
Chimerine and Ross Eisenbrey, The Economic Policy Institute, 5/17/05;
http://www.epi.org/content.cfm/bp157; (202) 775-8810
[7] “Math Divides Criticas As Startling Toll of Torts Is Added
Up,” Wall Street Journal, 3/13/06
[8] “Federal Tort Trials and Verdicts, 2002-03”, Bureau
of Justice Statistics, 8/17/05
[9] “Civil Trial Cases and Verdicts in Large Counties, 2001”,
Bureau of Justice Statistics, 4/04
###
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.
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