Economic Benefits of Tort Reform

An assessment of excessive US tort costs and potential economic benefits of reform

Published on February 01, 2022
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The civil justice system is a crucial institutional framework in America. When working properly, the system provides a fair and equitable forum for the resolution of disputes among parties, appropriately compensating those that have legitimately been harmed. Additionally, it acts as an effective deterrent to undesirable behavior. As part of this framework, tort litigation can be highly beneficial to society in terms of promoting equal and impartial justice as well as establishing part of the critical context in which economic activity can prosper.

On the other hand, a flawed civil justice system which generates exorbitant levels of damages or numbers of awards and which is unpredictable in its outcomes may result in negative impacts through the misallocation of society’s scarce economic and human resources. When such imbalances occur, tort reform can lead to substantial economic benefits, and states which have implemented reforms have seen improved judicial efficiency and measurable improvement in economic performance.

In order to evaluate the actual and potential economic benefits of tort reform in the US, states, and the District of Columbia, The Perryman Group (TPG) quantified the aggregate excess costs associated with the current system, allocated this amount across states, and examined the resulting downstream effects. Effective reform measures can reduce or eliminate these costs to the benefit of each state.

For more details please refer to the full report.