Lawsuits Gone Wild: Our out of Control Legal System and the Need for Tort Reform

In the society we live in, it has become increasingly popular and more common to sue. Whether we see it in the media, talk about it amongst ourselves, or are actually the ones doing the suing, (or being sued) we deal with lawsuits every day. Now, we’ve all heard the story about the grandmother who spilled hot coffee on herself and successfully sued McDonald’s for nearly $2.9 million, or the man who sued Winnebago and won $1.75 million after crashing his motor home off the freeway. But few of us ever question what these and all the other outrageous rewards for senseless lawsuits do to the economy. Have we ever wondered if they have a negative effect? Have we asked ourselves how they impact us, as consumers? Have we asked how they impact American business? The answer to all those questions is this: Frivolous lawsuits destroy the American economy.

Frivolous lawsuits can damage the economy in many ways. They can force companies out of business, increase the cost of financing and insurance, and cost millions of dollars every year in lost time, court awards, and legal fees. Also, litigation can increase the cost of products for consumers, up to 2.5% on an average (Abraham NP). David Bernstein, a law professor at George Mason University estimates that “…consumer prices could be reduced by 20% if actions are taken to reform the lawsuit process” (Javers 25). In addition, the time that is taken to prosecute, defend, settle, and try lawsuits, along with the costs of paying damages, can place a huge tab on the economy, with an estimated $132 billion lost in 1991 alone (Abraham NP). On top of all that, the threat of lawsuits often causes financial markets to overreact, and credit-rating agencies become likely to downgrade firms facing the threat of litigation. This in turn increases the cost of financing. Aside from spending and losing more money, immense awards for often ridiculous lawsuits can force businesses into bankruptcy, and cause large and small companies alike to shut down.

Another problem caused by frivolous lawsuits is that unnecessary precautions have become necessary. What would be unneeded protections now are needed to guard against litigation. Doctors carry out expensive but otherwise unnecessary tests to guard against medical malpractice suits, businesses are prevented from researching or improving products to protect against the threat of lawsuits, and firms have to limit services due to legal costs. “Doctors are forced to practice “defensive medicine”… and evidence suggests that doctors are eschewing areas of medicine that carry the greatest risk of malpractice suits,” says David Pleasant, of the Economist Newspaper (Pleasant NP). Insurance and financial firms also are affected, as they now are closing or limiting services as a result of legal expenses. Also, according to a Gallop survey, one in five businesses doesn’t improve or produce a new product for fear of litigation (Abraham NP).

Possibly the most negative and detrimental effect lawsuits have on the economy is how they drive up the cost of health care. Because the outcome of medical malpractice lawsuits can be so unpredictable, frivolous or not, they raise insurance costs for doctors. When insurance premiums rise, doctors end up passing some of those costs onto patients. Every time patients go to see their doctor, they are paying a higher price. People now pay more, because doctors need more to pay off extra insurance money. This extra money comes from lawsuits. Also, frivolous lawsuits cause the practice of defensive medicine. Defensive medicine compels doctors to over prescribe on tests, treatments, and medicine as a hedge against medical malpractice claims. President George W. Bush hopes to fix the current legal medical crisis, and is quoted as saying

For the sake of our health care system, we need to cut down on frivolous

lawsuits which increase the cost of medicine. People who have been

harmed by a bad doctor deserve their day in court. Yet the system shouldn’t reward lawyers who are simply fishing for a rich settlement. Frivolous lawsuits drive up the cost of health care. They affect the federal budget. And therefore, medical liability reform is a national issue that requires a national solution. (Javers 25)

Until something is done, excessive medical malpractice awards will continue