Thursday, January 27, 2005

The war on tort

on Economist

According to figures from Tillinghast-Towers Perrin, an insurance consultancy, tort-system costs amounted to $246 billion in 2003—excluding vast settlements agreed by tobacco companies (see chart). That represented 2.2% of GDP, compared with just 0.6% in 1950 and 1.3% by 1970

Businesses suffer indirect costs too. The threat of lawsuits often causes financial markets to overreact. Credit-rating agencies are likely to downgrade firms that face litigation, increasing the cost of financing.

It is hoped that the proposed $140 billion fund will convince all parties—on the one side businesses and insurers, and on the other victims and trade unions—to end a series of legal battles that has been running since the first asbestos-related claim was filed in 1966.

In the case of asbestos, many of those included in the class actions are not even ill, but merely worried that past exposure might make them sick in the future.

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