Get Involved

Louisiana’s annual tort system costs pegged at more than $4,000 per household


November 1, 2018
By Michael Carroll
Originally Posted on Louisiana Watchdog

Louisiana lawsuit costs are among the highest in the nation, with annual expenses in 2016 reaching nearly $7 billion – or the equivalent of $4,015 per household – according to a new study on the cost of tort litigation in all 50 states.

The study released last week by the U.S. Chamber of Commerce Institute for Legal Reform (ILR) reported that on average, U.S. tort system costs amount to $3,329 per household, which is about 2.3 percent of the nation's gross domestic product. So the tort system costs in Louisiana are 20.6 percent higher than the national average.

The study examined liability exposure data on businesses and individuals who are either self-insured or uninsured, as well as liability insurance premium numbers.

“It has to do with laws that are unfavorable toward business and also the culture in the courtroom, so it's a two-fold problem,” Lauren Chauvin, civil justice director at the Louisiana Association of Business and Industry (LABI), told Watchdog.org.

Court cases involving auto accidents made up the largest share of Louisiana's tort system costs, according to the ILR report. They added up to nearly $3.4 billion in 2016.

“Louisiana has an unhealthy auto insurance market right now, especially in commercial auto insurance,” Chauvin said. “... It's a crisis that we're dealing with.”

And the problem isn't that drivers in the state get into more car accidents or that their cars are being damaged more often, she said.

“The problem is the medical expenses from those accidents are through the roof,” Chauvin said, adding that some state laws need to be changed to get legal costs under control.

In Louisiana, residents don't have a right to a jury trial unless the total damages sustained are at least $50,000, she said. Louisiana is also one of three states that allows residents to sue insurance companies directly, according to Chauvin.

“Many cases stipulate $49,999 in damages so they don't go to a jury but to a judge,” she said.

Numerous other state laws, such as one that doesn't allow juries to be told that a plaintiff didn't wear a seat belt, also tend to inflate damage awards, Chauvin said.

“What this does is escalates those damages awards specifically when it's a personal injury damages award,” she said.

Tort reform is a top LABI priority and an issue that is causing angst among state residents, according to Chauvin.

“It's something that the public really is demanding at this point because of how high our insurance rates are,” she said.

Lana Venable, executive director of Louisiana Lawsuit Abuse Watch (LLAW), said the ILR study dovetails with her organization's reading of tort system costs in the state. LLAW released a study in September concluding that high tort costs are costing the state $1.5 billion in economic output and 15,556 jobs annually.

Lawsuits against oil and gas companies have a ripple effect on business costs in Louisiana, according to Venable. And that industry continues to be sued for damages that occurred before current federal environmental rules were even put in place, she said.

“These really hinder economic development in Louisiana,” Venable told Watchdog.org.

The state would attract more businesses if not for its litigious climate, she said. Louisiana has the second highest auto insurance rates in the nation, according to Venable, and fewer insurance carriers write policies in the state.

LLAW also favors lowering or eliminating the $50,000 threshold for civil jury trials. Personal injury cases can come before judges who are beholden to plaintiffs' attorneys because the lawyers have donated to the judges' election campaigns, she said.

Even without taking into account attorneys' contingency fees, only 57 percent of tort system costs nationwide go to compensation for plaintiffs, according to the ILR study.

Another Louisiana organization that has advocated for tort reform is the Pelican Institute for Public Policy in New Orleans.

Although studies have shown that legal system costs have hurt the state's ability to attract new businesses and jobs, the ILR study demonstrates that the problem is much closer to home because of the financial hit Louisiana's families are taking, according to Daniel Erspamer, the Pelican Institute's CEO.

“Advertisements for trial attorneys promising quick, easy money flood nearly every airwave and cover countless billboards on nearly all of our highways,” Erspamer told Watchdog.org in an email. “If lawsuits truly afforded jobs and opportunity for the people of our state, we'd be one of the wealthiest in the nation. Unfortunately, this is not the case, as Louisiana's economy is currently ranked the worst in the country.”

The institute plans to release some legislative recommendations in February to address the issue of tort system costs.