Slowing the Recovery: Too Many Lawsuits
[originally appeared in the San Diego Union-Tribune, May 3, 1992]
Last fall Vice President Dan Quayle spoke out against our national mania for suing each other.
Even more amusing than the resulting spate of lawyer jokes has been the self-serving reaction of organized lawyerdom to Quayle's remarks. The American Bar Association, for example, rushed out an indignant fact sheet in response.
Remember the Veep's suggestion that America could do with a smaller number of lawyers?
The ABA doesn't deny that the United States has three times as many attorneys per capita as a country like Great Britain. But the primary reason for such differences, it declares, is not that America has too many lawyers. It's that "other countries with large populations have too few." It seems everyone's out of step but us.
Nothing enraged the lawsuit lobby more than Quayle's comment that -- when you count all the different effects -- litigation may be costing this country $300 billion a year.
Quayle's number doesn't pretend to be anything more than an educated guess on the cost of suing. What's curious are the counter-numbers his opponents keep offering. The ABA fact sheet cites a figure of $29 billion to $35 billion. So does the Association of Trial Lawyers of America. So does lawyer Joan Claybrook, speaking on PBS's "Adam Smith's Money World."
That's lower than Quayle's estimate by a factor of ten. Obviously something's wrong with one number or the other. And something is.
To get a handle on the costs of suing, it helps to start close to home, in the family driveway. More than 120 million cars are on the road. Most are insured. The portion of auto insurance that goes to liability (as opposed to theft, self-inflicted dents, and so on) varies a lot from state to state, depending on how much people sue. But the nationwide average is well over $350. Which brings the cost of liability to at least $35 billion right there, for private cars alone.
To that add a goodly sum for trucks and other commercial vehicles. Hertz recently disclosed that in whole areas of New York City it spends more to defend lawsuits than it collects in rental fees for its cars--which leaves less than no money to pay for the vehicle itself, its upkeep, employees and so forth.
Suits involving planes and trains are big business too, but let's move on to the doctors. By now four of five obstetricians have been sued; in some places those with good records pay more than $100,000 a year for insurance. If a baby is born in bad enough shape, cynical lawyers know that a suit will always have settlement value, no matter what the doctor and hospital have done.
How much does this cost per baby delivered? A study by the National Institute of Medicine reported a 1987 figure of $736 for California, less elsewhere ($527 for New Jersey, for instance, $319 for North Dakota). To be conservative, call it $400. Multiply that by roughly 4 million births a year, and you get $1.6 billion just for obstetrics, one specialty among many. For medicine as a whole, the direct cash cost of suits is thought to top $10 billion, maybe $15 billion.
We're now past $50 billion, and just getting started. Suits against City Hall are another big cash cow for the lawsuit industry. New York City juries alone recently voted $4.3 million to a thug shot by police during the brutal mugging of a 72-year-old man (upheld on appeal Feb. 20); $9.3 million to an inebriate who fell in front of an oncoming subway train; $6 million to another track totterer, and $2.5 million to a would-be suicide who jumped on purpose.
Some of these get reduced on appeal, but overall Gotham taxpayers shell out sums pushing $100 million a year even aside from suits against municipal hospitals and crashes of city-owned cars. Factor in other levels of government that get sued -- school districts, counties, states -- and the national totals have to reach well into the billions.
We haven't even mentioned workers' compensation ($50 billion, up tenfold in the past 20 years, in large part because lawyers have muscled in). Or the megabucks business of suing companies over allegedly defective products. Or environmental litigation, which dumps into lawyers' pockets vast sums that might otherwise go to cleanup: as one attorney puts it, we manage to spend 90 cents on grey flannel for every dime on blue jeans. Or "premises liability" after someone slips and falls in a store or gets mugged in a parking lot. Or liquor-serving liability.
Small wonder that Tillinghast, a big consulting firm that's been studying legal costs for years, estimates the direct cost of injury law for 1987 at $117 billion. And injury law itself is just one legal category among many. It doesn't include most disputes between businesses, a phenomenally expensive growth area. Or real estate, zoning and neighborhood wrangles. Or divorce and custody litigation, which can be the most destructive kind of all.
How did ABA-'n'-ATLA come up with their low-ball $30 billion? They cite the Rand Corp., a respected source. Trouble is, Rand never intended its number to stand for the system's full cost.
To start with, Rand excluded the vast category of cases where money changes hands on a threat to sue without the formal filing of papers. Nor did it try to count the full costs of running liability insurance. Its figures are also from 1985, two years earlier than Tillinghast's.
Ask people at Rand, and they'll tell you they know of nothing wrong with the Tillinghast numbers. James Kakalik, co-author of the Rand study, says the two studies are just trying to measure different things, that's all.
Neither Rand nor Tillinghast takes into account the non-monetary costs that are much of the nightmare for persons caught up in litigation: name-calling and privacy-invasion, acrimony and bullying. Psychiatrist Sara Charles writes that a four-year lawsuit by a former patient "swallowed up my own life completely" before she finally won at trial. "It took over my life," agrees New York University professor Jan Moor-Jankowski of a defamation suit against him that was finally dismissed after seven years. Trial lawyers, who swear that emotional distress is worth a small fortune when their own clients are suing over it, are happy to value it at zero when they inflict it on their opponents.
Even the vice president's $300 billion estimate doesn't include these intangible torments. What it does add in is the tangible but indirect cost of suits. We've all heard of "defensive medicine," where doctors feel they must order extra tests and hospital stays to protect themselves from charges of not having done all they could. A quarter of all births are now by Caesarean section, far more than good medicine would dictate, simply because we've made it so easy to sue doctors for not performing them. An American Medical Association study found that much more is spent indirectly in this way than on direct malpractice litigation, by a factor of three.
No one really knows whether the comparable multiplier for other kinds of lawsuits is higher or lower. So the Veep's figure may be too high -- or, quite possibly, too low. Which is one definition of a reasonable guess.