U.S. tort costs increased by 5.1 percent in 2010, driven by the April 2010 Deepwater Horizon drilling rig explosion and resulting oil spill in the Gulf of Mexico, Towers Watson reports.
In its 2011 Update on U.S. Tort Cost Trends, Towers Watson notes that absent the cost from this event, tort costs would have shown an overall decrease of 2.4 percent in 2010.
Looking ahead, Towers Watson expects tort costs to decline by 4.4% in 2011 due to the lack of such an event during the year. Excluding the impact of the oil spill, Towers Watson forecasts tort costs in 2011 will show a modest increase relative to 2010, in the area of 3%.
The report finds:
The increase in U.S. tort costs for 2010 – which confirms earlier estimates from Towers Watson – follows a more favorable year in which tort costs decreased by 2.7 percent in 2009.
The U.S. tort system cost $264.6 billion in 2010, which translates to $857 per person, versus $820 per person in 2009.
The weak U.S. economy continued to have an influence on costs in 2010, according to Towers Watson:
Personal auto tort costs showed a 1.1% increase in 2010, and medical malpractice costs continued to be stable.
Overall economic growth in 2010 was 4.2%. As such, the ratio of tort costs to gross domestic product (GDP) rose in 2010 for the second consecutive year after five years of a decline in the ratio.
Since 1950, growth in tort costs has exceeded growth in GDP by an average of approximately two percentage points.
Towers Watson estimates growth in U.S. tort costs will range from 2% to 6% in 2012, with a midpoint of 4%. A similar increase is seen for 2013, with a midpoint of 4%.
Insurance Journal has more on this story.