The American Tort Reform Association (ATRA) has ranked California as the fifth Judicial Hellhole, citing its civil justice system for fostering novel liability theories and excessive litigation. This announcement was made in a report released on December 10, 2024.
According to ATRA, California's courts are described as the "trial bar's laboratory," becoming a hub for testing new legal theories such as the "duty to innovate." This theory imposes liability on manufacturers for not releasing safer products quickly. The state also faces high litigation activity under laws like the Private Attorneys General Act (PAGA), creating challenges for businesses operating there.
A report from the U.S. Chamber of Commerce Institute for Legal Reform (ILR) in 2024 states that California led the nation in nuclear verdicts in personal injury and wrongful death cases from 2013 to 2022, with 199 verdicts totaling over $9 billion in damages. Even when considering its population size, California ranked in the Top 10 on a per-capita basis for these awards. Auto-accident cases and product liability cases comprised more than half of these massive verdicts, with Los Angeles accounting for over one-third. Recent examples include a $61 million wrongful death verdict in December 2023 and $80.2 million in April 2024 for unlawful termination cases in Sacramento County.
The ILR report highlights the growing prevalence of nuclear verdicts—awards exceeding $10 million—and their impact on rising insurance costs. These verdicts are termed "nuclear" due to their effects on businesses, entire industries, and society as a whole. Such outcomes can erode fundamental fairness and predictability in the legal system while driving up the cost of goods and services. Additionally, nuclear verdicts increase insurance premiums and sometimes make obtaining coverage more challenging.
Auto insurance costs are complicating efforts by the Federal Reserve to control inflation. Chair Jerome Powell told The Washington Post earlier this year that auto and housing insurance have been persistent sources of inflation. Contributing factors include advanced vehicle technologies, rising repair costs, and labor expenses. Loretta Worters, spokeswoman for the Insurance Information Institute, said that increased fatalities and injuries are leading to more attorney involvement in claims.
ATRA is a nonprofit, nonpartisan organization founded in 1986 by the American Council of Engineering Companies, with the American Medical Association joining soon after. It focuses on reforming the civil justice system and promoting tort reform, with membership comprising nonprofits, businesses of all sizes, and state and national trade, business, and professional associations.