California's tort costs amount to $72 billion, or $5,429 per household. ILR President Stephen Waguespack has called for "strategic reforms to promote economic growth and lower costs for households" in a statement on January 3.
"The U.S. tort system is in desperate need of strategic reforms that promote economic growth and lower costs for American households," said Waguespack. "Plaintiffs' lawyers and litigation funders are getting bigger paydays at the expense of consumers and businesses. The higher the price tag, the more consumers pay for products and services, and businesses see an increase in their liability burden."
According to the U.S. Chamber Institute for Legal Reform (ILR), California's legal system leads the nation in nuclear verdicts, with jury awards surpassing $10 million. These high costs significantly increase litigation expenses, burdening businesses and consumers and often resulting in higher prices for goods and services. The ILR is calling for urgent reforms to address the root causes of these escalating tort expenses.
The ILR defines a "nuclear verdict" as a jury award exceeding $10 million, typically in personal injury or corporate negligence cases. Waguespack reports that the median nuclear verdict rose from $19.3 million in 2010 to $23.4 million in 2022, marking a 21% increase. These large awards are influenced by factors such as emotional appeals and changing juror attitudes, which significantly affect businesses and the legal landscape.
Third-party litigation funding (TPLF) involves external investors financing legal cases in exchange for a share of the settlement or judgment. This practice has driven up litigation costs and higher jury awards, particularly in the commercial auto sector, leading to increased insurance premiums for consumers. From 2010 to 2019, social inflation—partly fueled by TPLF—raised commercial auto liability claims by more than $20 billion, according to Risk&Insurance.
As reported by Insurify, the average monthly cost of full-coverage car insurance in California rose to $272 in 2024 from $208 in 2023. This increase is attributed to factors such as the state's recent approval of rate hikes after a two-year freeze and rising vehicle repair costs. Additionally, California's new mandatory liability limits, effective January 1, 2025, are expected to further impact insurance premiums.
The U.S. Chamber Institute for Legal Reform advocates for a fair legal system that fosters economic growth and opportunity. It focuses on issues like over-enforcement, class action reform, and curbing third-party litigation funding—all of which affect businesses and consumers. The ILR also works internationally, particularly within the European Union (EU), to prevent the expansion of U.S.-style class actions abroad.