August 22, 2005

Not just jury awards

As an attorney I wanted to point out that it is not just jury verdicts that are driving up the cost of insurance and of doing business. While verdicts contribute to the picture, the process of litigation itself generates enormous costs.

Take a class action against an major insurer or manufacturer. Plaintiffs will conduct extensive discovery seeking to prove the existence of a claim and to identify the dimensions of the class in question. Given the need to search for and review the relevant documents and electronic files before production, the target company may spend millions of dollars a month defending such cases, whether or not the underlying claims have merit or not. Many costly additional steps are needed to protect the client from inadvertent disclosures and to protect others from privacy invasion, which itself might spawn more litigation.

The defense of product liability cases incurs similar costs before getting to the question of what the real flaw in the product is or may be. Enormous sums are spent on discovery of documents and deposing experts. A whole support industry has sprung up to feed resources into litigation. Liberal discovery and pleading rules in most states run up costs by allowing a plaintiff to file a suit and then attempt to discover from the defendant's documents and employees what his claim might be.

The real people getting rich in all of this are the lawyers on both sides, while the costs impact businesses large and small as well as public entities such as school systems. No one seems to be talking about the fundamental alterations in the system we need. -- Jay Strickland, Georgia

Posted by Walter Olson at August 22, 2005 11:24 PM
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