Tort costs down in 2006

North America

The drop in asbestos related litigation in the US has had a significant impact on reducing the overall cost of legal settlements – which declined by 5.5% - in insurance disputes in 2006. This was significantly lower than the growth rate of 0.4% in 2005, 6% in 2004 and 5.5% in 2003, according to the 2007 Update on US Tort Cost Trends from the Tillinghast insurance consulting practice of Towers Perrin. The $13.4bn decrease over tort costs in 2005 marks the first downward trend since 1997. In 2006, insured asbestos losses totalled $1.9bn. That compared to $7.0bn in 2005 and $7.3bn in 2004. By comparison, there was only a modest decline in personal lines tort costs. The 2007 report analyzes US tort costs from 1950 through 2006, with projections through 2009. Commenting on the significant drop in commercial tort costs in 2006, Russ Sutter, a principal partner at Towers Perrin, cautioned against expectations of a downward trend in future years. He said that there were several factors, including the potential fallout from the current sub-prime loan crisis, that are prompting Towers Perrin to anticipate a reversal in 2007.