U.S. Chamber report shows the cost of Kentucky’s legal liability climate

On Wednesday, the U.S. Chamber of Commerce released a report, Costs and Compensation of the U.S. Tort System, showing that Kentucky’s legal liability climate costs every Kentucky household $2,608 a year.

The study finds that in 2016 the U.S. tort system’s total costs and compensation amounted to $429 billion, which is equivalent to 2.3% of U.S. GDP or $3,329 dollars per American household. To put that figure into perspective, the U.S. Chamber points out that $429 billion, the highest ever recorded, is almost six times the budget of the Department of Education.

The U.S. Chamber states they developed “consistent and transparent measures of costs and compensation using data on liability insurance premiums in the United States, and estimates of the liability exposure of businesses and individuals that are self-insured and do not purchase liability insurance.  Our estimate of self-insured liability includes both individuals and corporations with explicit arrangements and risk management programs, as well as those who assume risk passively by choosing to be uninsured.”

Diving deeper into these figures, the study points out that though it is a large number, only 57% of the $429 billion went to plaintiff compensation. The remaining 43% went to lawyers’ fees and other expenses.

The report breaks down the cost for each state and shows that the $2,608 the legal liability climate costs every house hold in Kentucky equals 2.3% of the Commonwealth’s GDP.

The Kentucky Chamber has long championed commonsense reforms to Kentucky’s broken legal liability system to establish a more equitable tort system like those in many other states.  Supporters of legal liability reform know it is a significant impediment to business and caregivers alike, but the full economic impact has been difficult to quantify, until now.

To read the full report and learn more about how the U.S. Chamber calculated the figures, you can read the full report here.

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