At its annual summit in October, the U.S. Chamber Institute for Legal Reform released a comprehensive study on how the tort system imposes costs on society. The study shows Wisconsin’s costs and compensation in its tort system fair well in comparison to other states.
The study showed Wisconsin has the fourth lowest tort costs per household at $2,464, almost $1,000 below the national average. In comparison, New York has the highest costs per household of any state at $6,066, more than double Wisconsin’s costs. Wisconsin’s tort costs make up 1.8 percent of the state’s gross domestic product (GDP), substantially below the national average of 2.3 percent. The highest of any state, Florida’s tort costs make up 3.6 percent of its GDP, again more than double Wisconsin’s numbers.
Wisconsin has enacted several significant legal reforms in the last few years to reduce tort costs, including the passage of 2017 Act 235. Act 235 included groundbreaking litigation funding transparency provisions, along with several other common-sense reforms to address the high transactional cost of litigation.
Despite the progress made by Wisconsin reforms, tort costs still impose significant costs for both businesses and individuals. The study estimated total tort costs and compensation paid in the U.S. at $429 billion. The study overall evaluated the tort system as inefficient, with 43 percent of costs covering litigation, insurance, and risk transfer expenses, rather than covering plaintiffs’ compensation. Furthermore, the costs estimated in the study do not include immeasurable costs such as disincentive for innovation and development that leads to lower employment and general harm to states’ economies.