“The U.S. litigation system, if left unchecked, will destroy the American spirit of enterprise and drain the U.S. economy,” was the stark message given by Lloyd’s Chairman Lord Peter Levene in a speech Tuesday to the Chicago business community held in conjunction with the RIMS conference.
Levene echoed the same theme as AIG CEO Maurice “Hank” Greenberg, who earlier told RIMS delegates that his company would launch an ad campaign ranking states by how their legal systems treat business. Speaking to the Union League Club of Chicago, Lord Levene called for a change in the law to stop a culture in which businesses are more prepared to cease trading than face the risk of litigation and individuals are living in fear of being sued.
Lloyd’s has a vested interest in controlling the spiraling costs of litigation, as the U.S. is the largest international market for Lloyd’s underwriters, accounting for over a third of Lloyd’s premium income.
Levene indicated that “The cost of the U.S. tort system has increased one hundred fold over the last fifty years and at current levels, tort costs are equivalent to a 5 per cent tax on wages.” He cited estimates made in a recent study by Tillinghast-Towers Perrin that litigation outlays would reach $298 billion by 2005, and urged Congress to act against the awarding of excessive damages.
“The U.S. system of civil litigation has spawned an American pastime, something that ranks alongside catching a game of baseball or basketball: going to court to sue other people, or companies, or organizations, or the Government. And as more and more people have gone to court, not only has the cost of doing so risen, but so too has the cost of insuring oneself or one’s company against litigation. To a foreigner like me, the drain that this system has on the U.S. economy is unbelievable,” he continued.
He cited the by now familiar examples of doctors shutting their practices because they can’t pay medical malpractice insurance premiums and people suing because they weren’t warned that coffee is hot, but didn’t mention lawsuits against McDonalds for selling fast food that makes people fat.
These types of lawsuits strike “at the very heart of the American spirit for enterprise,” said Levene. “We need to strike a balance, where individuals do have a means of redress, and where risk-takers have a safety net should things go wrong, but are not dragged into court at the merest slip. I am delighted that this issue is firmly back on the political agenda. I hope that Congress does act against excessive damages. I hope too that frivolous or groundless class actions, which reward the lawyer more than the plaintiff, become a thing of the past.”
Levene, possibly encouraged by recent efforts in Congress to reform asbestos litigation and the Supreme Court’s decision limiting punitive damages, indicated that it’s possible to address the problem of the culture of litigation. “It is a culture,” he said, “which, if left unchecked, threatens to sap the American will. In the dark days of the Depression, Franklin D. Roosevelt memorably told Americans that ‘the only thing we have to fear is fear itself.’ We cannot allow ourselves to create a culture in which you have everything to fear, unless you are covered by insurance and have a good attorney.”
The full text of Lord Levene’s speech is available on the Lloyd’s Web site at : www.lloyds.com
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