Tillinghast Defends U.S. Tort Costs Study Against Criticisms

May 18, 2005

The Tillinghast business of Towers Perrin has come out in defense of its annual study of the costs of the U.S. tort system, which has come under fire by a Washington, D.C. economic research group.

The insurance consulting firm said it stands behind its data, analysis and methoodolgy. It maintained that its studies provide “neutral data” and draw no conclusions about whether the costs of the tort system are too high or low.

“The report makes no conclusion about whether the costs of the system outweigh its benefits or vice versa,” Tillinghast said in a statement.

The Economic Policy Institute this week claimed that the methodolgy and costs cited in the Tillinghast study were misleading and that the Bush Administration uses them to claim there is a crisis in the tort system.

“TTP (Towers Perrin Tillinghast) has succeeded in alarming the public and the media by making a manageable situation seem like a crisis,” said Ross Eisenbrey in recent criticism by his organization, the Economic Policy Institute. “Their numbers do not stand up to analysis and neither do the promises about the economy that the administration has based on them.”

Tillinghast noted that its methodology incorporates three cost components: benefits paid or expected to be paid to third parties, defense costs and administrative expenses. Administrative expenses are identified separately in the report. While Tillinghast outlines why these are a real cost of the tort system, it said it takes no position on the efficiency of the insurance industry’s administrative expenses.

The Tillingast study also states that…”the costs tabulated in this study are not a reflection of litigated claims or of the legal system.” Accoording to the firm, this statement is included in the report because litigated claims and the legal system involve other areas beside tort claims, and not all tort claims are litigated. The study accumulates all of the costs of damages awarded to injured parties as a result of the negligence of others, including the costs that are embedded in the liability insurance system and the claims that are settled out of court.

Tillinghast countered with a point-by-point response to EPI criticisms and claims. A document outlining these responses can be found on the company’s web site at

http://www.towersperrin.com/tillinghast/press/2005_press/response_0517.pdf

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