Litigation Patterns in Automobile Bodily Injury Claims 1977–1997: Effects of Time and Tort Reforms

Abstract

Abstract:Benefiting from the extensive claims data available from the Insurance Research Council Closed Claims Surveys from 1977 to 1997, we investigate changes in claiming patterns among automobile third party claimants. Using state tort reform variables as controls, we find results consistent with general public opinion that lawyer use and claim filings have increased over the study period. Furthermore, the reforms themselves show effects consistent with expectations. Passage of joint and several liability limitations, caps on damages, and punitive damages reforms all reduce both attorney use and claim filing. Insurability of punitive damages and no-fault legislation lead to higher attorney use and claim filing. Using state variables as controls instead of reforms, however, we find that claim filing was higher in 1977 than 1997 and lawyer use statistically unchanged between the two periods. One possible cause for the differing results is that the tort reform variables are picking up a time effect, as observed in the mean values over the three data periods studied. To identify the marginal effect of the reform, we also ran the analysis with reform/data year interaction terms. In this third analysis, we find that use of attorneys and filing of legal claims has increased over time, and that most of the reforms have been effective in dampening both of these behaviors.

HOW DOES TORT LAW AFFECT CONSUMER AUTO INSURANCE COSTS?

“…8 Carvell, Currie, and MacLeod (2012), for example, examine how tort reform affects automobile accident deaths, finding evidence that no-fault repeal is associated with a decrease in auto accident deaths while other reforms do not, but they do not consider how such effects might impact insurance costs. 9 Similarly, Browne and Schmit (2008) demonstrate an association between the tort environment of a state and the likelihood that auto crash victims consult an attorney and file suit, but they do not connect these differences in litigation behavior to premiums. Single reform studies include Hawken, Carroll, and Abrahamse (2001), Browne, Pryor, and Puelz (2004), Insurance Resource Council (IRC) (2011), and Asmat and Tennyson (2014) who examine insurer bad faith, and Anderson, Heaton, and Carroll (2010) who demonstrate that repeal of no-fault lowered average automobile premiums in three states.…”

A Cross‐National Study of Government Social Insurance as an Alternative to Tort Liability Compensation

“…As Browne and Schmit (2008) state in their recent article, "Indisputably, U.S. society is viewed throughout the world as excessively litigious." This perception is consistently supported by the periodic Tillinghast Towers-Perrin reports showing that U.S. liability expenditures per capita are much higher than anywhere else (Towers, 2006 and prior years).…”

WHAT DRIVES TORT REFORM LEGISLATION? AN ANALYSIS OF STATE DECISIONS TO RESTRICT LIABILITY TORTS

“…Analyses of the first issue have provided strong evidence that limitations on tort liability reduce the frequency of claims and the size of claims (Browne and Puelz, ; Browne and Schmit, ; Paik, Black, and Hyman ). Analyses of the effect of tort reforms on insurance market quantities typically indicate that tort reforms reduce insurance losses (Born and Viscusi, , ; Born, Viscusi, and Baker, ) and insurance premiums (Zuckerman, Bovbjerg, and Sloan, ; Born and Viscusi, ; Heaton, 2015), although the results on premiums are less strong.…”

“…Physicians per capita ( Physician ) is taken from the U.S. Statistical Abstract for each state and year. The data are not available for each year, so we interpolate values for the years in which the data are not reported using a method from previous studies (e.g., Browne and Schmit, )…”