American Law and Economics Review Advance Access published online on October 19, 2007
American Law and Economics Review, doi:10.1093/aler/ahm011
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Tort Liability Litigation Costs for Commercial Claims
Vanderbilt University Law School
Send correspondence to: W. Kip Viscusi, University Distinguished Professor of Law, Economics, and Management, Vanderbilt University Law School, 131 21st Avenue South, Nashville, TN 37203; E-mail: kip.viscusi{at}vanderbilt.edu.
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Abstract |
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This article analyzes tort liability litigation costs using the Texas Department of Insurance Commercial Liability Insurance Closed Claim database for the years 1988–2004. Insurer costs to defend claims in which a suit was filed average $35,000 per claim in 2004$, which corresponds to a share of 0.18 of total expenditures. Claims with higher stakes and complexity lead to greater reliance on outside counsel and less reliance on in-house counsel. Total transactions costs for each dollar received by claimants average $0.75 for all claims and $0.83 for claims in which the claimant retained an attorney and a suit was filed.
We thank Steven Shavell, seminar participants at Vanderbilt University Law School and Stanford Law School, attendees at the 2007 American Law and Economic Association annual meeting, and two anonymous referees for their helpful comments.