Products Liability – Defense Costs

Thanks to Robert Ambrogi for telling us about an interesting study from the Rand Corporation.

Rand studied asbestos payments, and found that 42 cents of every dollar went to victims, 27 cents went to their lawyers, and 31 cents went to defense costs. See an executive summary of the study here.

While it is a shame that “administrative” costs eat up such a large share of the asbestos dollars, it is interesting to see it actually documented that defense costs exceed the monies paid to the lawyers for the victims. This study helps document why it is so unfair to cap attorneys’ fees on one side of the “v”.

In Tennessee, I keep up with the annual reports filed by State Volunteer Mutual Insurance Company, a physican-owned medical malpractice insurer. They are a well-run company and have made a fortune selling insurance to the doctor owners.

Well, I have analyzed the Company’s loss payments expenses and, guess what? Over the years the Company’s loss payment expenses equal about one-third of their total loss payouts. And this even though the Company does not have to pay its expert witnesses anywhere near what plaintiffs have to pay theirs.

I am all in favor of reducing attorneys fees and expenses in litigation. Anyone who tries lawsuits knows that litigation is expensive – too expensive. But capping fees for one party and not the other – well, that is obviously wrong to anyone who thinks about it for a nanosecond.