The RAND Study Eyes the Impact of Legal System Abuse and Social Inflation

A RAND study found that rising litigation rates, lawsuit awards, and claim severity are consistent with the expected effects of social inflation.

The study, What’s the Evidence for Social Inflation? Trends in Trial Awards and Insurance Claim Payments, found a 10% increase in the annual number of new cases per capita between 2012 and 2019 in 19 states and that 64% of cases reached a verdict in favor of the claimant in 2019, growing. from 53% in 2010.

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It also found a 7.6% compound annual growth rate in inflation-adjusted personal injury/wrongful death settlements from 2010 to 2019 and a 2.7% annual increase in severity adjusted for inflation of personal injury insurance claims between 2010 and 2019 for certain commercial liability and personal auto policies.

Those involved in the study say the rise in abuse of the legal system by billboard lawyers, combined with third-party funding of litigation by black money investors, is contributing to social inflation – a term to describe social trends believed to be expanding liability. of parties allegedly responsible for.

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It has been argued that social inflation creates a feedback loop: rising levels of tort compensation fuel expectations of windfall financial gains, which spur new claims and lawsuits.

The report shows that the percentage of large lawsuit awards ($5 million or more) increased between 2010 and 2019 — from a range of 5.5% to 7.5% between 2010 and 2016 to 12% by 2019.