Does Everyone America Has a Lawyer on Speed dial ? The Chilling Economic Effect of Litigation

By: Jeff_Berwick

Wendy McElroy writes: McDonald's is being sued again by a California woman who claims she was scalded by their hot coffee. In 1990, a New Mexico woman was awarded $2.9 million in a hot-coffee lawsuit against McDonald's; the award was later reduced to about $500,000. Meanwhile, a continent away, a New Jersey woman is suing a real estate developer for not disclosing the presence of a 'bad' neighbor when she purchased a house.

In any other place, these cases might seem odd. But America is the world's most litigious nation by far. The legal site eLocal Lawyer states that 15 million civil suits are filed every year; approximately 55% are decided in favor of the plaintiff. Those statistics do not count the many disputes that are settled before a filing occurs or criminal cases. According to the American Bar Association, there were 1,244,120 attorneys who were actively practicing in 2012; the American population is approximately 313 million.

And, yet, the average American cannot afford to sustain a legal process because of the high cost of a lawyer. Fortunately, at least for lawyers, there are work-arounds on the road to getting paid. In liability cases with some likelihood of success, for example, law firms often take the case 'on spec.' This means they do not charge the client but instead participate richly in any court awards. In other words, the case presents the plaintiff party with no risk and with a high chance of a cash.

America's runaway litigation threatens both individual freedom and the harmony of society. The most consistent risk factor for being sued is wealth. The more assets an entity or person has, the greater the chance of being sued. Lawsuits are yet another way in which America expresses open hostility toward success.

THE CHILLING EFFECT OF LITIGATION

Some effects of America's hyper-litigiousness are obvious. For example, when a corporation announces a change in its customer policies as a response to a substantial payout. Or when your neighbor declares bankruptcy because he cannot afford the damages from someone slipping on his icy driveway.

Less visible effects can be 'chilling' as well. A chilling effect occurs when people avoid the legitimate exercise of their rights because they fear repercussions. A common political example is a journalist who avoids criticizing the government because he fears reprisals, such as being audited by the IRS. An insidious aspect of chilling is that its consequences are often invisible; the journalist self-censors and the public never reads the words that express his true opinion. The impact of what is absent and unseen is as profound as a tangible presence, however. What is absent is freedom itself. The tangible presence is fear.

What are some of the less visible effects of litigious America? Consider the impact on one profession alone: physicians.

Services are absent. The tech site LiveScience reported (June 27, 2013) on a projected “shortfall of between 9,000 and 14,000” in obstetrician-gynecologists over “the next 20 years.” The shortfall is particularly acute as “1 in 7 ob-gyns have stopped delivering babies. More than 20 states are now in 'Red Alert' crisis mode — meaning the number of ob-gyns isn't sufficient to meet patients' needs.”

Two reasons for the shortage are cited: the advancing age of most ob-gyns; and, the high cost of malpractice insurance. (Arguably, this is only one reason. If insurance were less onerous, then younger doctors would be more likely to enter the field.) The highest rates for malpractice insurance were in the New York counties of Nassau and Suffolk with Physicians' Reciprocal Insurers charging $227,899 a year. Why so high? LiveScience noted “the average payment for claims involving neurologically impaired infants was $1.15 million.” 'Birth injury' has become a separate subcategory of legal practice.

Services are unnecessarily expensive. Doctors are notorious for ordering unnecessary tests; this allows a doctor to honestly state in court that he did “everything possible” to treat a patient. A 2008 Massachusetts survey found that 83% of doctors admitted to practicing defensive medicine; 18% to 28% of tests and procedures and 13% of hospital admissions were prompted by a wish to avoid lawsuits. Defensive medicine is commonsense. A study published in the medical journal BMJ Open (July 18, 2013) found that a family practitioner in the U.S. had a 76% risk of being sued before the age of 65. Not surprisingly, there is also a severe shortage of family practitioners who are a bedrock of primary care.

Lawsuits dictate the quality of patient care. As well as providing unnecessary medical care, doctors are reluctant to pursue necessary care that involves legal risk. For example, many of them refuse to prescribe effective pain killers, such as morphine for terminal patients, because morphine is addictive and raises official eyebrows.

[Note: the impact of the ever-evolving Obamacare on doctors is unclear. Public hospital doctors may well enjoy immunity but that would result in higher premiums for private practitioners, driving them out.]

Local events and traditions disappear. I used to volunteer at various events in my rural county, such as local fairs and an aviation display. The events have disappeared. The reason: the volunteer organizers cannot afford to pay the insurance that halls, parks and other venues demand in exchange for access. Newcomers to my small town will not notice the absence of community events or the decline in community spirit. They are like children who use a park for the first time and do not notice the absence of swing sets and jungle gyms upon which their parents played. Noticed or not, life has become a bit drearier, a bit less friendly. (Although my experience is in Canada, friends report the same situation in America, only more so.)

Small businesses never launch or they needlessly perish. Companies and individuals pass along the cost of insurance to customers. Tort liability is part of that cost; this is the legal requirement that companies pay for damages and injuries for which they are deemed responsible, including work injuries. The Concord Law School offered a glimpse of how substantial tort liability can be. “In 2008, the total cost of tort liability in the United States was more than $255 billion, which is equivalent to an $838 yearly tort tax on every American or $3,340 for a family of four.  Another study puts the cost at $9,827 for a family of four if all the indirect costs are included.  Higher levels...are forecast for 2010 and 2011."

CONCLUSION

No one argues against a lawsuit that seeks reasonable awards for a genuine harm. But the mass of litigation in America today has moved well beyond reasonable, well beyond genuine.

The United States will not become less litigious in the near future (Editor's Note: And all the more reason to get your assets outside of the US so they cannot be taken in a frivolous lawsuit... TDV's upcoming Crisis Conference has answers for that). A growing number of people make excellent money through filing suits against others. It is not merely plaintiffs or lawyers who use the courts to get a pay check. The New York Times (Nov. 14, 2010) reported, “Large banks, hedge funds and private investors hungry for new and lucrative opportunities are bankrolling other people’s lawsuits, pumping hundreds of millions of dollars into medical malpractice claims, divorce battles and class actions against corporations — all in the hope of sharing in the potential winnings.” Using the 2010 public records of one state alone (New York), the Times estimated that “more than 250 law firms borrowed on pending cases, often repeatedly” during the last decade.

America's assault on wealth and success is expressed daily basis in the form of frivolous or far-reaching lawsuits. From small town fairs that no longer exist to 'protective' medicine, money-grab lawsuits impoverish the quality of American life. 

Anarcho-Capitalist.  Libertarian.  Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks.  Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast.  Jeff is a prominent speaker at many of the world’s freedom, investment and gold conferences as well as regularly in the media.

© 2013 Copyright Jeff Berwick - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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