Settlement Versus Trial

The majority of tort disputes never reach a trial verdict. For example, of the 41,696 tort cases that were terminated in U.S. district courts in fiscal year 2000, only 3 percent were decided in trials.¹⁵ The NCSC similarly reports that “[t]he vast majority of all [state] tort cases are disposed through some form of settlement, with only 3 percent of all tort matters resulting in a jury trial.”¹⁶ Litigants have mutual incentives to save on litigation costs by settling out of court. They avoid uncertain trial outcomes and delays and can agree to keep settlements confidential.¹⁷ In some cases, settlements may be reached through alternative methods of dispute resolution, such as voluntary arbitration or mediation.

Generally, details of civil disputes settled before a trial are not reported to the courts and hence are not included in publicly available data. Those data therefore show only part of the picture—there may be important differences between cases that go to trial and cases that settle out of court.¹⁸ For example, cases that go to trial probably involve larger dollar amounts, on average. Nevertheless, trial verdicts set precedents for all cases and thus affect the incentive to settle by signaling the value and probability of success to future litigants.¹⁹

The vast majority of tort filings occur in state courts. In 2000, more than 700,000 torts were filed in state general-jurisdiction courts, compared with only about 37,000 in federal courts, the Congressional Budget Office (CBO) estimates.²⁰ Liability standards are not uniform among the various jurisdictions. For example, the extent to which damages may be reduced if the injured party contributed to the accident differs among states. In addition, a small number of local courts have been described as “class-action magnet courts” and criticized for being biased toward plaintiffs.²¹

U.S. district courts have jurisdiction in civil cases when a case deals with a federal question, the federal government is either a defendant or plaintiff, or the case involves “diversity of citizenship.”²² Of the tort cases that were terminated by trial in federal courts in fiscal year 2000, 72 percent involved diversity of citizenship, 18 percent involved a federal question, and 11 percent involved the U.S. government as a defendant or plaintiff. Many of those tort cases did not originate in federal courts: 28 percent were removed from state courts.²³

Different types of torts pose different challenges for the goals of the liability system, so it is useful to track the trends in filings for important categories of torts. For example, overall statistics on torts can be substantially driven by developments in mass torts. The General Accounting Office found that asbestos litigation accounted for half of the growth in tort filings that occurred in federal courts between 1974 and 1986.²⁴ Although tort filings as a whole have fallen significantly since 1996, that overall trend masks important developments in key categories of torts.

The major areas of tort litigation, based on their share of total tort trials completed in the general-jurisdiction courts of the 75 largest U.S. counties in 1996, are automobile-related torts (49 percent), premises liability (22 percent), and medical malpractice (12 percent).²⁵ Many of the common categories of torts pose few policy problems. For example, automobile torts often have low awards: a median jury award of $18,000 for winning plaintiffs in state courts in the 75 largest counties in 1996, compared with a median award of $31,000 for all torts (see Table 1).

In contrast, torts that have received the most public attention—such as products liability cases (including asbestos litigation) and medical malpractice cases—often involve larger stakes and have more significant effects on courts’ resources, victims’ compensation, the viability of businesses, and insurance premiums. Winning plaintiffs in state courts received a median award of $309,000 in asbestos cases and $286,000 in medical malpractice cases in the 75 largest counties in 1996. Moreover, about 20 percent of medical malpractice awards and 16 percent of products liability awards (other than in asbestos-related cases) were at least $1 million, compared with only 6 percent of state courts’ awards for all torts. (Although punitive damages were infrequently awarded in medical malpractice and asbestos cases, they were also higher than the average for all torts: median amounts of $250,000 and $110,000, respectively, compared with $38,000 for tort cases overall.)²⁶ At the federal level, medical malpractice cases terminated by trial in U.S. district courts in 1996 had a median final award of $252,000.

Policymakers and the business community have been concerned about the increasing costs of asbestos litigation. Researchers at RAND estimate that claims for asbestos-related compensation totaled $54 billion through 2000, with estimated future costs ranging from another $145 billion to $210 billion.²⁷ They also identified 67 bankruptcies related to asbestos litigation through 2002, up from three through 1982. Adding to that concern is the latency that occurs in the onset of asbestos-related disease, which makes it difficult to predict firms’ exposure to liability and to ensure adequate compensation for victims who have yet to file claims.²⁸

Table 1.

Asbestos cases also differ from other torts in the number of firms affected. The median number of defendants in asbestos litigation was 18, compared with a median of one defendant in tort cases overall.²⁹ Over time, the targets of asbestos suits have expanded from the original manufacturers of asbestos-related products to include customers who may have used those products in their facilities. According to RAND, the total number of defendants in asbestos litigation rose from 300 in 1982 to more than 6,000 in 2000.³⁰

Recent data show no growth in the total number of medical malpractice tort claims, but the size of awards has increased. Median payments for medical malpractice claims at trial rose from about $100,000 in 1990 to over $300,000 in 2001, according to the Physician Insurers Association of America.³¹ (BJS data from the nation’s largest counties show an increase in median awards in state courts from $201,000 in 1992 to $286,000 in 1996.)³² That rise coincides with increasing malpractice premiums for doctors, which critics blame for leading to a reduction in the availability of health care in some parts of the country.

Another set of tort claims that concerns policymakers is cases filed using the class-action procedure, in which a small number of plaintiffs represent a larger group of people who were similarly affected by the same product or tort. Class-action cases are designed to address relatively small but numerous losses for which individual suits would be impractical. However, when the class is large enough, even claims that are trivial individually can have a significant effect on particular firms and even whole industries. Limited data are available on class actions, but those cases are more likely than other torts to be filed in federal court. For example, a RAND study estimated that during the 1995-1996 period, 40 percent of reported class-action decisions arose in federal court, whereas CBO estimates that less than 5 percent of all torts are filed in federal court.³³

Next > Tort Liability as a Tool for Achieving Efficiency and Equity

15. Congressional Budget Office calculation based on “Civil Terminations, 2000,” Federal Court Cases: Integrated Data Base (Federal Judicial Center, Washington, D.C.), dataset no. 117, available from the Inter-university Consortium for Political and Social Research.

16. Kauder, Examining the Work of State Courts, p. 2.

17. Also, in some circumstances, compensatory damages are not taxable but punitive damages are. Therefore, plaintiffs who anticipate that the net value of a trial award will be reduced because of taxes have an incentive to settle for an amount below the expected trial award. See A. Mitchell Polinsky, “Are Punitive Damages Really Insignificant, Predictable, and Rational? A Comment on Eisenberg et al.,” Journal of Legal Studies, vol. 26, no. 2 (June 1997).

18. George L. Priest and Benjamin Klein argue, on the basis of a model of the determinants of settlement and litigation, that disputes selected for litigation are neither random nor representative of all disputes. See Priest and Klein, “The Selection of Disputes for Litigation,” Journal of Legal Studies, vol. 13, no. 1 (January 1984), pp. 1-55.

19. Firms such as Jury Verdict Research Inc. provide data to attorneys to help them value claims on the basis of verdicts for similar cases. Using their own private information about the probability of success, the litigants can calculate the expected return from going to trial. Thus, if a plaintiff thinks she has a 30 percent chance of winning at trial, and successful cases like hers average a trial award of $1,000, she should be willing to settle the case for $300 or more—or even a bit less if she is averse to risk.

20. The state figure is based on the information that 537,000 tort filings occurred in 2000 in general-jurisdiction courts in 30 states tracked by the National Center for State Courts and that those states contain 72 percent of the U.S. population. According to the Administrative Office of the U.S. Courts, 36,586 tort cases were filed in fiscal year 2000; see Administrative Office of the United States Courts, 2002 Annual Report of the Director: Judicial Business of the United States Courts (2003), Table C-2A, p. 132. Those statistics represent the number of cases filed, not the number of plaintiffs or defendants.

21. John H. Beisner and Jessica Davidson Miller, Class Action Magnet Courts: The Allure Intensifies, Civil Justice Report No. 5 (New York: Center for Legal Policy, Manhattan Institute, July 2002). Some observers argue that state courts in general are biased against large corporate defendants; see, for example, Robert J. MacCoun, “Differential Treatment of Corporate Defendants by Juries: An Examination of the “Deep-Pockets” Hypothesis,” Law & Society Review, vol. 30, no. 1 (1996).

22. Federal questions arise from interpretation and application of the U.S. Constitution, treaties, or acts of Congress. Diversity of citizenship cases are those in which no plaintiff and no defendant are citizens of the same state and at least one plaintiff seeks $75,000 or more in damages.

23. Congressional Budget Office calculations based on “Civil Terminations, 2000,” Federal Court Cases: Integrated Data Base (Federal Judicial Center, Washington, D.C.), dataset no. 117, available from the Inter-university Consortium for Political and Social Research.

24. General Accounting Office, Extent of “Litigation Explosion” in Federal Courts Questioned, GAO/HRD-88-36BR (January 1988).

25. Department of Justice, Bureau of Justice Statistics, Tort Trials and Verdicts in Large Counties, 1996, NCJ 179769 (August 2000). The same data also show that tort cases typically involve individuals suing individuals (42 percent of all torts) or individuals suing businesses (39 percent). 26. Those medians exclude cases with awards of zero.

27. Presentation by Deborah Hensler at the U.S. Chamber of Commerce seminar “Understanding Asbestos Litigation: The Genesis, Scope, and Impact,” Washington, D.C., January 23, 2003. See also Stephen J. Carroll and others, Asbestos Litigation Costs and Compensation: An Interim Report (Santa Monica, Calif.: RAND Institute for Civil Justice, 2002).

28. Another factor contributing to the concern has been a recent surge in new asbestos cases. New filings in U.S. district court for asbestos cases involving personal injury or products liability rose from 5,041 in fiscal year 2000 to 26,818 in 2002 (see Administrative Office of the United States Courts, 2002 Annual Report of the Director, Table C-2A). But federal cases are only a portion of total claims (which also include state and trust fund claims), and the number of new cases (which represent old exposures now coming to light rather than new exposures) fluctuates greatly from year to year.

29. Department of Justice, Tort Trials and Verdicts in Large Counties, 1996.

30. Carroll and others, Asbestos Litigation Costs and Compensation.

31. Data supplied to the Congressional Budget Office by the Physician Insurers Association of America in spring 2003.

32. See Department of Justice, Bureau of Justice Statistics, Tort Trials and Verdicts in Large Counties, 1996, and Civil Jury Cases and Verdicts in Large Counties, NCJ 154346 (July 1995).

33. Deborah R. Hensler and others, Class Action Dilemmas: Pursuing Public Goals for Private Gain (Santa Monica, Calif.: RAND Institute for Civil Justice, March 1999).

Last reviewed October 2024