Excessive litigation and abuse of the U.S. legal system are effectively imposing a tax on the U.S. economy and causing a surge in liability insurance costs, according to John Doyle, president and chief executive officer of Marsh McLennan.
“The U.S. already has the highest liability insurance rates in the world and escalating costs will only make it harder for companies to decide to invest and grow here,” he said during an analysts’ call to discuss the company’s second quarter results.
And for those companies that do invest in the U.S., they will have to pass along these increased costs to consumers, he added.
Doyle pointed to the fact that global casualty rates increased 4%, while U.S. excess casualty rates rose 18% in the second quarter.
“Over the past decade,” he said, “U.S. excess casualty insurance rates have increased by a cumulative 150%.”
“Our tort system is intended to provide fair compensation to injured parties who have been wronged, but too often we see tort litigation backed by a vast and growing industry with outside investors,” he said, referring to the growing litigation funding industry.
“The result in many cases is that aggrieved parties see less than half of the settlement awards,” he said, noting that Marsh McLennan’s clients are feeling the effects of this growing problem.
Doyle went on to discuss the rise of so-called nuclear verdicts. “Cases exceeding $100 million have grown 400% over the past decade,” he said, citing figures from the US Chamber of Commerce Institute for Legal Reform.
“This trend is encouraging more lawsuits and blockbuster verdicts which drive up insurance costs,” Doyle continued.
In fact, in 2024, US liability insurance experienced the most severe adverse reserve development of any single line of coverage since the 2008 global financial crisis, which was more than double the amount from the previous year, Doyle said.
During the question-and-answer session with the equity analysts, Doyle explained that his comments on the U.S. liability situation were in part driven by recent legislation in the form of the so-called “One Big Beautiful Bill,” which President Donald Trump signed into law on July 4.
Doyle noted that North Carolina Senator Thomas Tillis had proposed an amendment to the reconciliation bill that would have changed tax policy around litigation financing, but it failed to get included in the law. Doyle described the omission as a “missed opportunity.”
Read more: Tax Increase on Litigation Funders Does Not Make Final Budget Bill
Although an injured party, in many cases, gets less than 50% of the outcome of a settlement, that injured party pays ordinary U.S. income tax, while a litigation funder pays capital gains and a foreign investor pays zero tax, Doyle explained.
“Addressing these tort abuses will be challenging and take time. We’re committed to working with the business community and policymakers to tackle this challenge.”
Related:
Interested in Lawsuits?
Get automatic alerts for this topic.
