The Tort Tax

IN 1990 A UNIVERSITY OF TEXAS at Austin finance professor named Stephen Magee made headlines when he tried to put a dollar figure on the damage that lawyers and lawsuits inflict on the U.S. economy. He eventually estimated $320 billion a year—$1 million for each of the 320,000 American lawyers that he determined to be superfluous. Clever rogues that they are, lawyers were quick to respond: Magee received letters from attorneys wanting to know where they could surrender their law licenses in exchange for the million bucks.

Maybe that’s not such a bad deal after all. A good place to start would be the East Texas town of Daingerfield, the scene of the largest mass products-liability lawsuit in the United States and the subject of Skip Hollandsworth’s cover story, “The Lawsuit From Hell” (page 106). The case, which alleges that a variety of toxic products shipped to the Lone Star Steel plant caused thousands of workers to contract serious diseases, has lasted for nine years with minimal evidence to support it—“a maddening morass of litigation,” writes Hollandsworth, “that has ensnared hundreds of lawyers and generated untold millions of dollars in legal fees.” The discrepancy between the gargantuan cost of the case and its scant merits ought to make the entire legal profession ashamed of itself.

But the lawyers, of course, reap the rewards for their shenanigans while we pay the bills. The cost to each of us in the higher prices we pay for insurance and products is one good reason why, in the words on our cover, we hate lawyers. Excess medical claims add between $100 and $130 to the cost of every automobile insurance policy. The threat of lawsuits, which critics call a “tort tax,” accounts for half the cost of a football helmet, one-fifth the cost of a ladder, one-sixth the cost of a pacemaker. These indirect costs—estimated by Forbes magazine

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