Forecasting Claims in an Era of Tort Reform

24 November 2004
By Dr. Faten Sabry and former NERA Senior Vice President Dr. Fred Dunbar

Forecasting mass tort claims is often based on sophisticated models applied to large, complicated databases. Too often though, there is one variable that is simply extrapolated into the future at historical levels with no attempt to understand its causal influences: the filing rate (also known as the propensity to sue).

The filing rate is a complicated interaction between the behavior of individuals who have suffered an injury and the institutions through which such individuals can seek redress. Consequently, understanding the behavior and interactions of the various factors in the tort system is important to reduce the errors in claims forecasts.

In this article, NERA Senior Vice President Dr. Faten Sabry and former NERA Senior Vice President Dr. Fred Dunbar present their findings on the impact of institutional changes on future claiming rates and summarize the recent empirical research on individual propensity to sue. The authors analyzed the impact of state tort reform on filings in different states from 1991 through 2002 using regression models. The reforms examined included caps on non-economic damage awards, limits on punitive damages awards, limits on joint-and-several liability, sanctions on frivolous suits or defenses, and venue reform.

The authors found that the past frequency of tort filings in a given state has a highly significant and positive impact on predicting whether a state would enact tort reform legislation. Once enacted, they found that certain, but not all, types of tort reform decrease the number of filings in that state by a statistically significant amount. Moreover, tort reform does not cause an immediate decline in the volume of filings. Instead, on average, filings do not decline until two years after passage. The effect of the decline, however, is persistent.

Reprinted with permission from Law Journal Newsletters, November/December 2004 issue. Copyright 2004 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.