Impact of legal system abuse on the US civil justice system

3.5 minutes read

Published 02/25/2025

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In the United States, the court system, established by the US constitution and the Judiciary Act of 1789, is an integral part of our democratic system of government. It plays a vital role in resolving disputes and providing remedies for individuals and businesses. However, in recent years, the system has faced significant challenges from some parties who misuse procedural rules and utilize tactics that often drive up costs, which can lead to excessive verdicts. This article sheds light on the issue of legal system abuse, its drivers, and potential solutions.

The problem of legal system abuse

Legal system abuse refers to the various tactics employed by some members of the trial bar to initiate more lawsuits, increase litigation expenses, and secure higher verdicts and settlements. Some of the key issues contributing to this abuse include:

Third-party litigation financing
Misuse of attorney advertising
Jury anchoring and exploiting the collateral source rule to inflate medical costs
Unintended application of joint and several liability provisions to assign fault to deep pockets
Time-limited demand abuses and letters of protection
Inflated pre-judgment interest and eliminating non-economic damages caps
Expansive changes to wrongful death laws and bad faith standards
Broad application of premises liability and abuses of venue/forum selection
Private rights of action

These tactics have led to an increase in litigation expenses and costs, ultimately affecting businesses, consumers, and households across the United States. If left unchecked, it will continue to increase these costs for all. In fact, according to the Institute for Legal Reform, the average American household already pays an average of $4,200 per year in tort tax.

Doug Bradac

Casualty Team Lead

Munich Re US

Socioeconomic drivers of legal system abuse

Several socioeconomic factors contribute to the prevalence of legal system abuse. These include:

Economic inflation

Desensitization to large verdicts

Public distrust of corporate defendants and/or attorneys

Generational shift in jury pools

These factors, coupled with a lack of understanding of the practices within the civil justice system, have created an environment conducive to abuse.

The need for education and reform

To address the issue of legal system abuse, education and reform are necessary. The general public and key stakeholders must have a clear understanding of the civil justice system, its purpose, and the impact of excessive litigation on businesses and individuals.

Munich Reinsurance America, Inc. (“Munich Re US”) and the Triple-I’s RiskScan 2024 reveals that of the five audiences surveyed (consumers, small business owners, middle market decision makers, P&C agents and brokers, P&C insurance carriers), only insurance professionals pointed to legal system abuse as a key driver of the rise in P&C insurance costs.

However, evidence from two recent surveys on legal system abuse conducted by Munich Re US and APCIA suggests that when educated, the public wants reform. The survey found that of the 2,000 US respondents:

0%

Believed that state and federal lawmakers should address abuses of the legal system.

0%

Agreed that restrictions should be placed on lawyer advertising to ensure that they are not misleading consumers.

0%

Agreed that excessively high jury awards increase the overall cost of home, auto, and business insurance for all Americans.

Potential solutions

To combat legal system abuse, several steps can be taken. Primary insurers should be mindful of limits deployed to manage exposures and be proactive and diligent about claims management as noted below.

Identify problem claims quickly

Continuously monitor claims

Put adequate resources toward resolving claims

Place the claims with the right experts to enhance resolution

Actively educate their agents and insureds about the issue

As an industry, it is important to raise awareness and provide education on how these legal practices impact not only the insurance industry, but ultimately the end consumer. Allowing this abuse of the legal system to remain unchecked, it will likely persist and send improper signals to jurors, judges, and defendants about the value of damages. In turn, this can lead to higher insurance costs, financial strain on insurers and reinsurers, depletion of municipal resources, and disincentives for businesses to take risks.

Bonnie Guth

Head of Government Affairs

Munich Re America Services

There is still much work to be done to rein in the abuses of our legal system. Some progress has been noted in several states; however, gaps remain, and we must brace for continued volatility until broader reforms take hold.

Some of the information contained in this publication, including any numerical data, was culled from or based upon publicly available or other industry sources believed to be reliable, and Munich Re US does not warrant the accuracy or completeness of any such information. The presence of any link or reference to a third-party website, product, or service does not imply an endorsement or recommendation by Munich Re US.

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