Rising Litigation Costs Impact Missouri Insurance Premiums
A recent report by Missouri’s Department of Commerce and Insurance highlights the troubling impact of rising litigation costs on insurance premiums within the state. Business and trucking organizations anticipate that this revelation might spur the much-needed tort reforms that have been long discussed.
The Data Analytics Office within the department indicates that the current legal environment is adversely affecting insurance costs and market stability, despite past legislative efforts to address these challenges. Angela Nelson, DCI Director, emphasized the problem, noting that when litigation tactics inflate awards significantly beyond reasonable damages, the resulting costs ultimately manifest in increased premiums for consumers and businesses across Missouri.
The report, titled “Lawsuit Abuse: An Insurance Case Study — Part One,” outlines a per-person "tort tax" of about $1,216, attributing to $7.6 billion in lost economic output and $384 million in lost state revenue. The civil justice system's unpredictability and large awards are affecting resource allocation statewide, thereby underlining the pressing need for effective risk management strategies.
Insurance premiums in the state clearly reflect these challenges. For instance, homeowners insurance rates are surging by 8% to 12% annually, while medical malpractice insurance has seen a consistent increase of over 10% annually for six years. Across the nation, underwriting losses for private-passenger auto liability stand at $43 billion, with Missouri insurers seeking double-digit increases due to prevalent litigation practices such as third-party funding and jury-influencing strategies.
Need for Further Tort Reforms
The report reviews nine tort-reform measures implemented between 2015 and 2023, but suggests that additional reforms are essential. Recent comprehensive reforms in Georgia and Florida serve as examples that have bolstered market stability and attracted carrier engagement.
Missouri's earlier reforms included caps on non-economic damages, venue restrictions, and stricter punitive damage standards. However, St. Louis remains one of the most litigious cities nationally, according to the America Tort Reform Foundation. A significant case involved a $462 million verdict against a trailer manufacturer, which, despite being reduced, settled at $120 million.
The DCI advocates for reforms that better align liability with fault to mitigate unpredictable litigation impacts. Nelson warns that without such meaningful reforms, lawsuit abuse will increasingly elevate insurance premiums, ultimately affecting all Missourians.
The trucking industry, often targeted by substantial litigation, supports the report's conclusions. Tom Crawford, president and CEO of the Missouri Trucking Association, noted that the findings underscore the urgent need for tort reform. He expressed optimism that the report will galvanize legislative action. Nelson encouraged lawmakers to prioritize reforms promoting fairness and transparency to stabilize the insurance market and support Missouri’s economic health.