From homeownership to auto insurance, consumers across the U.S. are feeling the sting of rising costs — and not just because of inflation. A growing number of experts point to another, lesser-known culprit: widespread abuse of the legal system. Fueled by aggressive attorney advertising, frivolous lawsuits, and secretive litigation funding, this trend is creating a ripple effect that reaches every household and business. The result? Higher insurance premiums, rising operational expenses, and a troubling hit to the economy.
The Real Cost of Legal System Abuse
According to the American Property Casualty Insurance Association (APCIA), the price tag of legal system abuse is staggering. In 2023 alone:
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Plaintiff lawyers spent $2.4 billion on over 26 million ads, many designed to provoke litigation.
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Litigation funding surged to $15.2 billion, often backed by private or foreign investors.
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Typical injury awards ballooned by 319%, driven by tactics that aim to sway juries emotionally.
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The economic impact of litigation abuse reached $443 billion—the equivalent of a $3,600-per-household “lawsuit tax.”
These rising costs don’t just hit courtrooms. Insurers — especially those offering umbrella and high-limit liability coverage—are seeing more large claims, forcing premiums to climb. And businesses, facing increasing liability exposure, are passing the added expense along to consumers.
The Threat of Third-Party Litigation Funding
One of the most troubling trends is the rise of third-party litigation funding (TPLF). Unlike traditional loans, these investments are not subject to usury laws, meaning funders can charge litigants interest rates that exceed 200%. These backers treat lawsuits like stocks—betting on someone else’s legal battle for profit.
What’s more, most states don’t require transparency about who is funding a lawsuit, leaving the door open for conflicts of interest—and even foreign influence — in the U.S. legal system.
Why Legal Reforms Are Essential
Without reform, this unchecked system continues to burden American households, stall economic growth, and challenge the integrity of our legal institutions. The APCIA and other experts advocate for:
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Disclosure requirements for litigation funding
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Limits on misleading legal advertising
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Caps on interest rates for third-party litigation loans
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Legal protections for businesses and insurers against abusive litigation practices
These measures aim to restore balance, transparency, and fairness to the civil justice system, ultimately reducing the pressure on insurance markets and consumer wallets.
What’s Next?
Legal reform isn’t just about curbing lawsuits—it’s about restoring trust, affordability, and sustainability across every sector touched by insurance. As lawmakers consider these complex issues, consumers and insurance professionals alike have a role to play in demanding greater accountability and transparency in our courts.
MORE ABOUT ROBERT P. HARTWIG:
Robert P. Hartwig is a Clinical Associate Professor of Risk Management, Insurance, and Finance at the Darla Moore School of Business at the University of South Carolina and Director of the school’s Center for Risk and Uncertainty Management. He teaches courses in risk management, insurance, and corporate finance, mentors students, pursues a variety of research interests, and works with insurers, regulators, legislators, and many other insurance industry stakeholders, including media. Dr. Hartwig is also a member of the Federal Reserve Board’s Insurance Policy Advisory Committee. Dr. Hartwig serves as a media spokesperson for the property/casualty insurance industry and is quoted frequently in leading publications such as The Wall Street Journal, The New York Times, USA Today, Washington Post, Los Angeles Times, Financial Times, BusinessWeek, Newsweek, U.S. News & World Report, CFO, Fortune, Forbes, The Economist and many others throughout the world. Dr. Hartwig also appears regularly on television, including programs on ABC, CBS, NBC, CNN, CNBC, Fox, PBS, Univision and the BBC.
MORE ABOUT LYNNE MCCHRISTIAN:
Lynne McChristian joined the University of Illinois in January 2019. She is the director of the Office of Risk Management & Insurance Research at the University of Illinois in Urbana-Champaign, where she is also a senior instructor teaching insurance and enterprise risk management classes. She has previously held a similar teaching and research position at Florida State University. McChristian’s corporate career includes more than 16 years with USAA, the highly regarded insurance and financial services company that primarily serves members of the U.S. military and their families. At USAA, she was responsible for internal and external communication, including crisis and strategic communication planning and media relations. McChristian has also consulted with the Insurance Information Institute and the American Property Casualty Insurance Association, both industry trade groups. She has been a featured columnist for an insurance industry publication and authored research papers on the lessons learned from Hurricane Andrew and on what renewed ties with Cuba could mean for insurance markets.
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