April 10, 2000

            Washington, D.C. --  Calling the nation’s “litigation lottery” ineffective in compensating Americans for injuries, the Committee for Economic Development, a group of national business leaders, today urged Early Offers and Auto Choice insurance as practical alternatives to litigation.

            Early offers allow plaintiffs to receive immediate compensation for economic losses if they forego the right to sue for pain and suffering.  Auto choice insurance allows individuals to purchase significantly cheaper auto insurance when consumers agree not to seek non-economic damages in exchange for swift and certain compensation of their actual economic injuries.  Both Early Offers and Auto Choice can be implemented at the federal or state levels.

 According to the CED report, the current litigation process is “too intrusive, too slow, and too expensive.”  CED urges rapid implementation of new and balanced economic incentives, through Early Offers and Auto Choice, to use the money now spent on legal fees, transaction costs, and large non-economic damage awards to a few plaintiffs, to make it possible for more Americans to recover their real loss from injury.  “These two reforms will significantly improve the legal system by providing swift and sure compensation for real losses when injured parties need it the most – immediately after they have suffered injuries,” stated the report’s co-chair, CED Trustee Roderick M. Hills, Chairman, Hills Enterprises.

Breaking the Litigation Habit shows that Americans’ ability to recover economic losses through the courts has actually decreased in recent years, as the costs of litigation have soared.  Currently the costs of running the U.S. litigation system amount to almost as much as the total compensation all plaintiffs receive.  These litigation costs are being shouldered by consumers in the form of higher prices and slowed research and development.

            “Early offers and auto choice insurance will benefit consumers and businesses, injured parties and defendants by providing expedited resolutions for many legal complaints,” noted the report’s co-chair, CED Trustee Martin Zimmerman, Vice President of Government Affairs, Ford Motor Co.  “Individuals will be given the opportunity to avoid the waste and delay of the litigation system, while the dollars that would be used for non-economic losses and attorneys’ fees would instead go directly to the injured parties.”

            Specifically, the CED report calls for:

·        Early Offers – Potential defendants are given an incentive to make an early offer of settlement to pay all economic loss incurred by the injured party, including reasonable attorneys’ fees.  Because the opportunity to make an “early offer” is time-limited, the injured party is assured of rapid compensation.  If the offer is rejected, the plaintiff faces a higher burden of proof and a different standard of liability for recovering non-economic damages.  The benefits of early offers also include increased public safety, as they will encourage rapid reporting of product faults and defects.

·        Auto Choice – Under Auto choice, car owners have the option of buying less expensive insurance which quickly compensates them for economic loss resulting from personal injury and protects them from claims for non-economic loss by other drivers.  The benefits include quick payment to the injured, cheaper insurance (an estimated 24 percent reduction), and, on average, higher recovery for serious personal injuries. (Currently claimants pay an estimated 32 percent of their gross settlement in legal expenses.)

CED President Charles E.M. Kolb added, “This proposal provides two mechanisms for injured parties to receive fair compensation in a more efficient manner.  Instead of costly litigation that ties up the courts, lines the pockets of wealthy lawyers, and drives up prices for consumers, plaintiffs will have quicker access to reasonable damages.  This is a win-win situation for all parties involved.”

            CED is an independent, nonpartisan public policy organization of more than 200 business and academic leaders committed to promoting economic growth and greater opportunity for all Americans.  John Hoff, a nationally renowned expert on America’s legal system, directed CED’s Legal Reform project. 

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 Breaking the Litigation Habit is available from the Committee for Economic Development, 477 Madison Avenue, New York, NY 10022, telephone - (212) 688-2063 (dial ext. 274 to order), fax - (212) 758-9068.  The cost is $18.00 per copy.  Please add 15% for postage and handling.  Orders under $50 must be prepaid by check or money order (in U.S. dollars).