Civil litigation is a cornerstone of the American legal system. It provides individuals and businesses with a pathway to resolve disputes, seek compensation, and hold wrongdoers accountable. From contract conflicts to personal injury claims, civil courts play a vital role in maintaining fairness and order. But beyond the courtroom, civil litigation has a profound—and often underestimated—impact on the U.S. economy.

The Scale of Civil Litigation Costs

Recent data shows that the financial footprint of civil litigation is enormous. In 2022, the total cost of the U.S. tort system reached $529 billion, representing 2.1% of the nation’s GDP. That translates to $4,207 per American household, a figure that highlights how litigation expenses ripple through the economy, affecting consumers, businesses, and insurers alike.

These costs have been rising faster than inflation and GDP growth. Between 2016 and 2022, tort costs grew at 7.1% annually, outpacing inflation at 3.4% and GDP growth at 5.4%. Commercial liability costs grew even faster at 8.7% per year, driven by increasingly large settlements and verdicts.

Drivers Behind Rising Litigation Costs

Several factors contribute to the escalating economic impact:

1. Social Inflation

“Social inflation”—the trend of liability claims increasing faster than economic inflation—has become a major driver of rising litigation costs. Large jury verdicts, expanded liability theories, and broader access to litigation funding have pushed claims up by 57% over the past decade.

2. Third-Party Litigation Funding

Outside investors now finance lawsuits in exchange for a share of the proceeds. While this can improve access to justice, it also encourages more litigation and higher settlement demands, increasing overall system costs.

3. Aggressive Litigation Tactics

Some attorneys pursue strategies aimed at maximizing payouts, which can inflate settlement values and prolong cases. These tactics contribute to higher defense costs and insurance premiums, which businesses ultimately pass on to consumers.

Economic Consequences for Businesses and Consumers

The rising cost of civil litigation affects the economy in several ways:

• Higher insurance premiums: Businesses face increased liability insurance costs, which can reduce profitability or lead to higher prices for consumers.
• Reduced investment: Companies may delay expansion or hiring due to uncertainty around litigation exposure.
• Increased consumer prices: Litigation costs often trickle down to households through higher prices for goods and services.
• Strain on small businesses: Smaller firms, with limited resources, are disproportionately affected by legal expenses and unpredictable liability risks.

In 2023, U.S. commercial casualty insurance losses grew at an average annual rate of 11%, reaching $143 billion—surpassing even global natural catastrophe losses for the same year.

The Role of Civil Justice Reform

Organizations such as the U.S. Chamber of Commerce advocate for reforms aimed at reducing excessive litigation costs and improving transparency in the legal system. Proposed measures include:

• Requiring disclosure of third‑party litigation funding
• Curbing abusive class‑action practices
• Promoting clearer legal standards to reduce uncertainty

These reforms aim to preserve access to justice while reducing unnecessary economic burdens.

Balancing Justice and Economic Stability

Civil litigation is essential for accountability and fairness. It compensates victims, deters misconduct, and reinforces the rule of law. But as costs continue to rise, the challenge is finding a balance—ensuring the system remains accessible and fair without imposing unsustainable economic strain.

A more efficient, transparent, and predictable civil justice system would not only benefit litigants but also strengthen the broader U.S. economy.