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U.S. tort costs rose 5.1% in 2010: Towers Watson

U.S. tort costs rose 5.1% in 2010: Towers Watson

U.S. tort costs rose 5.1% in to $264.6 billion in 2010, according to a report released Thursday by Towers Watson & Co.

But “2011 Update on U.S. Tort Cost Trends,” the 15th report of its kind since 1985, notes that the increase was attributable to costs associated with one event and its aftermath—the April 2010 Deepwater Horizon drilling rig explosion and oil spill in the Gulf of Mexico.

New York-based Towers Watson said that without the costs from that event, tort costs would have dropped 2.4% in 2010 compared with 2009.

“The weak U.S. economy continued to have an influence on tort costs, which would have shown a decline minus the Deepwater Horizon event,” said Russ Sutter, Towers Watson consultant and author of the report, in a statement. “The decline is most notable in the commercial auto line of business, perhaps the most economically sensitive coverage with a tort component. The insured commercial auto tort costs in 2010 were the lowest since 2000 and 19% lower than in 2004.”

Mr. Sutter noted that insured commercial auto tort costs were $16.1 billion in 2000. They rose to $20.4 billion in 2004 and were $16.5 billion in 2010, according to Towers Watson.

Towers Watson's 2010 update noted that tort costs actually declined 2.7% in 2009, due in part to the economic slump.

The methodology used in the Towers Watson study incorporates three cost components: benefits paid or expected to be paid to third parties (losses), defense costs, and administrative expenses.