Statutory rules, attorney involvement, and automobile liability claims

The cost associated with an automobile liability incident in the United States has been hypothesized to be related to different tort reform statutes, the presence of no-fault rules, and the impact of a plaintiff's attorney. This article tests these relationships and reports the marginal impact of variables related to liability claims with individual loss data from a representative insurer. Among major tort reforms, our analysis reveals that punitive damage limits, caps on noneconomic damages, and minor reforms (sanctions on frivolous suits or defenses, prejudgment interest, and provisions for structured settlements) are associated with a reduced individual claim severity. Reform of the joint and several liability rule is associated with an increased individual claim severity in this insurance market. Low dollar thresholds and add-on no-fault rules increase liability claim severity, while no statistically significant difference in claim severity is found when the claim is subject to verbal threshold rules relative to tort law. Finally, attorney involvement is associated with a 64 percent increase in the average claim size.