October 25, 2010

How Likely Are you to Lose a >$1M Lawsuit?

Some people seem to think that multi million dollar lawsuits are as common as the common cold.   This might be because of the disproportionately high amount of media coverage such lawsuits receive and/or the amount of crime dramas that we watch on TV.   I don't think large lawsuit awards are nearly as common as people make them out to be.  I don't personally know anyone who has been sued for anything over a few thousand dollars over a car accident.  When you start to talk to friends eventually you might hear of a friend of a friend who was involved in a big lawsuit.  Of course this is just my own anecdotal evidence.    I decided to go out to find some actual data to figure out how frequent lawsuits with large cash awards are.  

I found data from 2005 on civil cases.   The Bureau of Justice Statistics has data in their report
Civil Bench and Jury Trials in State Courts, 2005

In 2005 there were 26,948 total civil trials.   56.4% of them were won by the plaintiff.  

The median award was $27,998.   Overall about 4.4% of the winning plaintiff's got awards of $1 million or more.    This tells us a couple things.   MOST lawsuits result in damages under $30,000 level.  
 It also means that about 669 people lost lawsuits in 2005 of $1M or more.  

Some lawsuit categories aren't something most of us need to worry about.   2,449 of the lawsuits were for medical malpractice.   21% of the malpractice cases resulted in awards of $1 million which means thats about 123 cases that were about malpractice.  Product liability accounted for 99 cases for things like asbestos and 30 of those resulted in $1M awards.  Another 3 cases with $1M awards were from false imprisonment claims.  Most of these cases would be filed against government or business rather than individuals.

Lots of lawsuits are against businesses and other entities.  Only about 50.1% of defendants in civil cases were individuals.   The other half of the time the defendant was business, government or hospital entity.  The data doesn't break down the % of defendants and awards over $1M.   But I can guess that the % of defendants is the same across lower and higher judgment lawsuits.  If anything I bet that the higher awards are skewed to businesses, government and hospitals who generally have deeper pockets than most individuals.

But roughly speaking I can guess that of the total 669 cases awarding >$1M only about 335 of them were awarded against individuals who weren't doctors.

With a population of about 295 million in 2005 and around 335 lawsuits of $1M or more then we're looking at roughly  1 in a million individuals losing a lawsuit for $1M or more in 2005.

So to summarize the math:

Total cases = 26,948.   Cases won = 56.4%.    Cases with awards over $1M = 4.4%.   Cases against individuals = 50%
Cases won against individuals with awards over $1M in 2005 = 26948 * 0.564 * 0.044 * 0.50 = 335

Population of the USA in 2005  = 295 Million

Civil lawsuits against individuals with awards over $1M in 2005 :    1.14 per 1,000,000 people

Bottom Line :  
Roughly speaking your chances of losing a $1M lawsuit in 2005 was 1 in 1 million.
The chances of losing over $28k in a civil lawsuit was about 26 in 1 million.
I'm assuming that the frequency of lawsuits in 2005 is similar to the frequency in any given year.

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