Does the tort system generate significantly greater administrative cost than comparable first-party insurance, such as health insurance and workers' compensation? It is commonly thought so. In their 1987 book, Landes and Posner called the tort system “an exceedingly costly insurance mechanism.” Others have made the same criticism, noting that tort awards are much greater than amounts paid under comparable first-party insurance policies.
There are two issues here. The "high costs" of the tort system, relative to first-party insurance, could be due to (i) its greater administrative cost or (ii) its broader coverage (or both). It is well known that tort law offers broader coverage than market insurance. Most notably, it compensates noneconomic harms, such as the pain and suffering arising from an accident. This undoubtedly raises the cost of the tort system relative to first-party insurance. But it’s a separate question whether tort law generates greater administrative expense, per dollar of compensation paid, relative to first-party insurance. Although it is widely believed that the tort system is administratively inefficient, what data support this claim?